RESTRICTIVE COVENANT AGREEMENT
Exhibit 10.63
THIS RESTRICTIVE COVENANT AGREEMENT (the “Agreement”), effective as of August 18, 2011,
between Xxxxxx Xxxx (“Shareholder”) and MedQuist Holdings Inc., a Delaware corporation (the
“Company”).
WHEREAS, pursuant to that certain Agreement and Plan of Merger and Reorganization, dated July
11, 2011, by and among the Company, Multimodal Technologies, Inc., a Pennsylvania corporation
(“Multimodal”) and certain other parties thereto (the “Merger Agreement”), the Company will acquire
Multimodal (the “Transaction”), and all of the issued and outstanding capital stock of Multimodal
shall be converted into the right to receive the consideration set forth in the Merger Agreement;
WHEREAS, in connection with the Transaction, Shareholder will receive significant money and
other property in exchange for Shareholder’s equity securities of Multimodal;
WHEREAS, Shareholder acknowledges that the Company would not enter into the Merger Agreement
or complete the Transaction unless Shareholder agrees to be bound by the restrictive covenants set
forth in this Agreement and that, accordingly, Shareholder is entering into this Agreement to
induce the Company to enter into the Merger Agreement and consummate the Transaction.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises
contained herein, and intending to be bound hereby, the parties agree as follows:
1. Definitions. Capitalized terms used herein that are not defined where used shall
have the meanings ascribed to them below:
1.1. “Affiliate” shall have the meaning set forth in the Merger Agreement.
1.2. “Closing Date” shall have the meaning set forth in the Merger Agreement.
1.3. “Company Group” means, collectively and individually, the Company and each of its
Subsidiaries.
1.4. “Competing Business” means any Person involved, anywhere in the world, in, for the
purpose of creating patient records or supplementing existing patient records, selling or reselling
technology products for use in the transcription of speech or in providing natural language
processing of text or in selling software-based solutions designed to provide means to capture,
interpret or analyze clinical data using speech recognition, speech understanding or natural
language processing capabilities.
1.5. “Person” means any individual, firm, corporation, partnership, limited liability company,
trust, joint venture, association, governmental entity, unincorporated entity or other entity.
1.6. “Restricted Period” means the period beginning on the Closing Date and ending on the
fifth (5th) anniversary of the Closing Date.
2. Restrictive Covenants. To induce the Company to enter into the Merger Agreement
and to consummate the Transaction, and in recognition of the substantial money and property which
Shareholder shall receive in exchange for his equity ownership interests in Multimodal upon
consummation of the Transaction, Shareholder shall be bound by the provisions of this Section 2
(the “Restrictive Covenants”).
2.1. Covenant Not To Compete. During the Restricted Period, Shareholder shall not,
directly or indirectly, own, manage, join, operate, participate in or otherwise be engaged in any
Competing Business. For purposes of this Section, (i) “participate” includes any direct or
indirect interest in any enterprise, whether as a stockholder, partner, joint venturer or otherwise
or rendering any direct or indirect service or assistance (including as a creditor for money
borrowed) to any Person, and (ii) ownership of voting securities of an entity whose securities are
publicly traded on a recognized securities exchange or quotation system not, in the aggregate, in
excess of two percent (2%) of such voting securities shall not be considered to be owning,
managing, joining, operating, participating in or otherwise being engaged in any Competing
Business. Shareholder acknowledges that this covenant is reasonably designed to protect the
Company’s substantial investment in Multimodal and is reasonable with respect to its duration,
geographical area and scope. For the avoidance of doubt, any employee, manager or officer of any
member of the Company Group shall not be considered to be participating in any Competing Business
in violation of this Section 2.1 in carrying out his or her activities on behalf of the Company
Group within his or her authority.
2.2. Covenant Not To Solicit. During the Restricted Period, Shareholder shall not,
directly or indirectly:
2.2.1. cause, solicit, induce or encourage, or attempt to cause, solicit, induce or encourage,
any actual or prospective customer, supplier or independent contractor of any member of the Company
Group (including any existing or former customer, supplier or independent contractor of any member
of the Company Group and any Person that becomes a customer, supplier or independent contractor of
any member of the Company Group on or after the Closing Date), or any other Person who has a
business relationship with any member of the Company Group, to terminate, modify or not establish
any such actual or prospective relationship;
2.2.2. (a) cause, solicit, induce or encourage, or attempt to cause, solicit, induce or
encourage, any employee or other Person providing service to any member of the Company Group to
leave such employment or service, or (b) hire, employ or otherwise engage any employee, former
employee or other Person that provided service to any member of the Company Group during the
immediately preceding twelve (12) month period; provided that the foregoing shall not prohibit any
general solicitation or advertising activities not targeted at any such Person.
3. Acknowledgements. Shareholder acknowledges that the restrictions on Shareholder’s
activities under this Agreement constitute a material inducement to the
consummation of the
Transaction, and Shareholder further acknowledges, stipulates and agrees that a breach of any of
the obligations and agreements set forth in this Agreement will result in irreparable harm and
continuing damage to the Company Group for which there will be no adequate remedy at law and
further agrees that in the event of any breach of said obligations and agreements, the Company and
its successors and assigns will be entitled to injunctive relief and to such other relief as is
proper under the circumstances.
4. Remedies and Enforcement Upon Breach.
4.1. Specific Enforcement. Shareholder acknowledges that any breach by Shareholder,
willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury
to the Company Group for which monetary damages would not be an adequate remedy. Shareholder shall
not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the
claim or defense that such an adequate remedy at law exists. In the event of any such breach by
Shareholder of any of the Restrictive Covenants, the Company shall be entitled to injunctive or
other similar equitable relief in any court, without any requirement that a bond or other security
be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise
available to the Company.
4.2. Judicial Modification. If any court determines that any of the Restrictive
Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of
such provision, such court shall have the power to modify such provision and, in its modified form,
such provision shall then be enforceable.
4.3. Accounting. If Shareholder breaches any of the Restrictive Covenants, the
Company will have the right and remedy to require Shareholder to account for and pay over to the
Company all compensation, profits, monies, accruals, increments or other benefits derived or
received by Shareholder as the result of such breach. This right and remedy will be in addition
to, and not in lieu of, any other rights and remedies available to the Company under law or in
equity.
4.4. Enforceability. If any court holds the Restrictive Covenants unenforceable by
reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the right of the Company to the relief provided above in
the courts of any other jurisdiction within the breadth or scope of such Restrictive Covenants.
4.5. Disclosure of Restrictive Covenants. Shareholder shall promptly disclose the
existence and terms of the Restrictive Covenants to any Person that Shareholder may be employed by
or provide services to during the Restricted Period.
4.6. Extension of Restricted Period. If Shareholder breaches this Agreement in any
respect, the restrictions contained in that section will be extended for a period equal to the
period that Shareholder was in breach.
5. Miscellaneous.
5.1. Other Agreements. Shareholder represents and warrants to the Company that there
are no restrictions, agreements or understandings whatsoever to which Shareholder is a
party that
would prevent or make unlawful Shareholder’s execution of this Agreement, that would be
inconsistent or in conflict with this Agreement or Shareholder’s obligations hereunder, or that
would otherwise prevent, limit or impair the performance by Shareholder of Shareholder’s duties
under this Agreement.
5.2. Successors and Assigns. The Company may assign this Agreement to any successor
to all or substantially all of its assets and business by means of liquidation, dissolution,
merger, consolidation, transfer of assets, or otherwise. The duties and obligations of Shareholder
hereunder are personal to Shareholder and may not be assigned by Shareholder.
5.3. Governing Law and Forum. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the principles of conflicts of
laws. Any legal proceeding arising out of or relating to this Agreement will be instituted in a
state or federal court in the State of New York, and Shareholder and the Company hereby consent to
the personal and exclusive jurisdiction of such court(s) and hereby waive any objection(s) that
they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or
defense of inconvenient forum.
5.4. Waivers. The waiver by either party of any right hereunder or of any breach by
the other party will not be deemed a waiver of any other right hereunder or of any other breach by
the other party. No waiver will be deemed to have occurred unless set forth in a writing. No
waiver will constitute a continuing waiver unless specifically stated, and any waiver will operate
only as to the specific term or condition waived.
5.5. Severability. Whenever possible, each provision and term of this Agreement shall
be interpreted in a manner to be effective and valid, but if any provision or term of this
Agreement is held to be prohibited or invalid, then such provision or term will be ineffective only
to the extent of such prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions or terms of this
Agreement. If any of the covenants set forth in this Agreement are held to be unreasonable,
arbitrary or against public policy, such covenants will be considered divisible with respect to
scope, time and geographic area, and in such lesser scope, time and geographic area, will be
effective, binding and enforceable against Shareholder.
5.6. Survival. The obligations contained in this Agreement shall survive the
termination of any relationship between Shareholder and the Company Group.
5.7. Entire Agreement; Amendments. This Agreement contains the entire agreement and
understanding of the parties hereto relating to the subject matter hereof, and merges and
supersedes all prior and contemporaneous discussions, agreements and understandings of every nature
relating to the subject matter, other than any employment agreement between any member of the
Company Group and Shareholder and that certain Restrictive Stock Award Agreement dated on or about
the date hereof between the Shareholder and the Company. This Agreement may not be changed or
modified, except by an agreement in writing signed by each of the parties hereto.
5.8. Section Headings. The headings of sections and paragraphs of this Agreement are
inserted for convenience only and will not affect the meaning or construction of any provision of
this Agreement.
5.9. Counterparts; Facsimile. This Agreement may be executed in multiple counterparts
(including by facsimile signature), each of which will be deemed to be an original, but all of
which together will constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer, and Shareholder has executed this Agreement, in each case as of the date
indicated below.
| MEDQUIST HOLDINGS INC. |
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| By: | /s/ Xxxx Xxxxx | |||
| Title: Chief Financial Officer | ||||
| Date: August 18, 2011 | ||||
| SHAREHOLDER |
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| /s/ Xxxxxx Xxxx | ||||
| Date: 7/11/2011 | ||||
