EXHIBIT 10.16
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), entered into effective as
of June 2, 2003 (the "Effective Date"), by and between Cyberonics, Inc. (the
"Company") and Xxxxx Xxxxxx ("Employee").
WITNESSETH:
WHEREAS, the Company desires to secure the experience, abilities and
service of Employee by employing Employee upon the terms and conditions
specified herein; and
WHEREAS, Employee is willing to enter into this Agreement upon the
terms and conditions specified herein;
NOW, THEREFORE, in consideration of the premises, terms and provisions
set forth herein, the mutual benefits to be gained by the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Employment. The Company hereby employs Employee, and
Employee hereby accepts such employment, all upon the terms and conditions set
forth herein.
SECTION 2. Term. Subject to the terms and conditions of this Agreement,
unless sooner terminated pursuant to Section 5 of this Agreement, Employee shall
be employed by the Company commencing on the Effective Date and terminating on
the close of business on the third anniversary of the Effective Date (the
"Term"). Termination of this Agreement shall not alter or impair any rights of
Employee (or his beneficiaries or heirs) with respects to payments, benefits or
other rights provided by the terms of this Agreement, arising before or after
the end of the Term.
SECTION 3. Duties, Responsibilities and Location.
A. Capacity. Employee shall serve as the Vice
President, Market Development of the Company and shall report
to the Chief Executive Officer of the Company.
B. Full-Time Duties. Employee shall devote his
full business time, attention and energies to the business of
the Company. Notwithstanding anything herein to the contrary,
Employee shall be allowed to (i) manage Employee's personal
investments and affairs and, (ii) with the written consent of
the Chief Executive Officer of the Company, serve on boards or
committees of civic or charitable organizations or trade
associations, provided that such activities do not materially
interfere with his performance of the duties and
responsibilities of his position specified in Section 3.A.
C. Offices. Employee's primary place of work
shall be at the principle executive offices of the Company
located in the greater Houston, Texas
metropolitan area, but Employee shall be required to travel on
a basis consistent with his position.
SECTION 4. Compensation.
A. Base Salary. During the Term, Employee shall
receive an annual salary of $206,000 (the "Base Salary")
payable in accordance with the Company's general payroll
practices. Employee's Base Salary shall be reviewed prior to
the beginning of each fiscal year of the Company for increase
in the discretion of the Compensation Committee of the Board
of Directors ("Compensation Committee"); provided, however,
that the Base Salary, as it may be increased at any time, may
not thereafter be decreased.
B. Annual Incentive Bonus. During the Term,
Employee shall be eligible to participate in the Annual CEO
Direct Reports Bonus Plan, with a target bonus of 50% of
Employee's annual Base Salary. A bonus, if earned, shall be
payable as soon as reasonably practical following the
completion of the applicable bonus year. Bonuses for Employee
shall be based on the achievement of such Company,
departmental and/or individual performance goals that may be
established for the applicable bonus year by the Compensation
Committee.
C. Annual Overachievement Bonus. During the
Term, Employee shall be eligible to participate in the Annual
CEO Direct Reports Overachievement Bonus Plan as determined by
the Compensation Committee. Overachievement Bonuses shall be
based on the Company's overachievement of the annual Net
Sales, Earnings per Share and Cash Flow objectives included in
the annual budget approved by the Board of Directors at the
beginning of each year.
D. Equity Compensation. Employee will be
eligible for grants of Company stock options (the "Options")
and other equity awards in the discretion of the Compensation
Committee.
E. General Benefits. Upon satisfying applicable
eligibility requirements, if any, Employee will be eligible to
participate in the Company's qualified 401(k) plan, group
health, group life insurance, accidental death and
dismemberment, travel accident, long-term disability and
short-term disability plans and other welfare and similar
plans and vacation policies under terms generally applicable
to other similarly situated employees of the Company and shall
be eligible to receive all perquisites and other benefits
provided or made available by the Company to other similarly
situated executives of the Company.
F. Reimbursements. Employee shall be entitled
to receive prompt reimbursement by the Company in accordance
with its business reimbursement policy in effect from time to
time for all reasonable, out-of-pocket business expenses
incurred by him in performing his duties under this Agreement
upon the submission by Employee of such accounts and records
as may be reasonably required under the Company's business
reimbursement policy.
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SECTION 5. Termination of Employment. Notwithstanding the provisions of
Section 2, Employee's employment hereunder may terminate under any of the
following conditions:
A. Death. Employee's employment under this
Agreement shall terminate automatically upon his death.
B. Disability. Employee's employment under this
Agreement may be terminated due to his Disability.
"Disability" shall mean Employee's inability to substantially
perform his duties hereunder for any period of at least 180
consecutive days due to a physical or mental incapacity. The
date of termination due to Disability shall be the date
Employee elects to terminate his employment service due to
such Disability or, if earlier, the date the Board determines
that Employee has met the definition of Disability and given
written notice of such termination to Employee.
C. Termination by Company Without Cause. The
Company may terminate Employee's employment hereunder without
Cause (as hereinafter defined) on 30 days' prior written
notice to Employee.
D. Termination by Company for Cause. Employee's
employment hereunder may be terminated for Cause by the
Company. For purposes of this Agreement, "Cause" shall mean
(i) the willful and continued failure by Employee to
substantially perform Employee's duties with the Company
(other than any such failure resulting from Employee's
incapacity due to physical or mental illness), (ii) an act or
acts of dishonesty taken by Employee and intended to result in
personal enrichment of Employee at the expense of the Company,
(iii) willful violation by Employee of Employee's material
obligations under this Agreement, (iv) willful violation by
Employee of a material policy of the Company, including its
policies regarding professional and ethical conduct, (v)
Employee's commission of one or more acts that constitute a
felony, (vi) Employee is publicly censured by the Securities
Exchange Commission, or (vii) Employee commits one or more
acts of fraud as regards the Company. For purposes of clause
(i) of this definition, no act, or failure to act, on
Employee's part shall be deemed "willful" unless done, or
omitted to be done, by Employee not in good faith and without
reasonable belief that Employee's act, or failure to act, was
in the best interest of the Company. The determination of
whether Cause exists must be made by a resolution duly adopted
by the affirmative vote of not less than a majority of the
entire membership of the Board of Directors of the Company.
E. Termination by Employee. Employee may
terminate his employment hereunder at any time on 30 days'
prior written notice to the Board.
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SECTION 6. Payments Upon Termination.
A. Upon termination of Employee's employment
for any reason prior to the expiration of the Term, the
Company shall be obligated to pay, and Employee shall be
entitled to receive:
1. all accrued and unpaid Base Salary
to the date of termination;
2. any earned, but unpaid, bonuses for
the bonus year ending prior to the date of
termination;
3. all incurred but unreimbursed
business expenses for which Employee is entitled to
reimbursement; and
4. any benefits to which he is
entitled under the terms of any applicable employee
benefit plan or program, or applicable law.
B. Upon termination of Employee's employment
pursuant to Section 5.C., the Company shall be obligated to
pay or provide, and Employee's estate or beneficiary shall be
entitled to receive:
1. all of the amounts and benefits
described in Section 6.A.; and
2. either (a) a lump sum payment equal
to 1.5 times the sum of (i)
Employee's Base Salary, plus (ii) the most recent
annual bonus earned by Employee or (b) a lump sum
payment equal to 1.5 times Employee's Base Salary
and, solely for purposes of determining Employee's
vesting under any Options, the number of shares that
would become vested under such Options during the
12-month period following Employee's termination date
if Employee's employment had continued during such
period shall become vested on his termination of
employment date, whichever of (a) or (b) is elected
by Employee in writing to the Company within five
days of his termination date.
C. In the event of any termination of
employment under Section 5, Employee shall be under no
obligation to seek other employment, and, except as provided
in Section 6.D, there shall be no offset against amounts due
Employee under this Agreement on account of any remuneration
attributable to any subsequent employment or self-employment
that he may obtain.
D. The Company and Employee have previously or
contemporaneously with this Agreement entered into a Severance
Agreement which provides certain payments and benefits to
Employee upon a qualified termination of employment in
connection with a change of control of the Company.
Notwithstanding anything in this Agreement to the contrary, to
the extent Employee is entitled to receive any severance
payment or benefits under the Severance Agreement any
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severance payment or benefits to which Employee is otherwise
entitled to receive under this Agreement shall be reduced or
offset by the severance payment or benefit payable under the
Severance Agreement in such manner as is appropriate, as
determined in good faith by the Board, to prevent a
duplication of such payment and benefits.
SECTION 7. Indemnification. The Company agrees to indemnify Employee to
the fullest extent permitted by applicable law with respect to any acts or
non-acts he may have committed during the period which he was an officer,
director and/or employee of the Company or any subsidiary or affiliate thereof,
or of any other entity of which he served as an officer, director or employee at
the request of the Company.
SECTION 8. Covenants of Employee. Employee covenants as follows:
A. Confidentiality. During and after his
employment with the Company and its affiliates, Employee will
hold in confidence all confidential information and will not
disclose it to any person other than in connection with the
performance of his duties and obligations hereunder, except
with the specific prior written consent of the Board of
Directors or the Chief Executive Officer; provided, however,
that the parties agree that this Agreement does not prohibit
the disclosure of confidential information where applicable
law requires, including, but not limited to, in response of
subpoenas and/or orders of a governmental agency or court of
competent jurisdiction. In the event that Employee is
requested or becomes legally compelled under the terms of a
subpoena or order issued by a court of competent jurisdiction
or by a governmental body to make any disclosure of
confidential information, Employee agrees that he will (i)
immediately provide the Company with written notice of the
existence, terms and circumstances, surrounding such
request(s) so that the Company may seek an appropriate
protective order or other appropriate remedy, (ii) cooperate
with the Company in its efforts to decline, resist or narrow
such requests and (iii) if disclosure of such confidential
information is required in the opinion of counsel, exercise
reasonable efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such
disclosed information. "Confidential information" means any
and all intellectual property of the Company (or any of its
affiliates), including but not limited to: (a) trade secrets
concerning the business and affairs of the Company (or any of
its affiliates), product specifications, data, know-how,
formulae, compositions, processes, designs, sketches,
photographs, graphs, drawings, samples, inventions and ideas,
past, current, and planned research and development, current
and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans,
computer software and programs (including object code and
source code), computer software and database technologies,
systems, structures, and architectures (and related formulae,
compositions, processes, improvements, devices, know-how,
inventions, discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented,
that is a trade secret under federal, state or other
applicable law; and (b) information concerning
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the business and affairs of the Company (or any of its
affiliates) (which includes historical financial statements,
financial projections and budgets, historical and projected
sales, capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training and
techniques and materials), however documented; and notes,
analysis, compilations, studies, summaries, and other material
prepared by or for the Company (or any of its affiliates)
containing or based, in whole or in part, on any information
included in the foregoing.
B. Trade Secrets. Any trade secrets of the
Company will be entitled to all of the protections and
benefits under the federal and state trade secret and
intellectual property laws and any other applicable law. If
any information that the Company deems to be a trade secret is
found by a court of competent jurisdiction not to be a trade
secret for purposes of this Agreement, such information will,
nevertheless, be considered confidential information for
purposes of this Agreement, so long as it otherwise meets the
definition of confidential information. Employee hereby waives
any requirement that the Company submit proof of the economic
value of any trade secret or post a bond or other security.
C. Proprietary Items. Employee will not remove
from the Company's premises (except to the extent such removal
is for purposes of the performance of Employee's duties at
home or while traveling, or except as otherwise specifically
authorized by the Company) any document, record, notebook,
plan, model, component, device, or computer software or code,
whether embodied in a disk or in any other form belonging to
the Company or used in the Company's business (collectively,
the "Proprietary Items"). All of the Proprietary Items,
whether or not developed by Employee, are the exclusive
property of the Company. Upon termination of his employment,
or upon the request of the Company during the Term, Employee
will return to the Company all of the Proprietary Items and
confidential information in Employee's possession or subject
to Employee's control, and Employee shall not retain any
copies, abstracts, sketches, or other physical embodiment,
including electronic or otherwise, of any of the Proprietary
Items or confidential information.
D. Non-Competition and Non-Interference. During
the period of his employment with the Company or its
affiliates and for the one-year period after the termination
of his employment with the Company and its affiliates,
Employee will not, directly or indirectly:
1. without the express prior written
consent of the Board of Directors, own an interest
in, manage, operate, join, control, lend money or
render financial or other assistance to or
participate in or be connected with, as an officer,
employee, partner, stockholder, consultant or
otherwise, any person that competes with the Company
in the field of neurostimulation in a matter covered
by a patent assigned to or held by the Company;
provided, however, that following Employee's
termination of employment with the Company the
foregoing restriction shall apply only
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to those areas where the Company is actually doing
business on the date of such termination of
employment; provided, further, that Employee may
purchase or otherwise acquire for passive investment
up to 3% of any class of securities of any such
enterprise if such securities are listed on any
national or regional securities exchange or have been
registered under Section 12(g) of the Securities
Exchange Act of 1934;
2. whether for Employee's own account
or for the account of any other person, (except for
the account of the Company and its affiliates),
solicit Business from any person known by Employee to
be a customer of the Company or its affiliates,
whether or not Employee had personal contact with
such person during Employee's employment with the
Company and its affiliates;
3. whether for Employee's own account
or the account of any other person, (i) solicit,
employ, or otherwise engage as an employee,
independent contractor, or otherwise, any person who
is an employee of the Company or an affiliate, or in
any manner induce, or attempt to induce, any employee
of the Company or its affiliate to terminate his
employment with the Company or its affiliate; or (ii)
interfere with the Company's or its affiliate's
relationship with any person who at any time during
the Term, was an employee, contractor, supplier, or
customer of the Company or its affiliate; or
4. at any time after the termination
of his employment, disparage the Company or its
affiliates or any shareholders, directors, officers,
employees, or agents of the Company or any of its
affiliates, so long as the Company does not disparage
Employee.
E. Acknowledgements. The Company acknowledges
that it is providing Employee with confidential information in
order for Employee to perform his duties under this Agreement.
Employee acknowledges that (a) the services to be performed by
him under this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character, and (b) the
provisions of this Section 8 are reasonable and necessary to
protect the confidential information, goodwill and other
business interests of the Company. If any covenant in this
Section 8 is held to be unreasonable, arbitrary, or against
public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area,
and such lesser scope, time, or geographic area, or all of
them, as a court of competent jurisdiction may determine to be
reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against Employee.
Employee hereby agrees that this covenant is a material and
substantial part of this Agreement and that: (i) the
geographic limitations are reasonable; (ii) the term of the
covenant is reasonable; and (iii) the covenant is not made for
the purpose of limiting competition per se and is reasonably
related to a protectable business interest of the Company. The
period of time applicable to any covenant in this Section 8
will be extended by the duration of any violation
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by Employee of such covenant. The provisions of this Section 8
shall survive the termination of the Term of this Agreement.
SECTION 9. Injunctive Relief and Additional Remedy. Employee
acknowledges that the injury that would be suffered by the Company as a result
of a breach of the provisions of Section 8 of this Agreement would be
irreparable and that an award of monetary damages to the Company for such a
breach would be an inadequate remedy. Consequently, the Company will have the
right, in addition to any other rights it may have, to obtain a temporary
restraining order and/or injunctive relief to restrain any breach or threatened
breach or otherwise to specifically enforce any provision of this Agreement.
Employee waives any requirement for the Company's securing or posting of any
bond in conjunction with any such remedies. Employee further agrees to and
hereby does submit to in personam jurisdiction before each and every court for
that purpose. Without limiting the Company's rights under this Section or any
other remedies of the Company, if Employee breaches any of the provisions of
Section 8 and such breach is proven in a court of competent jurisdiction, the
Company will have the right to cease making any payments or providing other
benefits otherwise due Employee under this Agreement.
SECTION 10. Amendment; Waiver. The terms and provisions of this
Agreement may be modified or amended only by a written instrument executed by
each of the parties hereto, and compliance with the terms and provisions hereof
may be waived only by a written instrument executed by each party entitled to
the benefits thereof. No failure or delay on the part of any party in exercising
any right, power or privilege granted hereunder shall constitute a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege granted hereunder.
SECTION 11. Entire Agreement. Except as contemplated herein and the
Severance Agreement referenced in Section 6.D., this Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes any and all prior or contemporaneous written or oral agreements,
arrangements or understandings between the Company and Employee.
SECTION 12. Notices. All notices or communications hereunder shall be
in writing, addressed as follows or to any address subsequently provided to the
other party:
To the Company:
Cyberonics, Inc.
Attention: Chief Executive Officer
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
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To Employee:
__________________________
__________________________
__________________________
All such notices shall be conclusively deemed to be received and shall be
effective, (i) if sent by hand delivery or overnight courier, upon receipt, (ii)
if sent by telecopy or facsimile transmission, upon confirmation of receipt by
the sender of such transmission or (iii) if sent by registered or certified
mail, on the fifth day after the day on which such notice is mailed.
SECTION 13. Severability. In the event that any term or provision of
this Agreement is found to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining terms and provisions hereof shall
not be in any way affected or impaired thereby, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained therein.
SECTION 14. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns (it being understood and agreed that, except as expressly provided
herein, nothing contained in this Agreement is intended to confer upon any other
person or entity any rights, benefits or remedies of any kind or character
whatsoever). No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this Agreement, either contractually or
as a matter of law. The Company further agrees that, in the event of a sale of
assets or liquidation as described in the preceding sentence, it shall take
whatever action it legally can in order to cause such assignee or transferee to
expressly assume the liabilities, obligations and duties of the Company
hereunder.
SECTION 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (except that no
effect shall be given to any conflicts of law principles thereof that would
require the application of the laws of another jurisdiction).
SECTION 16. Submission to Jurisdiction. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN XXXXXX
COUNTY, TEXAS, FOR THE PURPOSES OF ANY PROCEEDING ARISING OUT OF THIS AGREEMENT.
SECTION 17. Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
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SECTION 18. Tax Withholdings. The Company shall withhold from all
payments hereunder all applicable taxes that it is required to withhold with
respect to payments and benefits provided under this Agreement.
SECTION 19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date set forth above.
CYBERONICS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Chairman of the Board of Directors
and Chief Executive Officer
EMPLOYEE
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
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