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Exhibit 10.11
COVENANT NOT TO COMPETE
AND
SEVERANCE AGREEMENT
THIS COVENANT NOT TO Compete AND SEVERANCE AGREEMENT (this "Agreement"),
dated this 19th day of July, 1996, is made and entered into by and between
MEDIFAX, INC., a Missouri corporation (the "Company"); and XXXXXX X. XXXXX, an
individual resident of the State of Ohio (the "Employee").
W I T N E S S E T H
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WHEREAS, the Company and the Employee have entered into that certain
Transfer Agreement and Plan of Section 351 Exchange; dated July 19, 1996 (the
"Transfer Agreement"), pursuant to which the Company, in a series of related
transactions, has acquired all of the outstanding capital stock of Medical
Records Corp, an Ohio corporation of which the Employee was formerly a
shareholder and officer;
WHEREAS, the Company desires to employ the Employee to serve as Senior
Vice President of Corporate Development on an at will basis, and the Employee
desires to serve the Company in such capacity.
WHEREAS, as an inducement to the Company to consummate the transactions
contemplated by the Transfer Agreement, the Employee is willing to agree, on the
terms and conditions hereinafter set forth, to refrain from competing with the
Company for the period of time specified herein; and
WHEREAS, the execution and delivery of this Agreement by the Company and
the Employee is a condition precedent to the obligations of the Company under
the Transfer Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein and in the Transfer Agreement, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
l. EMPLOYMENT. The Company hereby employs the Employee as Senior Vice
President of Corporate Development 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 purposes of 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);
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(ii) termination of the Employee's employment by the Company
because of the Employee's inability to perform his duties due to
disability or incapacity for a period of 120 or more days, whether or
not consecutive; occurring within any period of twelve consecutive
months;
(iii) Employee is indicted or convicted for the commission of a
felony;
(iv) failure by the Employee to obey the reasonable and lawful
orders of the Board of Directors or to perform any duties material to
his responsibilities as an officer of the Company, if such failure 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 is
terminated without cause within one year of the date of this Agreement, the
calculation of the Severance Payment shall not include any performance bonuses
paid to Employee prior to the consummation of the transactions contemplated in
the Transfer Agreement, but shall include an amount equal to any bonus paid
after the date of this Agreement, on an annualized basis, and; provided,
further, 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 of 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, (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; and (v) a decision by the Company that
the Employee is required to relocate to a city other than Cleveland, Ohio, if
Employee refuses to accept such relocation.
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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 or indirectly: (i) own, manage, operate, control or
participate in, or be associated with as a director, officer, shareholder,
partner, joint venture, 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 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 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
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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 registerable 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 fully disclosed by the
Employee to an appropriate executive officer of the Company (other thin 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 thin 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 m 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.
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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 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. Xxxxxx X. Xxxxx
Medical Records Corporation
0000 Xxxxx Xxxx
Xxxxxxxxx, Xxxx 00000
If to the Company: Board of Directors
Medifax, Inc.
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
Medifax, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
All such notices shall 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 a
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.
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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 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.
13. FEES AND EXPENSES. If legal action (including a request for
injunctive relief) is commenced by either party to enforce or defend is 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.
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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
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Xxxxxx X. Xxxxx
President
EMPLOYEE
/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
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