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.

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          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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<PAGE>

                    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  Company Common Stock and  Outstanding  Company
Voting  Securities,  as the case may be, (B) no Person  (other than the Company,
any employee  benefit plan (or related  trust)  sponsored or  maintained  by the
Company  or any  corporation  controlled  by the  Company  or  such  corporation
resulting from such Corporate  Transaction)  will  beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common stock
of the  corporation  resulting from such  Corporate  Transaction or the combined
voting power of the outstanding  voting securities of such corporation  entitled
to vote  generally in the  election of directors  except to the extent that such
ownership existed with respect to the Company prior to the Corporate Transaction
and (C)  individuals  who were members of the Incumbent Board will constitute at
least a majority of the  members of the board of  directors  of the  corporation
resulting from such Corporate Transaction; or

                         (4)  The  sale  or  spin-off  of any  of the  Company's
divisions or operations  which in part, or in the aggregate,  generated at least
30% of the Company's most recent annual revenues; or

                         (5) The approval by the  shareholders of the Company of
a complete liquidation or dissolution of the Company; or

                         (6) Stonington  Capital  Appreciation  1994 Fund,  L.P.
ceases to beneficially  control or own more than 50% of the Outstanding  Company
Common Stock (other than as a result of (i) sales of Company Common Stock to the
public by the Company or Stonington or (ii)  distributions  by Stonington to its
partners).


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<PAGE>

                    (ii) A  termination  of employment by the Executive for Good
Reason shall be  effectuated by giving the Company  written  notice  ("Notice of
Termination for Good Reason") of the  termination,  setting forth the conduct of
the Company that  constitutes  Good Reason.  Such Notice of Termination for Good
Reason may be given by  Executive  not later than one  hundred  fifty (150) days
(four (4) months in the event of Change of Control)  following the  circumstance
giving rise to a "Good Reason"  termination  right  hereunder.  A termination of
employment  by the Executive for Good Reason shall be effective on the thirtieth
(30th)  business day following the date when the Notice of Termination  for Good
Reason 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).

               (d) NO WAIVER.  The failure to set forth any fact or circumstance
in a Notice of Termination  for Cause or a Notice of Termination for Good Reason
shall not constitute a waiver of the right to assert, and shall not preclude the
party giving notice from  asserting,  such fact or circumstance in an attempt to
enforce any right under or provision of this Agreement.

               (e) DATE OF TERMINATION. The "Date of Termination" means the date
of the Executive's  death, the Disability  Effective Date, the date on which the
termination  of the  Executive's  employment  by the Company for Cause or by the
Executive for Good Reason is  effective,  or the date on which the Company gives
the  Executive  notice  of a  termination  of  employment  without  Cause or the
Executive  gives the Company notice of a termination of employment  without Good
Reason, as the case may be.

          5.  OBLIGATIONS  OF THE COMPANY UPON  TERMINATION.  (a) OTHER THAN FOR
CAUSE OR DEATH;  GOOD REASON.  If,  during the  Employment  Period,  the Company
terminates the  Executive's  employment,  other than for Cause, or the Executive
terminates his  employment  for Good Reason,  the Company shall pay the amounts,


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and continue the benefits described, in subparagraph (i) below to the Executive.
The  payments  provided  pursuant to this Section 5(a) are intended as severance
payments for a termination  of the  Executive's  employment by the Company other
than for Cause or for the actions of the Company leading to a termination of the
Executive's  employment  by the  Executive for Good Reason and shall be the sole
and exclusive  remedy therefor;  PROVIDED FURTHER that as a condition  precedent
for such payments the Executive  shall execute and deliver a general  release of
all claims (other than any claims or rights pursuant to stockholders agreements,
stock option incentive and other benefit plans, as provided in Section 6 hereof)
against the Company, in form and substance satisfactory to the Company.

                    (i) The amounts to be paid as described above are:

                         A. The  Executive's  earned and accrued but unpaid cash
compensation,  in the form of a lump-sum payment,  to be paid within thirty (30)
days after the Date of Termination, which shall equal the sum of (1) any portion
of the  Executive's  Annual Base Salary earned  through the Date of  Termination
that has not yet been paid,  (2) an amount  equal to the Annual Bonus that would
have been paid for the  fiscal  year in which  the Date of  Termination  occurs,
calculated as if all goals had been achieved at the expected  level (the "Annual
Bonus Amount"),  times a fraction,  the numerator of which is the number of days
in the current fiscal year through the Date of Termination,  and the denominator
of which is 365;  (3) any  compensation  previously  deferred  by the  Executive
pursuant to this  Agreement  or  otherwise  that has not yet been paid,  and the
immediate payment of which is otherwise  permitted by applicable plan documents;
and (4) any accrued but unpaid Annual  Bonuses and vacation pay (the amounts set
forth in subclauses (1)-(4) constitute the "Accrued Obligations"); and


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                         B. (I) In the event that such  termination is effective
prior to the  occurrence  of a Change of  Control,  a payment  payable  in equal
amounts in  accordance  with the Company's  standard  payroll  practices  over a
twenty-four  (24) month  period of an amount equal to the product of (x) two (2)
times (y) the sum of (a) the Annual Base Salary and annual car  allowance  as of
the Date of  Termination  (the "Final Base  Salary")  and (b) an amount equal to
thirty (30%) percent of the Final Base Salary;

                              (II)  In  the  event  that  such   termination  is
effective at any time  following  the  occurrence  of a Change of Control (or in
connection  with a Change of  Control),  a payment  payable in equal  amounts in
accordance with the Company's standard payroll practices over a twenty-four (24)
month of an amount  equal to the  product  of (x) three (3) times (y) the sum of
(a) the Final  Base  Salary  and (b) an amount  equal to the higher of (w) fifty
(50%)  percent of Final Base  Salary and (z) a  percentage  of Final Base Salary
equal to the  highest  percentage  Annual  Bonus  paid to,  or  earned  by,  the
Executive  during  any of  three  (3)  years  immediately  prior  to the Date of
Termination.

                         C. The  benefits to be  continued  are  benefits to the
Executive  and/or the  Executive's  family at least as  favorable  as those that
would have been  provided to them under  Section  3(c) of this  Agreement if the
Executive's employment had continued through the end of the Employment Period or
for two years, whichever is greater;  PROVIDED,  HOWEVER, that during any period
when  the  Executive  is  eligible  to  receive  such  benefits   under  another
employer-provided  plan, the benefits provided by the Company under this Section
5(a)(c) may be made secondary to those provided under such other plan.

                         D. The Company shall,  at its sole expense as incurred,
provide the  Executive  with  outplacement  services,  the scope and provider of
which shall be selected by the Executive in the Executive's sole discretion, but
the cost thereof shall not exceed $40,000 in any nine (9) month period; provided


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that the  Executive  may elect,  upon prior  written  notice to the Company,  to
receive  a  lump-sum   payment  of  $40,000  subject  to  applicable  taxes  and
withholding, in lieu of outplacement services hereunder.

                         E. To the extent not theretofore paid or provided,  the
Company  shall  timely  pay or  provide to the  Executive  any other  amounts or
benefits  required to be paid or provided or which the  Executive is eligible to
receive under any plan, program,  policy or practice or contract or agreement of
the Company and its affiliated  companies (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits").

               (b) DEATH. If the Executive's  employment is terminated by reason
of the Executive's death during the Employment Period, the Company shall pay the
Accrued  Obligations  to  the  Executive  or the  Executive's  estate  or  legal
representative,  as  applicable,  in a lump-sum  payment  (subject to applicable
taxes and  withholding)  within thirty (30) days after the Date of  Termination,
and the  Company  shall have no further  obligations  under this  Agreement.  If
Executive's employment is terminated by reason of Disability, Executive shall be
entitled to receive  disability  benefits  at the  expiration  of the  severance
payments,  to the extent  available  under the Company's  benefit plans;  in the
event of  conflict  between  the  severance  benefits  hereunder  and  long-term
disability benefits payable under the Company's plans,  Executive shall have the
right to choose between them if such benefits are mutually exclusive.

               (c)  CAUSE;  OTHER  THAN  FOR  GOOD  REASON.  If the  Executive's
employment is terminated by the Company for Cause during the Employment  Period,
or if the Executive terminates his employment during the Employment Period other
than for Good Reason, the Company shall pay the Executive, in a lump-sum payment
(subject to  applicable  taxes and  withholding)  within thirty (30) days of the
Date of  Termination,  any earned and unpaid Annual Base Salary through the Date
of  Termination,  and the Company shall have no further  obligations  under this
Agreement.


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          6. NON-EXCLUSIVITY OF RIGHTS.  Nothing in this Agreement shall prevent
or limit  the  Executive's  continuing  or  future  participation  in any  plan,
program,  policy or practice  provided  by the Company or any of its  affiliated
companies  for which the  Executive  may  qualify,  nor shall  anything  in this
Agreement limit or otherwise  affect such rights as the Executive may have under
any contract or agreement with the Company or any of its  affiliated  companies.
Vested  benefits and other amounts that the  Executive is otherwise  entitled to
receive  under any plan,  policy,  practice  or program  of, or any  contract or
agreement  with, the Company or any of its affiliated  companies on or after the
Date of  Termination  shall be payable  in  accordance  with such plan,  policy,
practice,  program,  contract  or  agreement,  as the  case  may be,  except  as
explicitly modified by this Agreement.

          7. NO MITIGATION. In no event shall the Executive be obligated to seek
other  employment  or take any other action by way of  mitigation of the amounts
payable to the  Executive  under any of the  provisions of this  Agreement  and,
except as  specifically  provided in this  Agreement,  such amounts shall not be
reduced, regardless of whether the Executive obtains other employment.

          8.   CONFIDENTIAL   INFORMATION;    NONCOMPETITION.    The   Executive
acknowledges  that his  employment by the Company will,  throughout  the term of
employment,  bring him into close contact with many confidential  affairs of the
Company,  including information about costs, profits,  markets, sales, products,
key personnel,  pricing policies,  operational methods,  technical processes and
other business affairs and methods and other  information not readily  available
to  the  public,  and  plans  for  future  development.  The  Executive  further


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acknowledges  that the services to be performed  under this  Agreement  are of a
special,   unique,  unusual,   extraordinary  and  intellectual  character.  The
Executive further acknowledges that the business of the Company is international
in scope, that its products are marketed  throughout the world, that the Company
competes in nearly all of its business  activities  with other entities that are
or could be  located  in nearly any part of the world and that the nature of the
Executive's  services,  position  and  expertise  are such that he is capable of
competing with the Company from nearly any location in the world. In recognition
of the foregoing, the Executive covenants and agrees:

               (a) The Executive,  at all times during the Employment Period and
thereafter,  shall hold in a fiduciary  capacity  for the benefit of the Company
all secret, trade,  proprietary or confidential  information,  knowledge or data
relating to the Company or any of its affiliated companies and shareholders, and
their respective  businesses,  that the Executive obtains during the Executive's
employment  by the Company or any of its  affiliated  companies  and that is not
public  knowledge  (other than as a result of the Executive's  violation of this
Section 8(a)) ("Confidential Information"). The Executive shall not communicate,
divulge or disseminate  Confidential Information at any time during or after the
Executive's  employment with the Company,  except with the prior written consent
of the Company or as otherwise  required by law or legal process.  The Executive
shall  deliver  promptly  to the  Company  on  termination  of  the  Executive's
employment by the Company,  or at any other time the Company may so request,  at
the  Company's  expense,  all  memoranda,  notes,  records,  reports  and  other
documents (and all copies thereof) relating to the Company's business, which the
Executive  obtained while employed by, or otherwise  serving or acting on behalf
of,  the  Company  and which the  Executive  may then  posses or have  under the
Executive's control.


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               (b) During the "Noncompetition  Period," the Executive shall not,
without the prior written consent of the Board,  engage in or become  associated
with a  "Competitive  Activity."  For  purposes of this  Section  8(b):  (i) the
"Noncompetition Period" means the period commencing on the first date upon which
the Executive is employed by the Company, and ending on the two-year anniversary
of the date upon which Executive's employment with the Company is terminated for
any reason;  (ii) a "Competitive  Activity" means any business or other endeavor
that  engages  in any  line  of  business  in any  geographic  location  that is
substantially  the same as either (i) any line of operating  business  which the
Company  engages  in,  conducts,  or, to the  knowledge  of the  Executive,  has
definitive plans to engage in or conduct, or (ii) any operating business that is
engaged in or conducted by the Company and as to which,  to the knowledge of the
Executive,  the Company covenants in writing, in connection with the disposition
of such business,  not to compete  therewith;  and (iii) the Executive  shall be
considered  to have  become  "associated  with a  Competitive  Activity"  if the
Executive  becomes  directly  or  indirectly  involved  as an  owner,  investor,
employee, officer, director, consultant, independent contractor, agent, partner,
advisor,  or in any other capacity  calling for the rendition of the Executive's
personal  services,  with  any  individual,  partnership,  corporation  or other
organization  that is engaged in a  Competitive  Activity.  Notwithstanding  the
foregoing,  the Executive may make and retain  investments during the Employment
Period,  and  thereafter,  in not more than five  percent  of the  equity of any
publicly  traded  entity  engaged in a Competitive  Activity,  if such equity is
listed  on  a  national   securities   exchange  or   regularly   traded  in  an
over-the-counter market.

               (c) During the Noncompetition Period, the Executive shall not, on
his or her own  behalf  or on behalf of any  other  person,  firm or entity  (x)
directly  or  indirectly  solicit,  induce or  attempt  to solicit or induce any


                                       15
<PAGE>

employee of the Company to terminate his or her employment with the Company,  or
to provide any assistance  whatsoever to any person, firm or entity engaged in a
Competitive  Activity, or (y) employ, or cause any business or entity with which
Executive  is  affiliated  to employ,  any person who was a full-time  executive
employee of the Company at the Executive's Date of Termination or six (6) months
prior to such date.

               (d) In addition to such other  rights and remedies as the Company
may have at equity or in law with  respect to any breach of this  Agreement,  if
the Executive  commits a material  breach of any of the provisions of Section 8,
the Company shall have the right and remedy to have such provisions specifically
enforced by any court having  equity  jurisdiction;  it being  acknowledged  and
agreed that any such breach or threatened breach will cause  irreparable  injury
to the Company and that money damages alone will not provide an adequate  remedy
to the Company.

               (e) If the Executive  commits a material breach of the provisions
of Section 8, the Company  shall be  entitled to offset any amounts  owed by the
Executive  to the Company  under this  Section 8 against any amounts owed by the
Company to the Executive under any provision of this Agreement or otherwise.

               (f) The Executive  acknowledges and agrees that the provisions of
this Section 8 are necessary to protect the business  operations  and affairs of
the  Company,  and will not  restrict  the  ability of the  Executive  to secure
meaningful  employment  opportunities  following any  termination  of employment
hereunder.

          9.  ARBITRATION;  ATTORNEYS' FEES. Any dispute or controversy  arising
under or in  connection  with this  Agreement  shall be settled  exclusively  by
arbitration  in the State of  Connecticut,  in accordance  with the rules of the
Commercial Panel of the American Arbitration Association ("AAA") then in effect,
and  judgment  may be  entered  on the  arbitrator's  award in any court  having


                                       16
<PAGE>

jurisdiction.  The costs of the arbitration  shall be borne as determined by the
arbitrator;   PROVIDED,   HOWEVER,   that  if  the  Company's  position  is  not
substantially  upheld, as determined by the arbitrator,  the reasonable expenses
of Executive (including fees and expenses payable to the AAA and the arbitrator,
fees and expenses  payable to witnesses,  including  expert  witness  fees,  and
expenses payable to attorneys and other professionals,  costs in connection with
obtaining  and  presenting  evidence  and  costs  of  the  transcription  of the
proceedings), as determined by the arbitrator, shall be reimbursed to him by the
Company.  Nothing in this  Section  shall limit the right of the Company to seek
injunctive  relief in any federal or state  court or take any other  remedial or
enforcement measures in any federal or state court in connection with any breach
(or alleged breach) by the Executive of Section 8 of this Agreement.

          10.  SUCCESSORS.  (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive  otherwise than by will or the laws of descent and distribution.  This
Agreement  (including  post-termination  payment obligations) shall inure to the
benefit  of and be  enforceable  by the  Executive's  heirs  (in  the  event  of
Executive's death), and legal representatives.

               (b) This  Agreement  shall inure to the benefit of and be binding
upon the Company and its  successors  (by  operation  of law or  otherwise)  and
assigns, and may be assigned by Company in connection with any sale, transfer or
other disposition of all or substantially all of its business and assets.

               (c) The Company shall require any  successor  (whether  direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially  all of the  business  and/or  assets of the Company  expressly to
assume and agree to perform  this  Agreement  in the same manner and to the same


                                       17
<PAGE>

extent  that the  Company  would  have been  required  to  perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such  successor  that assumes and agrees to
perform this Agreement, by operation of law or otherwise.

          11.  RENEWAL OF  AGREEMENT.  If, not less than one  hundred and twenty
(120)  days  prior  to the  expiration  of the  Employment  Period,  the term of
employment shall not have been previously  terminated pursuant to the provisions
of this  Agreement  (whether as a result of a  termination  by the Executive for
Good Reason or  otherwise),  then the Employment  Period shall be  automatically
renewed for an additional  two (2) year period on the terms and  conditions  set
forth in this Agreement.

          12.  INDEMNIFICATION.  The Executive shall be entitled  throughout the
Employment  Period in the  capacity  as an officer or director of the Company or
any of its  subsidiaries,  or as a member  of any  other  governing  body or any
partnership  or joint  venture in which the Company has an equity  interest (and
after the term of employment, to the extent relating to any continued service as
such  officer,  director  or  member)  to the  benefit  of  the  indemnification
provisions  contained on the date hereof in the Certificate of Incorporation and
By-Laws of the Company (not including any amendments or additions after the date
of  execution  hereof  that limit or narrow,  but  including  any that add to or
broaden,  the protection afforded to the Executive by those provisions),  to the
extent not  prohibited  by  applicable  law at the time of the  assertion of any
liability against the Executive.

          13.  MISCELLANEOUS.  (a) This  Agreement  shall be  governed  by,  and
construed in accordance  with, the laws of the State of Connecticut,  applicable
to agreements made and to be performed  entirely within such state. The captions
of this Agreement are not part of the provisions  hereof and shall have no force
or effect.  This  Agreement  may not be amended or modified  except by a written


                                       18
<PAGE>

agreement  executed by the parties  hereto or their  respective  successors  and
legal representatives.

               (b) All notices  and other  communications  under this  Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered  or  certified  mail,  return  receipt  requested,  postage  prepaid,
addressed as follows:

                   If to the Executive:

                   [To home address as listed in the Company's records]

                   If to the Company:
                   Dictaphone Corporation
                   3191 Broadbridge Avenue
                   Stratford, CT 06614-2559
                   Attention: General Counsel

or to such other  address as either  party  furnishes to the other in writing in
accordance  with  this  Section  13(b).  Notices  and  communications  shall  be
effective when actually received by the addressee.

               (c) The invalidity or  unenforceability  of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this  Agreement.  If any provision of this Agreement shall be held invalid or
unenforceable  in part, the remaining  portion of such provision,  together with
all other  provisions of this Agreement,  shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law, and
the invalid or unenforceable provision shall be deemed to have been redrafted as
if in the  original,  so as to be valid and  enforceable  to the maximum  extent
permissible under applicable law.


                                       19
<PAGE>

               (d)  Notwithstanding  any other provision of this Agreement,  the
Company may withhold  from amounts  payable  under this  Agreement  all federal,
state,  local and foreign  taxes that are required to be withheld by  applicable
laws or regulations.

               (e) The  failure of the  Executive  or the Company to insist upon
strict  compliance  with any  provision  of, or to assert any right under,  this
Agreement  shall not be deemed to be a waiver of such  provision  or right or of
any other provision of or right under this Agreement.

               (f) The Executive and the Company acknowledge that this Agreement
represents the complete  agreement  between the parties and supersedes any other
agreement  (including  prior severance  agreements)  between them concerning the
subject matter hereof.

This Agreement may not be modified except by express written  agreement  between
the parties.

               (g) This  Agreement may be executed in one or more  counterparts,
each of which shall be deemed an original,  and which together shall  constitute
one instrument.

               (h)  Whenever  this  Agreement  provides  for any  payment to the
Executive's  estate,  such  payment may be made instead to such  beneficiary  or
beneficiaries  as the Executive may designate by written  notice to the Company.
The  Executive  shall  have the  right to  revoke  any such  designation  and to
redesignate a beneficiary or beneficiaries by written notice to the Company (and
to any applicable insurance company) to such effect.

               (i) The  Executive  represents  and  warrants to the Company that
this Agreement is legal,  valid and binding upon the Executive and the execution
of this Agreement and the performance of the Executive's  obligations  hereunder
does not and will not  constitute  a breach  of, or  conflict  with the terms or
provisions of, any agreement or  understanding to which the Executive is a party
(including,  without limitation,  any other employment  agreement).  The Company


                                       20
<PAGE>

represents and warrants to the Executive that this Agreement is legal, valid and
binding upon the Company and the execution of this Agreement and the performance
of the Company's obligations hereunder does not and will not constitute a breach
of, or conflict with the terms or provisions of, any agreement or  understanding
to which the Company is a party.

               (j)  Neither  the  Executive,  his legal  representative  nor any
beneficiary  designated by the Executive shall have any right, without the prior
written  consent of the  Company,  to  assign,  transfer,  pledge,  hypothecate,
anticipate  or commute to any  person or entity  any  payment  due in the future
pursuant to any provision of this  Agreement,  and any attempt to do so shall be
void and shall not be recognized by the Company.

                                       21
<PAGE>


                  IN  WITNESS  WHEREOF,  the  Executive  has  hereunto  set  the
Executive's hand and the Company has caused this Agreement to be executed in its
name on its behalf, all as of the day and year first above written.

Dictaphone Corporation

By: /s/ John H. Duerden
   ________________________________________

Printed Name: John H. Duerden

Title: Chief Executive Officer


/s/ Robert Schwager
___________________________________________
Robert Schwager



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