1
Exhibit 10.12
COVENANT NOT TO COMPETE
AND
SEVERANCE AGREEMENT
THIS COVENANT NOT TO COMPETE AND SEVERANCE AGREEMENT (this
"Agreement"), is made and entered into this 22nd day of October 1996 to be
effective as of July 19, 1996 by and between MEDIFAX, INC., a Missouri
corporation (the "Company"), and XXXXX X. XXXXX, an individual resident of the
State of Ohio (the "Employee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company desires to impose certain restrictions on
Employee's ability to compete with the Company upon termination of his
employment and, in consideration for Employee's agreement to be subject to such
restrictions, to grant Employee certain severance benefits on the terms set
forth herein.
WHEREAS, Employee desires to have the severance benefits set forth
herein and agrees that such benefits constitute fair and adequate consideration
with respect to the restrictive covenants set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as Senior Vice
President at an annual base salary of $165,000, and the Employee hereby accepts
such employment with the Company, on an at will basis on the terms and
conditions hereinafter set forth. The Company also agrees to approve an annual
performance bonus plan for the benefit of Employee based on the achievement of
certain performance criteria.
2. SEVERANCE. (a) If the Company terminates Employee's employment
hereunder "for cause" (as hereinafter defined), all obligations of the Company
to provide compensation and benefits to Employee shall immediately cease, other
than Employee's right to receive his prorated salary and reimbursement of
expenses incurred in accordance with Company policy through the date of such
termination. The Company's election to terminate Employee's employment for cause
shall be without prejudice to any remedy the Company may have against the
Employee for the breach or non-performance of any of the provisions of this
Agreement. For purpose this Agreement, "for cause" shall mean:
(i) Employee's drug or alcohol abuse (as determined by
majority vote of a committee of three physicians, one of whom shall be
appointed by the Employee, the second shall be appointed by the
Company, and the third shall be appointed by the mutual consent of such
physicians);
(ii) termination of the Employee's employment by the Company
because of the Employee's inability to perform his duties due to
disability of incapacity for a period of 120 or more days, whether or
mot consecutive, occurring within any period of twelve consecutive
months;
(iii) Employee is indicted or convicted for the commission of
a felony;
2
(iv) failure by the Employee to obey the reasonable and lawful
orders to the Board of Directors or to perform any duties material to
his responsibilities as an officer of the Company, if such is not
corrected within ten days after written notice has been given to the
Employee by the Board;
(v) termination of the Employee's employment by the Employee
at any time for any reason (including, without limitation, Employee's
resignation); or
(vi) the death of the Employee.
(b) In the event Employee's employment is terminated by the Company
"without cause" (as hereinafter defined), the Company shall pay the Employee
severance compensation equal to the sum of one year's base salary at the
Employee's then current level, plus an amount equal to any performance bonus
paid to Employee during the twelve months immediately preceding the date of
termination or accrued by the Company at the direction of the Board of Directors
for payment to Employee of a performance bonus for services rendered during such
period (collectively the "Severance Payment"); provided, however, if Employee
accepts other employment or provides consulting or advisory services within
twelve months of the date of termination of his employment, any salary or
consulting or advisory fees earned or received by Employee shall offset
dollar-for-dollar the Severance Payment. Employee covenants and agrees to
immediately notify the Company upon obtaining other employment or if he provides
any such consulting or advisory services within twelve months or the date of
such termination. Subject to the foregoing, the Severance Payment shall be paid
to Employee in twelve substantially equal installments (less legally required
deductions) in accordance with the Company's regular payroll cycle for the one
year period following the date of termination. No interest shall accrue on or be
paid with respect to any portion of such Severance Payment.
(c) For purposes of this Agreement, the term "without cause" shall mean
termination of Employee's employment by the Company for any reason other than
those enumerated in Section 2(a) above as constituting "for cause" including,
without limitation, (i) the Company's failure to pay Employee's base salary in
accordance with its regular payroll practices, if such failure is not corrected
within three business days of the Company's receipt of written notice thereof,
(ii) reduction of Employee's annual rate of base salary as set forth in Section
1 hereof, and (iii) the constructive termination of Employee as the result of
actions taken by the Company that result in the removal of Employee as an
officer of the Company or any material diminishment by the Company in Employee's
functions, duties or responsibilities, if such action is not corrected within
thirty days of the Company's receipt of written notice from Employee that a
constructive termination has occurred.
3. NONCOMPETITION. (a) Employee agrees that while employed by the
Company and for a two year period following the termination of such employment,
Employee will not, without the prior written consent of the Board of Directors
of the Company, directly of indirectly: (i) own, manage, operate, control or
participate in, or be associated with as a director, officer, shareholder,
partner, joint venturer, employee, consultant or otherwise, any business which
provides medical transcription services or any other services provided or
performed by the Company during the term of Employee's employment, which
compete, directly or indirectly, with the Company in any city or other
geographic area where any business is carried on by the Company or any of its
subsidiaries within the twelve month period immediately preceding the
termination of his employment (a "Prohibited Business"); (ii) become financially
interested in any person or entity engaged in any such Prohibited Business;
(iii) employ or solicit any employee of the Company either to work for him
personally or on behalf of any other person or entity whether or not engaged in
a Prohibited Business; or (iv) solicit any client or customer of the Company
with which Employee had substantial contact or oversight responsibility within
the twelve month period immediately preceding the termination of
-2-
3
his employment for the provision of services constituting a Prohibited
Business. Notwithstanding the foregoing, Employee shall not be deemed to be
engaged in a Prohibited Business solely by reason of his ownership of not more
than 5% of any class of securities registered under the Securities Act of 1933,
as amended, even if the issuer of such class of securities is engaged in a
Prohibited Business.
(b) In connection with the foregoing provisions of this Section
3, the Employee represents that his experience, capabilities and circumstances
are such that such provisions will not prevent him from earning a livelihood.
The Employee further agrees that the limitations set forth in this Section 3
(including, without limitation, any time or territorial limitations) are
reasonable and properly required for the adequate protection of the businesses
of the Company and its subsidiaries. It is understood and agreed that the
covenants made by the Employee in this Section 3 shall survive the expiration
or termination of this Agreement.
(c) The Employee acknowledges and agrees that a remedy at law for
any breach or threatened breach of the provisions of this Section 3 would be
inadequate and, therefore, the Employee agrees that the Company and any of its
subsidiaries shall be entitled to seek injunctive relief in addition to any
other available rights and remedies in cases of any such breach or threatened
breach; provided, however, that nothing contained herein shall be construed as
prohibiting the Company or any of its subsidiaries from pursuing any other
rights and remedies available for any such breach or threatened breach.
4. INVENTIONS AND CONFIDENTIAL INFORMATION. The Employee hereby
covenants, agrees and acknowledges as follows:
(a) The Company is engaged in a continuous program of research,
design, development, production, marketing and servicing with respect to its
businesses and that as part of the Employee's employment by the Company the
Employee is (or may be) expected to make new contributions and inventions of
value to the Company.
(b) The Employee's employment hereunder creates a relationship of
confidence and trust between the Employee and the Company with respect to
certain information pertaining to the business of the Company and its
subsidiaries or pertaining to the business of any client or customer of the
Company or its subsidiaries or pertaining to the business of any client or
customer of the Company or its subsidiaries which may be made known to the
Employee by the Company or any of its subsidiaries or by any client or
customer of the Company or any of its subsidiaries or learned by the Employee
during the period of his employment by the Company.
(c) The Company possesses and will continue to possess
information that has been created, discovered or developed by, or otherwise
become known to it (including, without limitation, information created,
discovered or developed by, or made known to, the Employee during the period of
his employment or arising out of his employment) or in which property rights
have been or may be assigned or otherwise conveyed to the Company, which
information has commercial value in the business in which the Company is engaged
and is treated by the Company as confidential.
(d) Any and all inventions, products, discoveries, improvements,
processes, manufacturing, marketing and service methods or techniques,
formulae, designs, styles, specifications, data bases, computer programs
(whether in source code or object code), know-how, strategies and data, whether
or not patentable or registrable under copyright or similar statutes made,
developed or created by the Employee (whether at the request or suggestion of
the Company, any of its subsidiaries, or otherwise, whether alone or in
conjunction with others, and whether during regular hours of work or
otherwise) during the period of his employment by the Company which may
pertain to the business, products, or processes of the Company or any of its
subsidiaries (collectively, hereinafter referred to as "Inventions"), will be
promptly and full
-3-
4
disclosed by the Employee to an appropriate executive officer of the Company
(other than the Employee) and shall be the Company's exclusive property, and the
Employee will promptly execute and/or deliver to an appropriate executive
officer of the Company (other than the Employee) without any additional
compensation therefor, all papers, drawings, models, data, documents and other
material pertaining to or in any way relating to any inventions made, developed
or created by him as aforesaid.
(e) The Employee will keep confidential and will hold for the Company's
sole benefit any Invention which is to be the exclusive property of the Company
under this Section 4 for which no patent, copyright, trademark or other right or
protection is issued.
(f) The Employee also agrees that he will not, without the prior written
consent of the Board of Directors of the Company (i) use for his benefit or
disclose at any time during his employment by the Company, or thereafter, except
to the extent required by the performance by him of his duties as an employee of
the Company, any confidential or proprietary information obtained or developed
by him while in the employ of the Company with respect to any Inventions or with
respect to any customers, clients, suppliers, products, employees, financial
affairs, or methods of design, distribution, marketing, service, procurement or
manufacture of the Company or any of its subsidiaries, or any confidential
matter, except information which at the time is generally known to the public
other than as a result of disclosure by him not permitted hereunder or the
disclosure of which is required by law or by Court Order, or (ii) take with him
upon leaving the employ of the Company any document or paper relating to any of
the foregoing or any physical property of the Company or any of its
subsidiaries.
(g) The Employee acknowledges and agrees that a remedy at law for any
breach or threatened breach of the provisions of this Section 4 would be
inadequate and, therefore, agrees that the Company and its subsidiaries shall be
entitled to seek injunctive relief in addition to any other available rights and
remedies in case of any such breach or threatened breach; provided, however,
that nothing contained herein shall be construed as prohibiting the Company or
any of its subsidiaries from pursuing any other rights and remedies available
for any such breach or threatened breach.
(h) The Employee agrees that upon termination of his employment by the
Company for any reason, the Employee shall forthwith return to the Company all
documents and other property in his possession belonging to the Company or any
of its subsidiaries.
(i) Without limiting the generality of Section 4 hereof, the Employee
hereby expressly agrees that the foregoing provisions of this Section 4 shall be
binding upon the Employee's heirs, successors and legal representatives.
5. SUCCESSORS BOUND; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the Employee, the Company, and their respective
successors, assigns, heirs, executors, legal representatives and administrators.
Any attempted assignment of this Agreement by the Employee shall be void.
6. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement or any word, phrase, clause, sentence, or other portion thereof
shall be held to be unenforceable or invalid for any reason, such provision or
portion thereof shall be modified or deleted in such a manner so as to make this
Agreement, as modified, legal and enforceable to the fullest extent permitted
under applicable laws.
7. NOTICES. All notices, demands, or other communications required to be
or otherwise given or made hereunder shall be in writing and shall be deemed
given if delivered personally, or mailed overnight
-4-
5
delivery service or by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to Employee: Xx. Xxxxx X. Xxxxx
The MRC Group
0000 Xxxxx Xxxx
Xxxxxxxxx, Xxxx 00000
If to the Company: Board of Directors
The MRC Group
c/o Welsh Xxxxxx Xxxxxxxx & Xxxxx
One World Financial Center, Suite 3601
New York, New York 10261
with a copy to: Xx. Xxxxxx X. Xxxxx
President
The MRC Group
0000 Xxxxx Xxxx
Xxxxxxxxx, Xxxx 00000
All such notices hall be deemed given on the date personally delivered or
received.
8. AGREEMENT NOT TO DISPARAGE. The Company shall not, and shall
admonish its officers, directors, employees, agents and affiliates not to say or
write anything derogatory about Employee and Employee shall not say or write
anything derogatory about the Company, its subsidiaries or their respective
officers, directors, employees, agents or affiliates. The parties agree that any
violation or threatened violation of any of the provisions of this paragraph
shall cause immediate and irreparable harm to the other party and, in such
event, an injunction restraining the breaching party from such violation may be
entered against such party in addition to any other relief available to the
nonbreaching party. In addition to the remedies set forth in the immediately
preceding sentence, in the event the Company files suit against the Employee
alleging a breach of this covenant not to disparage, all Severance Payments
otherwise payable pursuant to Section 2(b) hereof shall be held in abeyance by
the Company pending a judicial determination of the allegations. If the court
renders finding that Employee has breached this covenant, Employee shall forfeit
his right to such Severance Payments and the Company shall have no further
obligation to make any Severance Payments to Employee.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes and
cancels any prior agreements, representations, warranties or communications,
whether oral or written, among the parties relating to the subject matter
hereof.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
11. AMENDMENT AND MODIFICATION. This Agreement may not be amended or
modified, except by the mutual written consent of the parties hereto.
12. GOVERNING LAW. This Agreement shall be construed and interpreted
according to the substantive laws of the State of Ohio without giving effect to
the conflicts of laws provisions thereof.
-5-
6
13. FEES AND EXPENSES. If legal action (including a request for
injunctive relief) is commenced by either party to enforce or defend its rights
under this Agreement, the prevailing party in such action shall be entitled to
recover its costs and reasonable attorneys' fees in addition to any other
relief granted.
IN WITNESS WHEREOF, the parties have executed this Covenant Not to
Compete and Severance Agreement as of the date first above written.
MEDIFAX, INC.
By:/s/ Xxxxxx X. Xxxxx
--------------------
Xxxxxx X. Xxxxx
President
EMPLOYEE:
/s/ Xxxxx X. Xxxxx
-----------------------
Xxxxx X. Xxxxx
-6-
