INDEMNIFICATION
AGREEMENT
This
Indemnification Agreement (“Agreement”) is made as
of this 28th day of June, 1999, by and between Cyberonics,
Inc., a Delaware corporation (the “ Company
”), and Alan J. Olsen (“Indemnitee”)
.
WHEREAS,
the Company and Indemnitee recognize the increasing difficulty in
obtaining directors’ and officers’ liability insurance,
the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance;
WHEREAS,
the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers
and directors to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely
limited;
WHEREAS,
Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other
officers and directors of the Company may not be willing to
continue to serve as officers and directors without additional
protection; and
WHEREAS,
the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and
directors so as to provide them with the maximum protection
permitted by law.
NOW,
THEREFORE, the Company and Indemnitee hereby agree as
follows:
(a)
Third Party Proceedings . The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be
made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any
subsidiary of the Company, by reason of any action or inaction on
the part of Indemnitee while an officer or director or by reason of
the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be
unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action or proceeding if
Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests
of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe
Indemnitee’s
conduct was
unlawful. The termination of any action or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that (i) Indemnitee did not act in good faith and
in a manner which Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, or (ii) with
respect to any criminal action or proceeding, Indemnitee had
reasonable cause to believe that Indemnitee’s conduct was
unlawful.
(b)
Proceedings By or in the Right of the Company . The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or proceeding by or in the right of the Company or
any subsidiary of the Company to procure a judgment in its favor by
reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company,
by reason of any action or inaction on the part of Indemnitee while
an officer or director or by reason of the fact that Indemnitee is
or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys’ fees) and, to the fullest extent
permitted by law, amounts paid in settlement, in each case to the
extent actually and reasonably incurred by Indemnitee in connection
with the defense or settlement of such action or proceeding if
Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests
of the Company and its stockholders, except that no indemnification
shall be made in respect of any claim, issue or matter as to which
Indemnitee shall have been finally adjudicated by court order or
judgment to be liable to the Company in the performance of
Indemnitee’s duty to the Company and its stockholders unless
and only to the extent that the court in which such action or
proceeding is or was pending shall determine upon application that,
in view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnity for expenses and then only to
the extent that the court shall determine.
2.
Expenses; Indemnification Procedure .
(a)
Advancement of Expenses . The Company shall advance all
expenses incurred by Indemnitee in connection with the
investigation, defense, settlement or appeal of any civil or
criminal action or proceeding referenced in Section l(a) or
(b) hereof (but not amounts actually paid in settlement of any
such action or proceeding). Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall
ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be
made hereunder shall be paid by the Company to Indemnitee within
twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b)
Notice/Cooperation by Indemnitee . Indemnitee shall, as a
condition precedent to his right to be indemnified under this
Agreement, give the Company notice in writing as soon as
practicable of any claim made against Indemnitee for which
indemnification will be sought under this Agreement, Notice to the
Company shall be directed to the Chief Executive Officer of the
Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in
writing to Indemnitee). Notice shall be deemed received three
business days after the
-2-
date postmarked
if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such
notice shall actually be received by the Company. In addition,
Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within
Indemnitee’s power.
(c)
Procedure . Any indemnification and advances provided for in
Section 1 and this Section 2 shall be made no later than
forty-five (45) days after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company’s Certificate of
Incorporation or By-laws providing for indemnification, is not paid
in full by the Company within forty-five (45) days after a
written request for payment thereof has first been received by the
Company, Indemnitee may, but need not, at any time thereafter bring
an action against the Company to recover the unpaid amount of the
claim and, subject to Section 12 of this Agreement, Indemnitee
shall also be entitled to be paid for the expenses (including
attorneys’ fees) of bringing such action. It shall be a
defense to any such action (other than an action brought to enforce
a claim for expenses incurred in connection with any action or
proceeding in advance of its final disposition) that Indemnitee has
not met the standards of conduct which make it permissible under
applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on
the Company and Indemnitee shall be entitled to receive interim
payments of expenses pursuant to Subsection 2(a) unless and until
such defense may be finally adjudicated by court order or judgment
from which no further right of appeal exists. It is the
parties’ intention that if the Company contests
Indemnitee’s right to indemnification, the question of
Indemnitee’s right to indemnification shall be for the court
to decide, and neither the failure of the Company (including its
Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have
made a determination that indemnification of Indemnitee is proper
in the circumstances because Indemnitee has met the applicable
standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal
counsel, or its stockholders) that Indemnitee has not met such
applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of
conduct.
(d)
Notice to Insurers . If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has
director and officer liability insurance in effect, the Company
shall give prompt notice of the commencement of such proceeding to
the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on
behalf of the Indemnitee, all amounts payable as a result of such
proceeding in accordance with the terms of such
policies.
(e)
Selection of Counsel . In the event the Company shall be
obligate
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