INDEMNIFICATION
AGREEMENT
This
Indemnification Agreement (this “Agreement”) is
executed on and effective as of November 13, 2001 (the
“Effective Date”), by and between Cyberonics, Inc., a
Delaware corporation (the “Company”), and
(“Director”).
WHEREAS, the
Company and Director recognize the difficulty in obtaining
directors’ and officers’ liability insurance, the
increases in the cost of such insurance, and the general
limitations in the coverage of such insurance;
WHEREAS, the
Company and Director 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, Director
does not regard the current protection available as adequate under
the present circumstances, and Director and other officers and
directors of the Company may not be willing to serve or 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 Director, 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 Director hereby agree as follows:
(a) Third Party
Proceedings. The Company shall indemnify Director and any
partnership, corporation, trust, or other entity of which Director
is or was a partner, stockholder, trustee, director, officer,
employee, or agent (Director and each such partnership,
corporation, trust, or other entity being referred to as an
“Indemnitee”) if Indemnitee is or was a party or is
threatened to be made a party to any threatened, pending, or
completed action, suit 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 Director 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 Director while an officer or director or by reason of
the fact that Director 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, suit, or
proceeding, if Director acted in good faith and in a manner
Director 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 Director’s
conduct was unlawful. The termination of any action, suit, 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 Director did not act in good faith and in
a manner that
Director
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 reasonable cause to believe that Director’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
suit 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 Director 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 Director while an officer or
director or by reason of the fact that Director 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 suit, if Director acted in good faith and in a
manner Director reasonably believed to be in or not opposed to the
best interests of the Company, except that no indemnification shall
be made in respect of any claim, issue, or matter as to which
Director shall have been adjudged to be liable to the Company
unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, Indemnitee is fairly and reasonably entitled to indemnity
for such expenses that the Court of Chancery of the State of
Delaware or such other court shall deem proper.
(c) Mandatory
Payment of Expenses. To the extent that Indemnitee has been
successful on the merits or otherwise in defense of any action,
suit, or proceeding referred to in Sections 1(a) and (b) or
the defense of any claim, issue, or matter therein, Indemnitee
shall be indemnified against expenses (including attorneys’
fees) actually and reasonably incurred by Indemnitee in connection
therewith.
2. Expenses:
Indemnification Procedure.
(a) Advancement of
Expenses. The Company shall advance all expenses incurred by
Indemnitee, and, to the fullest extent permitted by law, amounts
paid in settlement by Indemnitee, in connection with the
investigation, defense, settlement, or appeal of any civil or
criminal action, suit, or proceeding referenced in Section 1(a) or
(b) hereof. 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 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 or its 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 or could be sought under this Agreement.
Notice to the Company
shall be
directed to the President 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 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 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 Bylaws providing
for indemnification, is not paid in full by the Company within
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, suit, or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct
that 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
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