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                            RETENTION BONUS AGREEMENT


         This Retention Bonus Agreement (the "Agreement") is made and entered
into effective as of October 1, 1996 (the 'Effective Date"), by and between
Steve Ford (the "Employee") and Cyberonics, Inc. (the "Company").

                                    RECITALS

         A. The Company has announced the execution of an Agreement and Plan of
Merger pursuant to which the Company may be acquired by another company. The
Board of Directors of the Company (the "Board") recognizes that such
announcement can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility or occurrence of a Change of Control (as defined
below) of the Company.

         B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.

         In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:

         1. Definitions. For purposes of this Agreement, the following
definitions shall apply:

                  (a) "Bonus" shall mean the applicable of the follow: (i) a
lump sum payment equal to nine (9) months of the Employee's annual base salary
as in effect on the Effective Date, if prior to the Payment Date, the Company or
successor corporation has not offered the Employee Continued Employment with the
Company or successor corporation, or (ii) a lump sum payment equal to seven (7)
months of the Employee's annual base salary as in effect on the Effective Date,
if prior to the Payment Date, the Company or successor corporation has offered
the Employee Continued Employment with the Company or successor corporation;

                  (b) "Cause" shall mean:

                           (i) Conviction of a crime involving moral turpitude;

                           (ii) Employee's malfeasance in connection with his
employment or neglect of his duties after written notification thereof by the
Company or its successor, which notice shall specify the alleged instances of
neglect of his duty, and shall provide Employee with 30 days in which to remedy
such neglect, if it is subject to being remedied;

                           (iii) Employee's material breach of this Agreement or
the confidential information agreement entered into with the Company; or

                           (iv) Employee's personally engaging in knowing and
intentional illegal conduct which is seriously injurious to the Company or its
affiliates.
<PAGE>   2
                  (c) "Change of Control" shall mean (i) a corporate
reorganization of the Company which results in the stockholders of the Company
immediately prior to such reorganization owning less than 50% of the combined
voting power of the capital stock of the surviving company immediately following
such reorganization, or (ii) the sale of all or substantially all of the assets
of the Company.

                  (d) "Closing Date" means that date upon which a Change of
Control is consummated.

                  (e) An offer of "Continued Employment' shall mean an offer
extended by Company or its successor to Employee of employment with the Company
or its successor beyond the Payment Date which (X) the Employee accepts or (Y)
which meets each of the following conditions:

                           (i) the assignment to Employee of duties which are
substantially equivalent to the Employee's duties with the Company as of the
Effective Date;

                           (ii) a salary which is equal to or greater than the
Employee's salary with the Company as of the Effective Date; and

                           (iii) receipt of employee benefits which are
comparable to employee benefits received by other employees of the Company or
successor corporation who have comparable salaries and duties to the Employee.

It is understood and agreed that an offer of employment which meets the
requirements of the term "Continued Employment" may require the Employee to
relocate, may involve a different job grade level and may carry a different
title.

                  (f) "Involuntary Termination" means:

                           (i) the continued assignment to Employee of any
duties or the continued significant reduction of Employee's duties, either of
which is not substantially equivalent to the Employee's duties with the Company
as of the Effective Date, provided that a change in job title shall not
constitute a significant reduction in Employee's duties;

                           (ii) a reduction in Employee's salary;

                           (iii) receipt of employee benefits which are not
comparable to employee benefits received by other employees of the Company or
successor corporation who have comparable salaries and duties to the Employee;

                           (iv) the relocation of Employee's principal place for
rendering the Employee's services to the Company to a location more than fifty
(50) miles from the present location of the principal executive office of the
Company prior to the Payment Date;

                           (v) any material breach by the Company of any
material provision of this Agreement which continues uncured for 30 days
following notice thereof, provided, however, that



                                       -2-
<PAGE>   3
none of the foregoing shall constitute "involuntarily terminated" to the extent
Employee has agreed thereto in writing; or

                           (vi) termination of the Employee's employment with
the Company or the successor corporation by the Company or the successor
corporation other than for Cause.

                  (g) "Payment Date" means that date which is six (6) months
after the Closing Date.

         2. Payment of Bonus; Effect of Termination of Employment.

                  (a) Triggering Event. In the event of a Change of Control
occurring on or before December 31, 1996, as long as the Employee has maintained
continuous employment with the Company or its successor from the Effective Date
hereof through the Payment Date, Employee shall be entitled to receive the
Bonus. The Company or its successor shall pay such Bonus to the Employee not
later than five (5) business days after the Payment Date.

                  (b) Accrual of Right; Effect of Termination. No right shall
accrue hereunder in the event that Employee's employment with the Company is
terminated for any reason, with, or without Cause and whether initiated by
Employee or by Company, at any time prior to the Closing Date. In the event that
Employee has maintained continuous employment with the Company from the
Effective Date through the Closing Date but Employee's employment with the
Company or its successor is terminated as a result of an Involuntarily
Termination at any time between the Closing Date and the Payment Date, then the
Bonus shall become payable within five (5) business days after the termination
date.

                  (c) No Bonus. No Bonus shall be payable hereunder to Employee
if Employee's employment is terminated for Cause prior to the Payment Date.

         3. At-Will Employment. This Agreement does not guarantee or imply any
right to continued employment for any period whatsoever. The Company and the
Employee acknowledge that the Employee's employment is and shall continue to be
at-will, as defined under applicable law. If the Employee's employment
terminates for any reason, all payments of compensation and benefits shall cease
and thereafter the Employee shall not be entitled to any payments, benefits,
damages, awards or compensation except for the Bonus (subject to Section 2(c)),
and except as may otherwise be available in accordance with the Company's
established employee plans and practices or other agreements with the Company at
the time of termination.

         4. Duration. The terms of this Agreement shall terminate upon the date
that all obligations of the parties hereunder have been satisfied; provided,
however, that this Agreement may be extended for an additional period or periods
by resolution adopted by the Board at any time during the period that the
Agreement is in effect.




                                       -3-
<PAGE>   4
         5. Miscellaneous Provisions.

                  (a) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.

                  (b) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.

                  (c) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.




                                       -4-
<PAGE>   5
         IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.


COMPANY:                                CYBERONICS, INC.


                                        By:   /s/ Robert P. Cummins
                                           -------------------------------------

                                        Title:  President & CEO
                                              ----------------------------------




EMPLOYEE:                               /s/  Steve Ford
                                        ----------------------------------------
                                        Steve  Ford




                                       -5-

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