Employment Agreement

EXHIBIT 10.25


EMPLOYMENT AGREEMENT


AGREEMENT by and between Dictaphone Corporation, a Delaware corporation (the "Company"), and Robert Schwager (the "Executive"), dated as of the 1st day of June, 1999.


WHEREAS, the Executive is currently employed by the Company in an executive position of importance to the business and prospects of the Company; and


WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders to secure the services of the Executive on a full-time basis in the position, and for the period set forth below, and the Executive desires to continue to serve in such capacity.


NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:


1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and the Executive shall serve the Company, on the terms and conditions set forth in this Agreement, for the period commencing on June 1, 1999, and ending on May 31, 2001 (the "Employment Period"). The Employment Period may be renewed as provided in Section 11 hereof.


2. POSITION AND DUTIES. (a) The Executive shall serve as Senior Vice President and General Manager - Voice Systems of the Company, reporting to the Chief Operating Officer of the Company, with such duties and responsibilities as are customarily assigned to such position, and such other duties and responsibilities not inconsistent therewith as may be assigned to the Executive from time to time by the Company.


(b) The Executive's services shall be performed at the Company's headquarters in Stratford, Connecticut, subject to such business travel as may be required from time to time.


3. COMPENSATION. (a) BASE SALARY. During the Employment Period, the Executive shall receive a base salary (the "Annual Base Salary") at the annual rate of $285,000. The Annual Base Salary shall be payable in accordance with the Company's payroll practices as in effect from time to time, subject to applicable taxes and withholding. During the Employment Period, the Annual Base Salary shall be reviewed for possible merit increases at least annually, on or about December 1. Any increase in the Annual Base Salary shall not limit or reduce any other obligation of the Company under this Agreement. The Annual Base Salary shall not be reduced after any such increase, and the term "Annual Base Salary" shall thereafter refer to the Annual Base Salary as so increased.


(b) ANNUAL BONUS. In addition to the Annual Base Salary, for each calendar year or portion of a calendar year during the Employment Period, the Executive shall be eligible to earn an annual performance bonus (the "Annual Bonus") pursuant to the Company's management incentive bonus programs, as in effect from time to time. In the event of a "Change of Control" (as defined herein), the Annual Bonus shall be paid immediately to Executive on a pro-rated basis as calculated pursuant to the formula set forth in Section 5(a)(i)(A)(2) hereof.


(c) BENEFITS. During the Employment Period:(i) the Executive shall be entitled to participate in all stock incentive, savings and retirement plans, practices, policies and programs of the Company to the same extent as made available to other key executives as a group; and (ii) the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in, and shall receive all benefits under, all welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life insurance, group life insurance, accidental death and travel accident insurance plans and programs) to the same extent as made available to other key executives as a group.


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(d) FRINGE BENEFITS. During the Employment Period, the Executive shall be entitled to paid vacation, car allowance (not less than is in effect as of the date hereof) and such other benefits as shall be made available to other key executives as a group from time to time. In addition, during the term of the Employment Period, the Company shall procure and maintain term life insurance in the amount of One Million ($1,000,000) dollars for Executive, payable to the Executive's designated beneficiary.


4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. The Company shall be entitled to terminate the Executive's employment because of the Executive's "Disability" (as herein defined) during the Employment Period. "Disability" means that (i) the Executive has been unable, for a period of six (6) months, or for a total of 180 days in any given period of twelve (12) months, to perform the Executive's duties under this Agreement, as a result of physical or mental illness or injury, and (ii) a physician selected by the Company or its insurers, has determined that the Executive's incapacity is total and permanent. A termination of the Executive's employment by the Company for Disability shall be communicated to the Executive by written notice, and shall be effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), unless the Executive is able to, and does, return to full-time performance of the Executive's duties before the Disability Effective Date.


(b) BY THE COMPANY. (i) The Company may terminate the Executive's employment during the Employment Period for Cause or without Cause. "Cause" means:


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A. (i) the repeated failure or refusal of the Executive to perform the Executive's material duties or responsibilities under this Agreement (other than as a result of physical or mental illness or injury) or (ii) the engaging by the Executive in gross misconduct or dishonesty that is materially injurious to the Company; PROVIDED THAT in the case of conduct covered by subclause (i) the Company shall give written notice to the Executive at least ninety (90) days prior to such termination of the Company's intent to terminate, which notice shall set out in detail the ways in which Executive has failed to perform such duties and/or responsibilities, and Executive shall have failed to cure such failure prior to the expiration of such 90-day period;


B. any fraud, embezzlement or other dishonesty or breach of business ethics by the Executive that could likely adversely affect the Company's business or reputation;


C. the Executive's conviction of a felony or entering into a plea of nolo contendere with respect to a felony; or


D. failure by the Executive to provide sixty (60) days advance written notice of resignation (other than in connection with a termination as a result of "Good Reason" (as hereinafter defined)).


(ii) A termination of employment by the Company for Cause shall be effectuated by giving the Executive written notice ("Notice of Termination for Cause") of the termination, setting forth the conduct of the Executive that constitutes Cause. Except as provided in subclause A of Section 4(b)(i) above, a termination of employment by the Company for Cause shall be effective on the date when the Notice of Termination for Cause is given, unless the notice sets forth a later date (which date shall in no event be later than thirty (30) days after the notice is given).


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(iii) A termination of the Executive's employment by the Company without Cause shall be effected by giving the Executive written notice of the termination.


(c) BY THE EXECUTIVE FOR GOOD REASON. (i) For purposes of this Agreement, "Good Reason" means:


A. the assignment to the Executive of any duties and/or responsibilities inconsistent in any respect with paragraph (a) of Section 2 of this Agreement (including but not limited to a material reduction in responsibilities, rank or reporting relationship), other than actions that are not taken in bad faith and are remedied by the Company within twenty (20) business days after receipt of written notice thereof from the Executive, provided however that, notwithstanding the foregoing, the appointment by the Company of a Chief Financial Officer or a Chief Technical/Engineering Officer, and the assignment to such individuals of duties customarily associated with such positions, shall not be deemed to be "Good Reason" hereunder;


B. any failure by the Company to comply with any provision of Section 3 of this Agreement, other than failures that are not taken in bad faith and are remedied by the Company within twenty (20) business days after receipt of written notice thereof from the Executive;


C. any failure by the Company to comply with Section 10(c) of this Agreement;


D. the Company's requiring the Executive to be based at any office or location more than a reasonable commuting distance from the Company's executive headquarters as of the date hereof; or


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E. following the occurrence of a "Change of Control" of the Company (as defined below) (i) the occurrence, within two (2) years of the date of the Change of Control, of any event that would otherwise constitute "Good Reason" within the provisions of Section 4(c)(A)-(D) hereof, or (ii) a termination by the Executive, at the Executive's own initiative, for any reason during the four (4) month period immediately following the first twelve (12) month period following the date of the Change of Control. For purposes of this Agreement, "Change of Control" means the happening of any of the following events:


(1) An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (A) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any Person pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (3) of this Section 4(c); or


(2) A change in the composition of the Board such that the individuals who, as of the first day of the Employment Period, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board")


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cease for any reason to constitute at least a majority of the Board; PROVIDED, HOWEVER, for purposes of this Section 4(c), that any individual who becomes a member of the Board subsequent to such date, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; PROVIDED FURTHER, however, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or


(3) The approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (A) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the


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same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Com ...