EMPLOYMENT AGREEMENT
Exhibit 10.38
This Employment Agreement (the “Agreement”), entered into effective as of June
15, 2006 (the “Effective Date”), by and between Cyberonics, Inc. (the “Company”)
and W. Xxxxxx Xxxxxxxx (“Employee”).
W1TNESSETH:
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,
Sales 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 $260,000 (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 ail 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.
SECTION 5. Termination of Employment. Notwithstanding the provisions
of Section 2, Employee’s employment hereunder may terminate under any of the
following conditions:
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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:
W. Xxxxxx Xxxxxxxx
0000 Xxxxxx Xxx
Xxxxxxx, XX 00000
0000 Xxxxxx Xxx
Xxxxxxx, 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/ W. Xxxxxx Xxxxxxxx 6/16/2006 | ||||
| W. Xxxxxx Xxxxxxxx | ||||
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