EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") made and entered into effective
as of June 1, 2003 (the "Effective Date") by and between Cyberonics, Inc. (the
"Company"), a Delaware corporation, and Xxxxxx X. Xxxxxxx (the "Executive").
WHEREAS, the Company desires to secure the continued employment of the
Executive in accordance herewith and the Executive is willing to commit to be
employed by the Company on the terms and conditions set forth herein and thus to
forgo opportunities elsewhere;
NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
(a) Employment. The Company agrees to employ the
Executive, and the Executive agrees to be employed by the Company, in
accordance with the terms and provisions of this Agreement during the
Employment Period (as defined below).
(b) Term. Subject to earlier termination as provided in
Section 5, the term of the Executive's employment under this Agreement
shall commence as of the Effective Date and shall continue until the
fifth anniversary of the Effective Date (such term being referred to
hereinafter as the "Employment Period"); provided, however, that
commencing on the fifth anniversary of the Effective Date (and on each
anniversary thereafter) the Employment Period automatically shall be
extended for one additional year, unless six months prior to such
anniversary date the Company or the Executive shall give written notice
to the other party that it or the Executive, as the case may be, does
not wish to so extend this Agreement. However, in the event of a Change
in Control (as defined below) during the Employment Period, in no event
shall the Employment Period end prior to the first anniversary of such
Change in Control.
2. Duties and Powers of Executive.
(a) Duties. During the Employment Period the Executive
shall serve as the Chairman of the Board of Directors and the Chief
Executive Officer of the Company with such authority, duties, powers
and responsibilities as are normally attributable to such positions and
with such other duties and responsibilities as may be from time to time
reasonably assigned to the Executive by the Board of Directors of the
Company (the "Board").
(b) Attention. Except as provided below, during the
Employment Period the Executive shall devote the Executive's full
attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use
the Executive's best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of
the foregoing for the Executive to (i) serve on industry, civic or
charitable boards
or committees, (ii) manage the Executive's personal investments, or
(iii) with the consent of the Board, serve on the boards of other
businesses, so long as such activities do not interfere with the
performance of the Executive's duties in accordance with this
Agreement. In no event shall such activities by the Executive be deemed
to interfere with the Executive's duties hereunder until the Executive
has been notified in writing thereof by the Board and given a
reasonable period in which to cure such interference.
3. Place of Employment. The Executive's place of employment
hereunder shall be at the Company's principal executive offices in the greater
Houston, Texas area.
4. Compensation.
(a) Base Salary. During the Employment Period, the
Executive's annual base salary ("Annual Base Salary") shall be $395,000
payable in accordance with the Company's general payroll practices.
(b) Annual Bonus. During the Employment Period, the
Executive will annually be eligible to earn a bonus (the "Annual
Bonus") up to 100% of his Annual Base Salary based upon the Company's
achievement of the annual Net Sales, Earnings per Share and Cash Flow
objectives included in the annual budget approved by the Board and the
achievement of one or more qualitative objectives as established at the
beginning of each year by the Compensation Committee of the Board. For
Annual Bonus purposes, each of the Company's objectives shall receive
at least a 15% weighting and the qualitative objectives will together
receive a maximum 40% weighting as established at the beginning of each
year by the Compensation Committee of the Board.
(c) Annual Overachievement Bonus. During the Employment
Period, the Executive will annually be eligible to earn an
overachievement bonus (the "Overachievement Bonus") based upon 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. Each objective will receive a maximum weighting of 40% and a
minimum weighting of 25% as determined annually at the beginning of
each year by the Compensation Committee of the Board. The calculation
of the Annual Overachievement Bonus will be done in a manner consistent
with the calculation used to determine the Fiscal 2003 Overachievement
Bonus.
(d) Equity Compensation. On the Effective Date the
Executive shall be granted an option with respect to 250,000 shares
under the Company's 1997 Stock Option Plan.
(e) Retirement and Welfare Benefit Plans. During the
Employment Period, the Executive shall be eligible to participate in
all savings, retirement and welfare benefit plans, practices, policies
and programs applicable generally to employees and/or senior executives
of the Company, subject to meeting the general eligibility requirements
of such plans or programs.
(f) Expenses. The Company shall promptly reimburse the
Executive for all reasonable business expenses, including those for
travel and entertainment, properly incurred
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by the Executive in the performance of his duties hereunder in
accordance with policies established from time to time by the Company.
(g) Fringe Benefits and Perquisites. During the
Employment Period, the Executive shall be entitled to receive fringe
benefits and perquisites in accordance with the plans, practices,
programs and policies of the Company from time to time in effect, and
which are commensurate with the Executive's positions.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate upon the Executive's death or, at the election of the Board
or the Executive, by reason of his Disability (as defined below) during
the Employment Period; provided, however, that the Board may not
terminate the Executive's employment hereunder by reason of Disability
unless at the time of such termination there is no reasonable
expectation that the Executive will return to work on a substantially
full-time basis within the next one hundred eighty day period. For
purposes of this Agreement, Disability shall mean the Executive is
receiving long-term disability benefits under the Company's long-term
disability plan.
(b) By the Company for Cause. The Company may terminate
the Executive's employment during the Employment Period for Cause (as
defined below). For purposes of this Agreement, "Cause" shall mean (i)
the willful and continued failure by the Executive to substantially
perform the Executive's duties with the Company (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive
pursuant to Section 5(d)), (ii) the Executive's commission of one or
more acts that constitute a felony or a misdemeanor involving moral
turpitude, (iii) the Executive is publicly censured by the Securities
Exchange Commission, or (iv) the Executive 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 the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that the Executive'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 two-thirds of the
entire membership of the Board at a meeting of the Board that was
called for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board and, if possible, to cure the breach that was the alleged
basis for Cause) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct and specifying the particulars
thereof in detail.
(c) By the Company without Cause or by the Executive
without Good Reason. Notwithstanding any other provision of this
Agreement, the Company, by action of the Board, may terminate the
Executive's employment other than for Cause during the Employment
Period and the Executive may similarly terminate his employment for
other than Good Reason during the Employment Period.
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(d) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason
(as defined below). For purposes of this Agreement, "Good Reason" shall
mean the occurrence, without the written consent of the Executive, of
any one of the following acts by the Company, or failures by the
Company to act, unless such act or failure to act is corrected prior to
the Date of Termination (as defined below) specified in the Notice of
Termination (as defined below) given in respect thereof:
(i) an adverse change in the Executive's title,
status, authority, duties, or responsibilities;
(ii) any failure by the Company to continue in
effect any material incentive compensation or employee benefit
plan or arrangement (unless replacement plans providing the
Executive with substantially similar benefits are adopted)
(herein referred to as "Benefit Plans")) or the taking of any
action by the Company that would adversely affect the
Executive's participation in any such Benefit Plan or
materially reduce the Executive's incentive compensation
opportunities or employee benefits under such Benefit Plan, as
the case may be;
(iii) any purported termination of the Executive's
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 5(g); for
purposes of this Agreement, no such purported termination
shall be effective;
(iv) the failure by the Company to obtain a
satisfactory agreement from any successor of the Company
requiring such successor to assume and agree to perform the
Company's obligations under this Agreement, as contemplated in
Section 14; or
(v) the failure by the Company to comply with
any material provision of this Agreement.
The Executive's continued employment following any act or
omission to act constituting Good Reason hereunder shall not constitute
the Executive's consent to, or a waiver of the Executive's rights with
respect to, such act or failure to act. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental
illness. Following a Change in Control (as defined below) the
Executive's determination that an act or failure to act constitutes
Good Reason shall be presumed to be valid unless such determination is
deemed by an arbitrator pursuant to Section 9 be unreasonable and not
to have been made in good faith by the Executive.
(e) Termination by Mutual Agreement. The parties may
mutually agree that the Executive's employment shall terminate during
the Employment Period by evidencing their agreement in writing that
expressly acknowledges it is mutual. Such a mutual termination shall
not be treated hereunder as a unilateral termination of employment by
either party.
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(f) Change in Control. For purposes of this Agreement, a
Change of Control of the Company shall mean:
(i) the acquisition by any "person," as such
term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other
than the Company, a subsidiary of the Company or a Company
employee benefit plan, of "beneficial ownership" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of
directors; or
(ii) the consummation of a reorganization,
merger, consolidation or other form of corporate transaction
or series of transactions, in each case, with respect to which
persons who were the shareholders of the Company immediately
prior to such reorganization, merger or consolidation or other
transaction do not, immediately thereafter, own more than 50%
of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities in
substantially the same proportions as their ownership
immediately prior to such event; or
(iii) the sale or disposition by the Company of
all or substantially all the Company's assets; or
(iv) a change in the composition of the Board, as
a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of
October 2, 2000, or (B) are elected, or nominated for
election, thereafter to the Board with the affirmative votes
of at least a majority of the Incumbent Directors at the time
of such election or nomination, but "Incumbent Director" shall
not include an individual whose election or nomination is in
connection with (i) an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or an actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board or (ii) a plan or agreement to
replace a majority of the then Incumbent Directors; or
(v) the approval by the Board or the
stockholders of the Company of a complete or substantially
complete liquidation or dissolution of the Company.
(g) Notice of Termination. During the Employment Period,
any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto (or, if by mutual
agreement by a joint written agreement) in accordance with Section
14(b). For purposes of this Agreement, a "Notice of Termination" shall
mean a notice that shall indicate the specific termination provision in
this Agreement relied upon, if any, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
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(h) Date of Termination. "Date of Termination", with
respect to any purported termination of the Executive's employment
during the Employment Period, shall mean the date specified in the
Notice of Termination (which, in the case of a termination by the
Company for reasons other than Cause or a termination by the Executive
shall not be less than 30 days from the date such Notice of Termination
is given).
6. Obligations of the Company Upon Termination.
(a) Termination by the Company Other than for Cause,
Death or Disability or Termination for Good Reason. During the
Employment Period, if the Company shall terminate the Executive's
employment other than for Cause, death or Disability or the Executive
shall terminate his employment for Good Reason, the Company shall pay
to the Executive the amounts described in this Section 6 (hereinafter
referred to as the "Severance Payments") and the Executive shall become
vested in all stock options or other equity based instruments as
provided below. The amounts specified in this Section 6(a) shall be
paid within five business days after the Date of Termination.
(i) Lump Sum Payment. The Company shall pay to
the Executive a lump sum amount in cash equal to the greater
of (1) three times the sum of (x) the Executive's Annual Base
Salary and (y) an Annual Bonus equal to 100% of such Annual
Base Salary, and (2) sum of the amount of Annual Base Salary
that would be payable to the Executive if the Employment
Period continued through its then term ("Remaining Term"), and
an Annual Bonus for such Remaining Term equal to 100% of the
Annual Base Salary that would be payable for such period.
(ii) Accrued Obligations. The Company shall pay
the Executive a lump sum amount in cash equal to the sum of
(A) the Executive's earned Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (B) an
amount equal to any Annual Bonus and Overachievement Bonus
earned with respect to fiscal years ended prior to the year
that includes the Date of Termination to the extent not
theretofore paid, and (C) an Annual Bonus for the fiscal year
that includes the Date of Termination equal to 100% of his
Annual Base Salary multiplied by a fraction, the numerator of
which shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the
denominator of which shall be 365. (The amounts specified in
clauses (A), (B) and (C) shall be hereinafter referred to as
the "Accrued Obligations").
(iii) Accelerated Vesting and Payment of Stock
Options and Other Equity Based Instruments. All stock options
and other equity based instruments held by Executive shall
immediately vest and become fully exercisable or payable, as
the case may be, as of the Date of Termination. In addition,
all of the Executive's stock options and equity based
instruments shall remain exercisable through the 180th day
following the end of the Remaining Term; provided, however,
that in no event shall the options remain outstanding for
longer than their original term.
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(b) Termination by the Company for Cause or by the
Executive Other than for Good Reason. If the Executive's employment
shall be terminated 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 have no further obligations to
the Executive under this Agreement other than the Accrued Obligations.
(c) Termination due to Death or Disability. If the
Executive's employment shall terminate by reason of death or
Disability, the Company shall pay the Executive or his estate, as the
case may be, the Accrued Obligations. Such payments shall be in
addition to those rights and benefits to which the Executive or his
estate may be entitled under the relevant Company benefit plans or
programs. In addition, all stock options and equity based instruments
held by the Executive shall immediately vest and become fully
exercisable or payable, as the case may be, as of the Date of
Termination. In addition, all of the Executive's stock options and
equity based instruments shall remain exercisable through the 180th day
following the end of the Remaining Term; provided, however, that in no
event shall the options remain outstanding for longer than their
original term.
(d) Mutual Termination of Employment. If the Executive's
employment shall terminate due to the mutual written agreement of the
parties, the Company shall pay the Executive an amount in cash equal to
the sum of (1) his Annual Base Salary plus an Annual Bonus equal to
100% of his Annual Base Salary and (2) the Accrued Obligations. In
addition, all stock options and equity based instruments held by the
Executive shall immediately vest and become fully exercisable or
payable, as the case may be, as of the Date of Termination. In
addition, all of the Executive's stock options and equity based
instruments shall remain exercisable through the 180th day following
the end of the Remaining Term; provided, however, that in no event
shall the options remain outstanding for longer than their original
term.
(e) Gross Up Payment. In the event that any payment or
benefit received or to be received by the Executive (whether pursuant
to the terms of this Agreement or any other plan, arrangement or
agreement with (A) the Company, (B) any Person (as defined in Section
5(e)) whose actions result in a "change in control" (for purposes of
Section 280G of the Internal Revenue Code (the "Code")) or (C) any
Person affiliated with the Company or such Person) (all such payments
and benefits being hereinafter called "Payments") would be subject to
the excise tax imposed by Section 4999 of the Code (or any interest or
penalties with respect to such excise tax (collectively, the "Excise
Tax")), then, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that after payment by the
Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including any Excise Tax, imposed on the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. For purposes
of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income tax at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's
residence on the date on which the Gross-Up Payment is calculated for
purposes of this section, net of the maximum reduction in federal
income taxes which could be obtained from
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deduction of such state and local taxes. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into
account hereunder, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment being repaid by
the Executive to the extent that such repayment results in a reduction
in Excise Tax and/or a federal, state or local income tax deduction)
plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder (including
by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make
an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess if finally
determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability
for Excise Tax with respect to the Payments. It is understood that the
application of this Section 6 and Section 280G may have differing
interpretations; however, the parties intend that the Gross-Up Payment
be determined in a manner that is most favorable to the Executive.
(f) Any delay by the Company in paying any amount due the
Executive under this Agreement shall bear interest at the maximum
nonusurious rate from the date such payment was due until paid.
7. Nonexclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for which
the Executive may qualify, nor shall anything herein limit or otherwise
adversely affect such rights as the Executive may have under any other contract
or agreement entered into after the Effective Date with the Company. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any benefit, plan, policy, practice or program of, or any contract
or agreement entered into with the Company shall be payable in accordance with
such benefit, plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
8. Full Settlement; No Mitigation. The Company's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other clam, right or action which the Company may have
against the Executive or others, provided that nothing herein shall preclude the
Company from separately pursuing recovery from the Executive based on any such
claim. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts (including amounts for
damages for breach) payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment.
9. Arbitration. Any dispute about the validity, interpretation,
effect or alleged violation of this Agreement (an "arbitrable dispute") must be
submitted to confidential arbitration in Houston, Texas. Arbitration shall take
place before an experienced employment arbitrator licensed to practice
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law in such state and selected in accordance with the rules of the Model
Employment Arbitration Procedures of the American Arbitration Association.
Arbitration shall be the exclusive remedy of any arbitrable dispute. Should any
party to this Agreement pursue any arbitrable dispute by any method other than
arbitration, the other party shall be entitled to recover from the party
initiating the use of such method all damages, costs, expenses and attorneys'
fees incurred as a result of the use of such method. Notwithstanding anything
herein to the contrary, nothing in this Agreement shall purport to waive or in
any way limit the right of any party to seek to enforce any judgment or decision
on an arbitrable dispute in a court of competent jurisdiction. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts in Houston, Texas, for the purposes of any proceeding arising out of this
Agreement.
10. Confidentiality. The Company agrees to provide the Executive,
in the course of his employment with the Company, with non-public privileged or
confidential information and trade secrets concerning the operations, future
plans and methods of doing business of the Company, its subsidiaries and
affiliates ("Proprietary Information"); and the Executive agrees that it would
be extremely damaging to the Company, its subsidiaries and affiliates if such
Proprietary Information were disclosed to a competitor of the Company, its
subsidiaries and affiliates or to any other person or corporation. In
consideration for the Company providing such Proprietary Information to the
Executive, the Executive agrees that all Proprietary Information divulged to the
Executive is in confidence and further agrees to keep all Proprietary
Information secret and confidential (except for such information which is or
becomes publicly available other than as a result of a breach by the Executive
of this provision) without limitation in time. In view of the nature of the
Executive's employment and the Proprietary Information the Executive has
acquired during the course of such employment, the Executive likewise agrees
that the Company, its subsidiaries and affiliates would be irreparably harmed by
any disclosure of Proprietary Information in violation of the terms of this
paragraph and that the Company, its subsidiaries and affiliates shall therefore
be entitled to preliminary and/or permanent injunctive relief prohibiting the
Executive from engaging in any activity or threatened activity in violation of
the terms of this Section and to any other relief available to them. Inquiries
regarding whether specific information constitutes Proprietary Information shall
be directed to the Board, provided that the Company shall not unreasonably
classify information as Proprietary Information.
11. Non-Solicitation of Employees. The Executive recognizes that
he will be provided confidential information about other employees of the
Company, its subsidiaries and affiliates relating to their education,
experience, skills, abilities, compensation and benefits, and inter-personal
relationships with customers of the Company, its subsidiaries and affiliates and
recognizes that such information is not generally known, is of substantial value
to the Company, its subsidiaries and affiliates in developing their business and
in securing and retaining customers, and has been and will be acquired by him
because of his business position with the Company, its subsidiaries and
affiliates. Accordingly, in consideration of the Proprietary Information and
other benefits provided to the Executive under this Agreement, the Executive
agrees that, during the Employment Period and for the Restricted Period (as
defined in Section 12), he will not, directly or indirectly, solicit or recruit
any employee of the Company, its subsidiaries or affiliates on whose behalf he
is acting as an agent, representative or employee and that he will not convey
any such confidential information or trade secrets about other employees of the
Company, its subsidiaries and affiliates to any other person; provided, however,
that it shall not constitute a solicitation or recruitment of employment in
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violation of this Section to discuss employment opportunities with any employee
of the Company, its subsidiaries or affiliates who has either first contacted
the Executive or regarding whose employment the Executive has discussed with and
received the written approval of the Chairman of the Board prior to making such
solicitation or recruitment In view of the nature of the Executive's employment
with the Company, the Executive likewise agrees that the Company, its
subsidiaries and affiliates would be irreparably harmed by any solicitation or
recruitment in violation of the terms of this paragraph and that the Company,
its subsidiaries and affiliates shall therefore be entitled to preliminary
and/or permanent injunctive relief prohibiting the Executive from engaging in
any activity or threatened activity in violation of the terms of this Section
and to any other relief available to them.
12. Noncompetition.
(a) In consideration for the Company's providing the
Executive with Confidential Information during the Employment Period
and the other benefits provided by this Agreement, the Executive agrees
that while employed by the Company and for the Restricted Period (as
defined below), the Executive shall not, unless the Executive receives
the prior written consent of the Board, 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 Company patent; provided, however, that following
the Executive's termination of employment with the Company the
foregoing restriction shall apply only to those areas where the Company
is actually doing business on the date of such termination of
employment. The Restricted Period shall be (i) the one-year period
following the mutual termination of the Executive's employment and (ii)
in all other cases, the period beginning on the Date of Termination and
ending one year after the end of the Remaining Term.
(b) The Executive has carefully read and considered the
provisions of this Section 12 and, having done so, agrees that the
restrictions set forth in this Section 12 (including the Restricted
Period, scope of activity to be restrained and the geographical scope)
are fair and reasonable and are reasonably required for the protection
of the interests of the Company, its officers, directors, employees,
creditors and shareholders. The Executive understands that the
restrictions contained in this Section 12 may limit his ability to
engage in a business similar to the Company's business, but
acknowledges that he will receive sufficiently high remuneration and
other benefits from the Company hereunder to justify such restrictions.
(c) It is specifically agreed that the Restricted Period
following termination of employment, during which the agreements and
covenants of the Executive made in Sections 11 and 12 shall be
effective, shall be computed by excluding from such computation any
time which the Executive is in violation of the provisions of such
Sections.
(d) In the event that any provision of this Section 12
relating to the Restricted Period and/or the areas of restriction shall
be declared by a court of competent jurisdiction to exceed the maximum
time period or areas such court deems reasonable and enforceable, the
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Restricted Period and/or areas of restriction deemed reasonable and
enforceable by the court shall become and thereafter be the maximum
time period and/or areas.
13. Legal Fees. The Company shall promptly pay all legal fees and
expenses (including, without limitation, fees and expenses in connection with
any arbitration) incurred by the Executive in disputing in good faith any issue
arising under this Agreement relating to the termination of the Executive's
employment or in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement.
14. Successors.
(a) Assignment by Executive. 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 shall inure to the
benefit of and be enforceable by the Executive's legal representatives.
(b) Successors and Assigns of Company. This Agreement
shall inure to the benefit of and be binding upon the Company, its
successors and assigns.
(c) Assumption. 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 to assume expressly and agree in writing prior to such
succession to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. A copy of such agreement shall be furnished
to the Executive. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its businesses
and/or assets as aforesaid that assumes and agrees to perform this
Agreement by operation of law or otherwise. Any failure of the Company
to timely obtain such agreement shall be a material breach of this
Agreement.
15. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas,
without reference to its principles of conflict of laws. 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, modified,
repealed, waived, extended or discharged, except by an agreement in
writing signed by the party against whom enforcement of such amendment,
modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee
thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) Notices. All notices and other communications
hereunder 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, in either case, to the Company's
headquarters or to such other address as either party shall have
furnished to the other in writing in
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accordance herewith. Notices and communications shall be effective when
actually received by the addressee.
(c) Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) Taxes. The Company may withhold from any amounts
payable or benefits provided under this Agreement such federal, state
or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision hereof or any other
provision of this Agreement or the failure to assert any right that the
Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5 of this Agreement.
(f) Entire Agreement; Effect on Stock Awards. This
instrument contains the entire agreement of the Executive and the
Company with respect to the subject matter hereof, and all promises,
representations, understandings, arrangements and prior agreements
between the parties with respect to the subject matter hereof,
including without limitation that certain Severance Agreement between
the parties dated May 1, 2001, are terminated hereby. The provisions of
this Agreement concerning the accelerated vesting and extended period
for exercise of Company stock options and other stock incentive awards
shall be deemed to modify any such options and awards outstanding as of
the Effective Date and shall be incorporated by reference into any such
grants made after the Effective Date; the intent of the parties being
that, in the event of any language in any plan or award agreement in
conflict herewith or to the contrary, the terms of this Agreement shall
control as to the vesting and exercisability of all outstanding and
future stock options and stock incentive awards granted to the
Executive.
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IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed effective for all purposes as of the Effective Date.
CYBERONICS, INC. CYBERONICS, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------------
Xxxx Xxxxxx
Chairman of the Compensation Committee
Member of the Board of Directors
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx
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