Chief Information Officer Employment Agreement - Joseph Degati

EMPLOYMENT AGREEMENT


This EMPLOYMENT AGREEMENT is made and entered into as of this 4th day of April, 2005, by and between Spheris Operations Inc. (the "Company") and Joseph Degati (the "Employee").


WITNESSETH:


WHEREAS, the Company desires to enter into an employment agreement embodying the terms of Employee's employment (this "Agreement") and Employee desires to enter into this Agreement.


NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Employee agree as follows:


Section 1. DEFINITIONS.


(a) "Accrued Obligations" shall mean (i) all accrued but unpaid Base Salary through the date of termination of Employee's employment, (ii) any unpaid or unreimbursed expenses incurred in accordance with Section 7 below, and (iii) any benefits provided under the Company's employee benefit plans upon a termination of employment, in accordance with the terms therein.


(b) "Annual Bonus" shall have the meaning set forth in Section 4(b).


(c) "Base Salary" shall mean the salary provided for in Section 4(a) below or any increased salary granted to Employee pursuant to Section 4(a).


(d) "Board" shall mean the Board of Directors of the Company.


(e) "Cause" shall mean (i) a continuing failure, neglect or refusal by Employee to perform in any material respect his duties or responsibilities; (ii) embezzlement, theft, larceny, material fraud or other acts of dishonesty; (iii) Employee's conviction of, admission to, or entry of pleas of no contest to any felony or any other crime which has, or may have within the Company's reasonable discretion, a material adverse effect on Employee's ability to carry out his duties under this Agreement or upon the reputation of the Company; (iv) consistent drunkenness by Employee or his illegal use of narcotics which is, or could reasonably be expected to become, materially injurious to the reputation or business of the Company or its affiliates or which impairs, or could reasonably be expected to impair, the performance of Employee's duties hereunder; or (v) Employee's material breach of this Agreement or the Noncompetition Agreement.


(f) "Disability" shall mean any physical or mental disability or infirmity that prevents the performance of Employee's duties hereunder for a period of (i) ninety (90) consecutive days or (ii) one hundred twenty (120) non-consecutive days during any twelve (12) month period. Any question as to the existence, extent or potentiality of Employee's Disability upon which Employee and the Company cannot agree shall be determined by a qualified,


independent physician selected by the Company and approved by Employee (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.


(g) "Noncompetition Agreement" shall mean that certain Confidential Information, Non-Competition and Invention Assignment Agreement, dated April 4, 2005 entered into by Employee and the Company.


(h) "Non-Renewal Notice" shall have the meaning set forth in Section 2 hereof.


(i) "Severance Term" shall mean the period specified in Section 8(d)(ii) below.


(j) "Term of Employment" shall mean the period specified in Section 2 below.


Section 2. ACCEPTANCE AND TERM OF EMPLOYMENT.


The Company agrees to employ Employee and Employee agrees to serve the Company on the terms and conditions set forth herein. Unless sooner terminated as provided in Section 8 hereof, the Term of Employment shall commence on April 4, 2005 and shall continue during the period ending on the second anniversary thereof. Subject to Section 8 hereof, the Term of Employment shall be extended automatically without further action by either party by one additional year first on the second anniversary hereof of the Closing Date, and on each succeeding anniversary thereafter, unless, not later than ninety (90) days prior to the end of the Term of Employment (including any prior extension thereof), either the Company or Employee shall have notified the other in writing of its intention not to renew this Agreement (a "Non-Renewal Notice"). Once the Company or Employee has delivered a Non-Renewal Notice to the other, Employee's employment hereunder shall terminate on the close of the business on the last day of the Term of Employment.


Section 3. POSITION, DUTIES AND RESPONSIBILITIES.


(a) During the Term of Employment, Employee shall be employed and serve as the Chief Information Officer of the Company (together with such other position or positions consistent with Employee's title as the Chief Executive Officer and/or Board shall specify from time to time) and shall have such duties typically associated with such title. Employee shall report to the Chief Executive Officer. Employee also agrees to serve as an officer and/or director of any subsidiary of the Company without additional compensation.


(b) Employee shall devote his full business time, attention, skill and reasonable best efforts to the performance of his duties under this Agreement and shall not engage in any other business or occupation during the Term of Employment without the written permission of the Board, including, without limitation, any activity that (x) conflicts with the interests of the Company, (y) interferes with the proper and efficient performance of his duties for the Company, or (z) interferes with the exercise of his judgment in the Company's best


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interests. Notwithstanding the foregoing, nothing herein shall preclude Employee from (i) serving, with the prior written consent of the Board, as a member of the board of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of non-competing businesses and charitable organizations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs; provided, however, that the activities set out in clauses (i), (ii) and (iii) shall be limited by Employee so as not to materially interfere, individually or in the aggregate, with the performance of his duties and responsibilities hereunder.


Section 4. COMPENSATION. During the Term of Employment, Employee shall be entitled to the following compensation:


(a) Base Salary. Employee shall be paid an annualized Base Salary, payable in accordance with the regular payroll practices of the Company, of not less than $175,000 with increases, if any, as may be approved in writing by the Board.


(b) Annual Bonus. Employee shall be eligible for an annual discretionary incentive bonus award determined by the Board in respect of each fiscal year during the Term of Employment (the "Annual Bonus"). The target Annual Bonus for each such year shall be 50% of Employee's annual Base Salary for such year, although the actual Annual Bonus amount may be less than or greater than the target Annual Bonus depending upon the degree of attainment of individual and Company performance criteria established by the Board for such year. Employee shall receive the Annual Bonus in respect of any year at the same time as bonuses are paid to other executive officers of the Company, but in no event later than ninety (90) days after the end of the fiscal year for which the bonus is payable.


Section 5. EMPLOYEE BENEFITS.


During the Term of Employment, Employee shall be entitled to participate in health, insurance, retirement and other benefits provided to other senior executives of the Company. Employee shall also be entitled to the same number of holidays, vacation, sick days (or the same amount of paid time off, as applicable) and other benefits as are generally allowed to senior executives of the Company in accordance with the Company policy in effect from time to time.


Section 6. KEY-MAN INSURANCE.


At any time during the Term of Employment, the Company shall have the right to insure the life of Employee for the sole benefit of the Company, in such amounts, and with such terms, as it may determine. All premiums payable thereon shall be the obligation of the Company. Employee shall have no interest in any such policy, but agrees to cooperate with the Company in taking out such insurance by submitting to physical examinations, supplying all information required by the insurance company, and executing all necessary documents, provided that no financial obligation is imposed on Employee by any such documents.


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Section 7. REIMBURSEMENT OF BUSINESS EXPENSES.


Employee is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement and the Company shall promptly reimburse him for all busine ...