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Exhibit 10.38
EMPLOYMENT AGREEMENT
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. Steven Jennings ("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. A
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
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