1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 16 day of
October, 2000, by and between F. Xxxxx Xxxxx (the "Executive") and INVIVO
CORPORATION, a Delaware corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Corporation considers it essential to the best interests of
the Corporation and its stockholders to take steps to retain key personnel such
as the Executive; and
WHEREAS, the Corporation recognizes particularly that uncertainty might
arise among personnel in the context of any possible or actual Change in
Control, as hereinafter defined, which could result in the departure or
distraction of key personnel to the detriment of the Corporation and its
stockholders; and
WHEREAS, the Corporation has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
personnel of the Corporation including the Executive to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from any possible or actual Change in Control.
NOW, THEREFORE, in consideration of the covenants, terms, and conditions
contained herein, the Corporation and the Executive agree:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth in this Section 1.
a. "Administrative Committee" shall mean the Board or a committee
appointed by the Board to administer this Agreement.
b. "Affiliate" shall mean, with respect to a first Person, a
second Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the first Person.
c. "Associate" shall mean, with respect to a Person, (a) any
corporation or organization of which such Person is an officer or
partner or, directly or indirectly, the beneficial owner of ten percent
(10%) or more of any class of equity securities, (b) any trust or other
estate in which such Person has a substantial beneficial interest or as
to which such Person serves as trustee or in a similar fiduciary
capacity, and (c) any relative or spouse of such Person, or any relative
of such spouse, who has the same home as such Person.
36
2
d. "Benefit Continuation Period" shall mean the period beginning
on the date of the Severance of Employment or Non-Change in Control
Termination, as the case may be, and ending on the earlier to occur of
(a) the one year anniversary of the Severance of Employment, where
termination was a Severance of Employment, and the date six months from
the date of such Non-Change in Control Termination where termination was
a Non-Change in Control Termination, or (b) the date that the Executive
and the Executive's dependents are eligible and elect coverage under the
plans of a subsequent employer that provide substantially equivalent or
greater benefits to the Executive and the Executive's dependents.
e. "Board" shall mean the Board of Directors of the Corporation.
f. "Business Combination" shall mean a merger or consolidation of
the Corporation and one or more other entities in which the Corporation
or a subsidiary of the Corporation is a merging or consolidating party.
g. "Change in Control" shall mean (a) the sale of all or
substantially all of the assets of the Corporation; (b) any change in
ownership or control of the outstanding voting securities of the
Corporation following which any Person beneficially owns, together with
its Affiliates and Associates, fifty percent (50%) or more of the
outstanding voting securities of the Corporation; (c) any change in the
membership of the Corporation's Board following which Continuing
Directors do not constitute a majority of the Board; or (d) a Business
Combination immediately following which the stockholders of the
Corporation immediately prior to such Business Combination do not hold
more than fifty percent (50%) of the outstanding voting securities of
the surviving entity, or the parent company of the surviving entity, of
such Business Combination in the same proportion as such stockholders
held Common Stock of the Corporation immediately prior to such Business
Combination. Notwithstanding the foregoing, the occurrence of any of the
events set forth in the prior sentence shall not constitute a Change in
Control unless such event occurs on or prior to June 30, 2001, or such
event occurs on or prior to August 31, 2001 pursuant to the terms of
definitive agreement providing for such Change in Control that is
entered into on or before June 30, 2001.
h. "Code" shall mean the Internal Revenue Code of 1986, as
amended to date.
i. "Constructive Discharge" shall mean (a) without the
Executive's express written consent, the assignment to the Executive of
any duties, or the removal from or reduction or limitation of the
Executive's duties or responsibilities, which is inconsistent with the
Executive's position, organization level, duties, responsibilities or
compensation status with the Corporation immediately prior to such
assignment, removal, reduction or limitation; (b) without the
Executive's express written consent, a substantial reduction of the
facilities and perquisites (including office space and location)
available to the Executive; (c) a reduction by the Corporation in the
base cash salary of the Executive; (d) a material reduction by the
Corporation in the kind and level of employee benefits to which the
Executive is entitled, with the result that the Executive's overall
benefit package is materially reduced; or (e) without the Executive's
express written consent, the relocation of the Executive to a facility
or location more than thirty five (35) miles from the Executive's then
present location.
j. "Continuing Director" shall mean, at any given time, a member
of the Board who was (a) a member of the Board on August 31, 2000, (b)
elected to the Board by the Board after August 31, 2000, provided that a
majority of the Continuing Directors voted in favor of such election, or
(c) nominated to the Board by the Board after August 31, 2000, provided
that a majority of the Continuing Directors voted in favor of such
nomination, and subsequently elected to the Board by the stockholders of
the Corporation.
k. "Just Cause Termination" shall mean a termination by the
Corporation of the Executive's employment in connection with the good
faith determination of the Corporation's Board of Directors that the
Executive has engaged in:
37
3
(i) any material breach of any written agreement between
Executive and the Corporation, if such breach causes material
harm to the Corporation;
(ii) any gross negligence or willful misconduct by Executive
in performance of duties to the Corporation that causes material
harm to the Corporation;
(iii) the substantial and repeated failure of Executive to
follow the lawful written directions of the Board or to the
person whom Executive reports;
(iv) commission of a felony under the laws of the United
States or any state thereof;
(v) commission of any material act of fraud, embezzlement or
dishonesty; or
(vi) the abuse of alcohol or controlled substances that has a
materially detrimental effect upon Executive's performance of his
duties.
l. "Non-Change in Control Termination" shall mean that either (i)
the Executive's employment is terminated by the Corporation and the
termination is not a Just Cause Termination and is not by reason of the
Executive's death or disability, or (ii) the Executive terminates his or
her employment with the Corporation by resignation following a
Constructive Discharge, and, in either event, no Change in Control has
occurred prior to such termination or resignation.
m. "Person" shall mean any individual, corporation, partnership,
limited liability company, sole proprietorship, joint venture or other
organization.
n. "Severance of Employment" shall mean (a) the termination of
the Executive's employment with the Corporation within two (2) years
after the date of a Change in Control by (i) discharge by the
Corporation or (ii) resignation of the Executive following a
Constructive Discharge, or (b) the termination of the Executive's
employment with the Corporation by resignation of the Executive within
the thirty (30) day period immediately following the first anniversary
of a Change in Control. Despite the foregoing, neither of the following
will constitute a Severance of Employment:
i. The termination of the Executive's employment by reason of
death or disability.
ii. A Just Cause Termination of the Executive's employment.
2. POSITION.
During the term of this Agreement, Corporation will employ the
Executive, and the Executive will serve the Corporation in the capacity of Vice
President of Operations.
3. TERM OF EMPLOYMENT.
The Corporation agrees to continue the Executive's employment, and the
Executive agrees to remain in the employ of the Corporation, for a period of one
(1) year from the date hereof unless the Executive's employment is earlier
terminated pursuant to the provisions of this Agreement.
38
4
4. COMPENSATION AND BENEFITS.
a. The Corporation agrees to pay the Executive a minimum annual
salary of $150,000, or in the event of any portion of a year, a pro rata amount
of such annual salary. The Executive's salary will be payable as earned in
accordance with Corporation's customary payroll practice.
b. The Executive will be eligible to receive an annual cash bonus in
the discretion of the Corporation's Board of Directors.
c. The Executive will be eligible to participate in Corporation's
employee benefit plans of general application, including without limitation
pension and profit-sharing plans, deferred compensation, supplemental retirement
or excess-benefit plans, stock option, incentive or other bonus plans, life,
health and dental insurance programs, 401(k) plan, paid vacations and sabbatical
leave plans, and similar plans or programs, in accordance with the rules
established for individual participation in any such plan. The Executive shall
be entitled each year to four (4) weeks leave for vacation at full pay. The
Executive shall also be entitled to reasonable holidays and illness days with
full pay in accordance with the Corporation's policy from time to time in
effect.
d. The Corporation will reimburse the Executive for all reasonable
and necessary expenses incurred by the Executive in connection with the
Corporation's business.
5. ADMINISTRATION.
The Administrative Committee shall administer this Agreement and shall
have the power and the duty to make all determinations necessary for the
implementation of this Agreement, including by way of example and not as a
limitation, the occurrence of a Change in Control and the date of such change.
Any such determination (a) shall be made on the basis of all information known
to the persons making the determination, after reasonable inquiry, (b) may be
made prospectively and subject to one or more contingent events, and (c) will be
binding on the Corporation but not the Executive. Any disagreement between the
Corporation and the Executive concerning any such determination or the
administration, implementation or interpretation of this Agreement shall be
subject to the claims and arbitration procedures set forth in Section 16
hereunder.
6. OBLIGATIONS OF THE CORPORATION UPON CHANGE IN CONTROL.
a. Within fifteen (15) days after a Change in Control or at such earlier
time as may be required by law, the Corporation shall pay to the Executive:
i. The full amount of any earned but unpaid base salary through
the date of the Change in Control, plus a cash payment for all
reasonable travel, entertainment and other expenses properly incurred by
the Executive in connection with his or her employment by the
Corporation to the extent the Executive has not already been reimbursed
for such expenses.
ii. The full amount of any unpaid annual cash bonus for any
fiscal year of the Corporation prior to the year in which the Change in
Control occurs, and a pro rata amount of any unpaid annual cash bonus
for the fiscal year in which the Change in Control occurs calculated by
multiplying (A) the number of full calendar months that the Executive
was employed by the Corporation in such fiscal year divided by 12 and
(B) the amount of $42,500, representing the target annual cash bonus
amount.
39
5
b. In the event that the Executive is employed by the Corporation on the
date of a Change in Control, then on the earlier to occur of (i) ninety (90)
days after the date of the Change in Control or (ii) three (3) business days
after the date that the Executive ceases to be employed by the Corporation, then
the Corporation shall pay to the Executive the amount of $207,000, representing
an amount equal to the aggregate of the Executive's annual base salary and
target bonus plus other benefits and expenses, unless the Executive ceases to be
employed by the Corporation for either of the following reasons prior to the
date which is ninety (90) days after the date that the Change in Control occurs,
in which event no amount shall be due under this Section 6.b.: (1) a Just Cause
Termination of the Executive prior to ninety (90) days after the date of a
Change in Control or (2) the voluntary resignation of the Executive prior to
ninety (90) days after the date of a Change in Control, other than a resignation
following a Constructive Discharge. The Executive shall be eligible to make
contributions to the Corporation's Section 401(k) plan, to the extent allowed
under the plan, from amounts payable to the Executive under this Section 6.
c. If and to the extent that the Executive continues to be employed by
the Corporation following a Change in Control, the Executive shall continue to
receive his salary and be eligible for bonus notwithstanding the payment of the
amounts provided herein.
d. Immediately prior to a Change in Control, any unvested stock options
to purchase shares of Common Stock from the Corporation then held by the
Executive shall become fully vested and exercisable at the time of the Change in
Control.
7. OBLIGATIONS OF THE CORPORATION UPON NON-CHANGE IN CONTROL TERMINATION.
a. Within fifteen (15) days after a Non-Change in Control Termination or
at such earlier time as may be required by law, the Corporation shall pay to the
Executive:
i. The full amount of any earned but unpaid base salary through
the date of the Non-Change in Control Termination, plus a cash payment
for (a) all unused vacation time which the Executive has accrued as of
the Non-Change in Control Termination, and (b) all reasonable travel,
entertainment and other expenses properly incurred by the Executive in
connection with his or her employment by the Corporation to the extent
the Executive has not already been reimbursed for such expenses.
ii. The full amount of any unpaid annual cash bonus for any
fiscal year of the Corporation prior to the year in which the Non-Change
in Control Termination occurs, and a pro rata amount of any unpaid
annual cash bonus for the fiscal year in which the Non-Change in Control
Termination occurs calculated by multiplying (A) the number of full
calendar months that the Executive was employed by the Corporation in
such fiscal year divided by 12 and (B) the amount of $42,500,
representing the target annual cash bonus amount.
b. Within 30 days after a Non-Change in Control Termination, the
Corporation shall pay to the Executive the amount of $103,750 and no further
payments (other than as provided in this Agreement) shall be due in respect of
the Executive's salary or bonus for such year.
8. TERMINATION DUE TO DEATH OR DISABILITY.
40
6
Within fifteen (15) days after the Executive is terminated due to death
or disability, or at such earlier time as may be required by law, the
Corporation shall pay (a) to the Executive, if the Executive has been terminated
due to disability, or (b) if the Executive has died, to the Executive's
surviving spouse, issue by right of representation or estate, in that order:
a. The full amount of any earned but unpaid base salary through the date
of termination, plus a cash payment for (a) all unused vacation time which the
Executive has accrued as of the date of termination, and (b) all reasonable
travel, entertainment and other expenses properly incurred by the Executive in
connection with his or her employment by the Corporation to the extent the
Executive has not already been reimbursed for such expenses.
b. The full amount of any unpaid annual cash bonus for any fiscal year
of the Corporation prior to the year in which the termination due to death or
disability occurs, and a pro rata amount of any unpaid annual cash bonus for the
fiscal year in which the termination due to death or disability occurs
calculated by multiplying (A) the number of full calendar months that the
Executive was employed by the Corporation in such fiscal year divided by 12 and
(B) the amount of $42,500, representing the target annual cash bonus amount.
c. If the termination due to death or disability occurs after the date
of a Change in Control and prior to ninety (90) days after the date of a Change
in Control, the full amount otherwise payable to the Executive under Section
6.b. hereof.
9. OTHER TERMINATION.
Within fifteen (15) days after (a) a Just Cause Termination of the
Executive or (b) the voluntary resignation of the Executive, other than a
resignation following a Constructive Discharge or at such earlier time as may be
required by law, the Corporation shall pay to the Executive the full amount of
any earned but unpaid base salary through the date of such termination or
resignation, plus a cash payment for (i) all unused vacation time which the
Executive has accrued as of date of such termination or resignation, and (ii)
all reasonable travel, entertainment and other expenses properly incurred by the
Executive in connection with his or her employment by the Corporation to the
extent the Executive has not already been reimbursed for such expenses.
10. CONTINUATION OF BENEFITS AFTER TERMINATION.
a. After a Severance of Employment or a Non-Change in Control
Termination, the Executive and the Executive's eligible dependents shall
continue to be eligible to participate during the Benefit Continuation Period in
the medical, dental, vision, health, disability, life and other similar plans
and arrangements applicable to the Executive immediately prior to the Severance
of Employment or Non-Change in Control Termination. The Executive shall
participate on the same terms and conditions in effect throughout the Benefit
Continuation Period for active employees of the Corporation.
b. If, at the conclusion of the Benefit Continuation Period, the
Executive is not eligible to receive coverage under the plans of a subsequent
employer that provide substantially equivalent or greater benefits to the
Executive and the Executive's dependents, the Executive may exercise his or her
right under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), to continue to participate in the Corporation's medical,
dental, vision, health, disability, life and other similar plans and
arrangements applicable to the Executive, subject to the terms and conditions
set forth in COBRA and any rules and regulations promulgated thereunder.
11. FEDERAL EXCISE TAX.
41
7
a. If any amounts payable to the Executive under this Agreement are
characterized as excess parachute payments pursuant to Section 4999 of the Code
and Executive thereby would be subject to any United States federal excise tax
due to that characterization, then Executive may elect, in Executive's sole
discretion, to reduce the amounts payable under this Agreement or to have any
portion of applicable options not vest in order to avoid any "excess parachute
payment" under Section 280G(b)(1) of the Code.
b. Unless the Corporation and Executive otherwise agree in writing, any
determination required under this Section 11 shall be made in writing by
independent public accountants for the Corporation (the "Accountants"), whose
determination shall be conclusive and binding upon Executive and the Corporation
for all purposes. For purposes of making the calculations required by this
Section 11, the Accountants may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The
Corporation and Executive shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make the
required determinations. The Corporation shall bear all fees and expenses the
Accountants may reasonably charge in connection with the services contemplated
by this Section 11. The Corporation shall pay all reasonable legal fees and
expenses incurred in defending against any claim by the Internal Revenue Service
that would require payment of any tax under Section 4999 of the Code and shall
promptly reimburse them for the reasonable expenses incurred by Executive in
connection with defending such claim provided that Executive: (i) give the
Corporation any information reasonably requested by the Corporation relating to
the claim; (ii) accept legal representation with respect to such claim by an
attorney reasonably selected by the Corporation and reasonably acceptable to
Executive; (iii) cooperate with the Corporation in good faith in contesting the
claim; and (iv) permit the Corporation to participate in and control any
proceedings relating to the claim.
12. TAXES.
The Corporation shall deduct from any payments to the Executive under
this Agreement amounts that the Corporation is required to withhold and pay
either to government agencies on behalf of the Executive or under court order to
any Person.
13. DEATH PRIOR TO PAYMENT OF AMOUNTS DUE.
In the event of the Executive's death after a Change in Control,
Severance of Employment or Non-Change in Control Termination but prior to
payment to the Executive of amounts due under this Agreement, such payment shall
be made to the Executive's surviving spouse, issue by right of representation or
estate, in that order.
14. ASSIGNMENT.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and the successors and assigns of the Corporation, including
any successor or assign pursuant to a Change in Control.
15. NON-ASSIGNMENT BY THE EXECUTIVE.
The Executive shall not assign, hypothecate, or transfer any of the
rights herein to any Person other than pursuant to the laws of descent and
distribution. Any attempt to assign, hypothecate or transfer the rights
hereunder shall immediately terminate all of the Executive's rights under this
Agreement.
16. CLAIMS PROCEDURE AND ARBITRATION.
42
