EMPLOYMENT AGREEMENT
Exhibit 10.58
This Employment Agreement (the “Agreement”), entered into effective as of June
15, 2006 (the “Effective Date”), by and between Cyberonics, Inc. (the “Company”)
and Xxxxxx X. Xxxxxxxxx (“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 June 1, 2009 (the “Term”). Termination of this Agreement shall not
alter or impair any rights of Employee (or his beneficiaries or heirs) with respect
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,
Finance and
Administration and Chief Financial Officer 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 $300,000 (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
fiscal 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 such Company,
departmental and/or individual performance goals that may be established for the
applicable bonus year by the Compensation Committee.
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 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, 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: Vice President of Human Resources
000 Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Vice President of Human Resources
000 Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
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To Employee:
Xxxxxx X. Xxxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
00 Xxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
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.
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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.
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 | |||
| Xxxxxx X. Xxxxxxx | ||||
| Chairman of the Board of Directors | ||||
| and Chief Executive Officer | ||||
| EMPLOYEE | ||||
| /s/ Xxxxxx X. Xxxxxxxxx | ||||
| Xxxxxx X. Xxxxxxxxx | ||||
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