EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as
of October 16, 2000 by and between MedQuist Inc., a New Jersey corporation (the
"Company"), and Xxxxx X. Xxxxxx, a resident of Princeton Junction, New Jersey
("Employee").
BACKGROUND
The Company desires to provide for Employee's continued
employment with the Company. Employee desires to accept such employment on the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending legally to be bound, hereby agree as follows:
1. Employment. The Company hereby employs Employee as Senior
Vice President, Treasurer and Chief Financial Officer and Employee hereby
accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. Term. The Company shall employ Employee hereunder for a
term commencing on the Effective Date hereof and ending June 30, 2003 (the
"Term"), which Term will be automatically extended for additional one (1) year
periods beginning on July 1, 2003 and upon each subsequent anniversary thereof
unless either party provides the other party with at least ninety (90) days'
prior written notice of its intention not to renew this Agreement.
3. Office and Duties.
a. Duties. During the Term, Employee shall render such
services as are appropriate for a person holding Employee's position and such
additional or alternative duties as may from time to time be assigned to
Employee by the Board of Directors of the Company ("Duties").
4. Full Time Emp1oyment. During the Term, Employee shall use
Employee's best efforts to carry out the Duties and other obligations hereunder
and devote Employee's entire working time to the business and affairs of the
Company, and shall not, in any advisory or other capacity, work for any other
individual, firm or corporation without the prior written consent of the
Company.
a. No Conflicting Agreements. Employee represents and
warrants to the Company that he is not subject or a party to any Agreement,
non-competition covenant, non-disclosure agreement or other agreement, covenant,
understanding or restriction which would prohibit Employee from executing this
Agreement or performing fully the Duties and other obligations hereunder, or
which would in any manner, directly or indirectly, limit or affect the Duties or
other obligations hereunder.
b. Base Salary; Short Term Bonus; Options. As compensation
for the services that Employee shall render hereunder, Employee shall be
entitled to a total base salary of $190,000 per year ("Base Salary"), payable at
such times as is consistent with the Company's pay periods for other executives
of the Company. In addition, Employee shall be eligible for participation in the
Company's short term targeted bonus plan in an amount equal to up to 30% of Base
Salary. Subject to approval of the Board of Directors, on or promptly following
the Effective Date, the Company shall grant to Employee an option to purchase
shares of the common stock of the Company under the Company's Incentive Stock
Option Plan for Officers and Key Employees adopted by the Board of Directors on
January 17, 1992 in accordance with the terms outlined on Schedule A annexed
hereto.
5. Other Benefits. During the Term, Employee will be eligible
to receive the following benefits (collectively, "Benefits"):
a. Savings and Retirement Plans. Participation in all
savings, pension and retirement plans and programs of the Company generally
available to other executives of the Company as in effect from time to time;
b. Welfare Plans. Participation in any welfare benefit
plans and programs of the Company as in effect from time to time;
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c. Life Insurance. Life insurance maintained by the Company
on the life of Employee (naming the beneficiary of Employee's choice) in an
amount consistent with policy of the Company as in effect from time to time;
d. Vacation. Paid vacation (taken consecutively or in
segments) in accordance with the Company's policies generally applicable to
other executives of the Company from time to time, taken at such times as is
reasonably consistent with proper performance by Employee of Employee's duties
and responsibilities hereunder; and
e. Car Allowance. The Company shall continue to provide a
car allowance or use of an automobile to Employee, including all reasonable
expenses of operation, in an amount of $400 per month.
6. Reimbursement for Expenses. During the Term, the Company
shall reimburse Employee in full for all reasonable and necessary business and
travel expenses incurred by him in connection with the performance of the Duties
(collectively, "Expenses"). Notwithstanding any provision herein to the
contrary, the Company shall reimburse Employee only (i) upon presentation by
Employee of written vouchers or expense statements satisfactorily evidencing
such expenses as may be reasonably required by the Company and (ii) if such
expenses are in accordance with the Company's policies generally applicable to
executives of the Company.
7. Termination.
a. Death or Disability. Subject to Section 7.d. below, this
Agreement shall terminate immediately upon Employee's death. Subject to Section
7.d. below, the Company may terminate Employee's employment hereunder in the
event of physical or mental incapacity or disability which renders Employee
unable to perform the Duties for a period of one hundred twenty (120) days or
more during any period of twelve (12) consecutive months ("Disability").
b. Termination for Cause. Subject to Section 7.d. below,
the Company may terminate this Agreement at any time with cause upon written
notice to Employee. Termination for "cause" shall mean discharge of the Employee
by the Company on any of the following grounds:
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(i) Employee's indictment or conviction in a court of
law of any crime or offense that makes Employee unfit for continuing employment,
prevents Employee from performing the Duties or other obligations hereunder or
adversely affects the reputation or business activities of the Company;
(ii) Employee's dishonesty, substance abuse or
misappropriation of funds; or
(iii) Employee's failure or refusal to perform the
Duties or other obligations hereunder.
c. Resignation. Subject to Section 7.d. below, Employee may
resign from his employment hereunder by giving the Company six (6) months' prior
written notice.
d. Obligations of the Company Upon Termination.
(1) Termination for Cause; Resignation; Death or
Disability. If the Company terminates Employee's employment hereunder for cause,
or if Employee resigns, or if Employee dies or suffers a Disability, the Company
shall have no further obligations to Employee hereunder other than for the
payment of (i) accrued but unpaid salary prorated through the date of
termination or effective date of resignation ("Accrued Salary"), (ii) any
Benefits vested as of such date ("Vested Benefits") and (iii) unreimbursed
Expenses incurred prior to such date.
(2) Termination Without Cause, Upon Required Relocation
or Material Breach. If (i) the Company terminates Employee's employment
hereunder without cause or (ii) if the Employee voluntarily terminates his
employment following a required relocation of his principal place of business by
more than 50 miles or following a Material Breach, the Company shall have no
further obligation to Employee hereunder other than for the payment of (i)
Accrued Salary, (ii) a lump sum payment equal to (x) 1.5 multiplied by (y) the
sum of all cash compensation awarded to Employee in the fiscal year immediately
prior to termination, or if Employee's compensation was higher or would be
higher on an annualized basis, in the fiscal year in which such termination
takes place, (iii) any Vested Benefits and (iv) unreimbursed Expenses incurred
prior to the date of termination.
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8. Restrictive Covenants and Confidentiality; Injunctive
Relief.
a. As a condition to the performance by the Company of its
obligations hereunder so long as Employee remains an employee of the Company,
and for a period of two (2) years thereafter, Employee shall not, without the
prior written approval of the Board of Directors of the Company, directly or
indirectly through any other person, firm or corporation, whether individually
or in conjunction with any other person, or as an employee, agent,
representative, partner or holder of any interest in any other person, firm,
corporation or other association:
(i) solicit, entice or induce any person, firm or
corporation who or which presently is, within eighteen (18) months prior hereto
was, or at any time during the Term shall be, a client or customer of the
Company or any of its subsidiaries to become a client or customer of any other
person, firm or corporation, and Employee shall not approach any such person,
firm or corporation for such purpose or authorize or knowingly approve the
taking of such actions by any other person; or
(ii) solicit, entice, induce or hire any person who
presently is, within eighteen (18) months prior hereto was, or at any time
during the term hereof shall be an employee of the Company or any of its
subsidiaries to become employed by any other person, firm or corporation, and
Employee shall not approach any such employee for such purpose or authorize or
knowingly approve the taking of such actions by any other person; or
(iii) compete with, or encourage or assist others to
compete with, or solicit orders or otherwise participate in business
transactions in the electronic transcription services and other health
information management solutions services businesses in which the Company is
engaged anywhere within the United States (each, a "Competing Business"); or
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(iv) lend any credit or money for the purposes of
establishing or operating or assisting any Person to establish or operate a
Competing Business, or otherwise give aid or advice to any other person or
entity engaging in any Competing Business; or
(v) lend or allow his professional skill, knowledge or
experience to be so used by any person or entity which is engaged in a Competing
Business.
Nothing in the foregoing shall prohibit Employee from engaging
in any business that is not a Competing Business after termination of Employee's
employment with the Company, or investing in the securities of any corporation
(including a Competing Business) having securities listed on a national security
exchange, provided that such investment does not exceed 5% of any class of
securities of any corporation engaged in business in competition with the
Company, and provided that such ownership represents a passive investment and
that neither Employee nor any group of persons including Employee, in any way,
either directly or indirectly, manages or exercises control of any such
corporation, guarantees any of its financial obligations, otherwise takes any
part in its business, other than exercising Employee's rights as a shareholder,
or seeks to do any of the foregoing.
b. Employee acknowledges that during the Term, Employee
will have access to confidential information of the Company, including plans for
future developments, and information about costs, customers, potential
customers, profits, markets, sales, products, key personnel, pricing policies,
operational methods, technical processes and other business affairs and methods
and other information not available to the public or in the public domain
(hereinafter referred to as "Confidential Information"). In recognition of the
foregoing, Employee covenants and agrees that, except as required by Employee's
duties to the Company, Employee will keep secret all Confidential Information
and will not, directly or indirectly, either during the Term or at any time
thereafter, disclose or disseminate to anyone or make use of, for any purpose
whatsoever, any Confidential Information, and upon termination of Employee's
employment, Employee will promptly deliver to the Company all tangible materials
containing Confidential Information (including all copies thereof, whether
prepared by Employee or others) which Employee may possess or have under
Employee's control.
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c. Employee represents (i) that Employee's experience and
capabilities are such that the restrictions contained herein will not prevent
Employee from obtaining employment or otherwise earning a living at the same
general economic benefit as reasonably required by Employee and (ii) that
Employee has, prior to the execution of this Agreement, reviewed this Agreement
thoroughly with Employee's legal counsel.
d. Employee acknowledges that the services to be rendered
by Employee are special, unique and extraordinary, that the restrictions
contained in this Section 8 are reasonable and necessary to protect the
legitimate business interests of the Company and that the Company and Parent
would not have entered into this Employment Agreement in the absence of such
restrictions. By reason of the foregoing, Employee consents and agrees that if
Employee violates any of the provisions of this Section 8, the Company would
sustain irreparable harm and, therefore, irrevocably and unconditionally agrees
that in addition to any other remedies which the Company may have under this
Agreement or otherwise, all of which remedies shall be cumulative, the Company
shall be entitled to apply to any court of competent jurisdiction for
preliminary and permanent injunctive relief and other equitable relief. In the
event that any of the provisions of this Section 8 hereof should ever be
adjudicated to exceed the time, geographic, service, or other limitations
permitted by applicable law in any jurisdiction, then such provisions shall be
deemed reformed in such jurisdiction to the maximum time, geographic, service,
or other limitations permitted by applicable law.
e. Employee agrees that the Company may provide a copy of
this Agreement to any business or enterprise (i) which the Employee may directly
or indirectly own, manage, operate, finance, join, control or participate in the
ownership, management, operation, financing, or control of, or (ii) with which
Employee may be connected with as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise, or in connection with
which Employee may use or permit Employee's name to be used. Employee will
provide the names and addresses of any of such persons or entities as the
Company may from time to time reasonably request.
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f. In the event of any breach or violation of the
restriction contained in Section 8.a. above, the period therein specified shall
xxxxx during the time of any violation thereof and that portion remaining at the
time of commencement of any violation shall not begin to run until such
violation has been fully and finally cured.
g. Employee acknowledges that the Company shall be the sole
owner of all the results and proceeds of Employee's services hereunder,
including but not limited to, all inventions, developments, enhancements,
discoveries and other improvements relating to equipment, methods or processes
connected with or useful to the Company's and its subsidiaries' businesses,
(collectively, the "Developments"), which Developments Employee, by himself or
in conjunction with any other person or entity, may conceive, make, acquire,
acquire knowledge of, develop or create in connection with and during the term
of or prior, to Employee's employment hereunder, free and clear of any claims by
Employee (or any successor or assignee of Employee) of any kind or character
whatsoever other than Employee's right to compensation hereunder. Employee
hereby assigns and transfers his right, title and interest in and to all such
Developments, and agrees that he shall, at the request of the Company, execute
such assignments, certificates or other instruments, and do any and all other
acts, as the Company from time to time reasonably deems necessary or desirable
to evidence, establish, maintain, perfect, protect, enforce or defend the
Company's right, title and interest in or to any such Developments. Employee
acknowledges that any Development which may be copyrightable shall be deemed to
be "work for hire."
9. Survival. The provisions of Section 8 shall survive the
termination of this Agreement for any reason whatsoever.
10. Certain Additional Payments by the Company
a. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) to or for the
benefit of Employee (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
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under this Section 11) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Employee with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Employee an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Employee of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the
Gross-Up Payment in Employee's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Employee shall be deemed to (i) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (iii) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income.
Notwithstanding the foregoing provisions of this Section 11(a), if it shall be
determined that Employee is entitled to a Gross-Up Payment, but that the
Payments would not be subject to the Excise Tax if the Payments were reduced by
an amount that is less than 10% of the portion of the Payments that would be
treated as "parachute payments" under Section 280G of the Code, then the amounts
payable to Employee under this Agreement shall be reduced (but not below zero)
to the maximum amount that could be paid to Employee without giving rise to the
Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall be made to
Employee. The reduction of the amounts payable hereunder, if applicable, shall
be made by reducing first the payments under Section 8(d)(ii), unless an
alternative method of reduction is elected by Employee. For purposes of reducing
the Payments to the Safe Harbor Cap, only amounts payable under this Agreement
(and no other Payments) shall be reduced. If the reduction of the amounts
payable hereunder would not result in a reduction of the Payments to the Safe
Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to
this provision. Notwithstanding the foregoing, this Section 10 shall not apply
to any stock option grant if the result of the application of such Section 10
would be to alter the basis on which compensation expense is measured for
purposes of APB Opinion Number 25.
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b. Subject to the provisions of Section 10(a), all
determinations required to be made under this Section 11, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the
reduction of the Payments to the Safe Harbor Cap and the assumptions to be
utilized in arriving at such determinations, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the Change in Control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Employee within fifteen (15)
business days of the receipt of notice from the Company or the Employee that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, Employee may appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company and the
Company shall enter into any agreement requested by the Accounting Firm in
connection with the performance of the services hereunder. The Gross-Up Payment
under this Section 11 with respect to any Payments shall be made no later than
thirty (30) days following such Payment. If the Accounting Firm determines that
no Excise Tax is payable by Employee, it shall furnish Employee with a written
opinion to such effect, and to the effect that failure to report the Excise Tax,
if any, on Employee's applicable federal income tax return will not result in
the imposition of a negligence or similar penalty. In the event the Accounting
Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it
shall furnish Employee with a written opinion to such effect. The Determination
by the Accounting Firm shall be binding upon the Company and Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
Excise Tax or additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall
be promptly paid by the Company to or for the benefit of Employee. In the event
the amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm shall determine the amount of
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the Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by Employee (to the extent he has received a refund if the
applicable Excise Tax has been paid to the Internal Revenue Service) to or for
the benefit of the Company. Employee shall cooperate, to the extent his expenses
are reimbursed by the Company, with any reasonable requests by the Company in
connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
11. Miscellaneous.
a. Any notice authorized or required to be given or made by
or pursuant to this Agreement shall be made in writing and either personally
delivered or mailed by overnight express mail to the respective address of the
party to receive such notice, which address is the one designated below the
signature of such party hereto, or to such other address as a party may specify
by notice to the other parties hereto. In the event that the Company desires to
terminate Employee for cause pursuant to Section 7.b. of this Agreement, the
Company shall provide Employee with prompt written notice of such termination
and, if requested by Employee, afford Employee a reasonable opportunity to cure
such default within sixty (60) days after receipt of such notice.
b. All of the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, legal representatives, successors and assigns
of the parties hereto, except that the duties and responsibilities of Employee
hereunder are of a personal nature and shall not be assignable or delegatable in
whole or in part by Employee.
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c. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
d. No remedy conferred upon any party by this Agreement is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to any other remedy given hereunder
or now or hereafter existing at law or in equity. No delay or omission by any
party in exercising any right, remedy or power hereunder or existing at law or
in equity shall be construed as a waiver thereof, and any such right, remedy or
power may be exercised by the party possessing the same from time to time and as
often as may be deemed expedient or necessary by such party in its sole
discretion.
e. This Agreement may be executed in several counterparts,
each of which is an original. It shall not be necessary in marking proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
f. In the event of a lawsuit by either party to enforce any
provisions of this Agreement, the prevailing party shall be entitled to recover
reasonable costs, expenses and attorney's fees from the other party.
12. Controlling Law. The validity, interpretation,
construction, performance and enforcement of this Agreement shall be governed by
the laws of the State of New Jersey, without reference to principles of
conflicts of laws. Venue, for purposes of all causes of action, mediation,
arbitration or other disputes shall be in Camden County, New Jersey.
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13. Gender; Number. In this Agreement, words of gender may be
read as masculine, feminine, or neuter, as required by context. Words of number
may be read as singular or plural, as required by context.
IN WITNESS WHEREOF, Employee has hereunto set Employee's hand and the
Company has caused this instrument to be duly executed as of the day and year
first above written.
EMPLOYEE
/s/Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
MEDQUIST INC.
/s/Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx, CEO
MedQuist Inc.
Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxx Xxxxxx 00000
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