INDEMNIFICATION
AGREEMENT
This
Indemnification Agreement (this “Agreement”) is
executed on and effective as of August 1, 2003 (the
“Effective Date”), by and between Cyberonics, Inc., a
Delaware corporation (the “Company”), and David S. Wise
(“Officer”).
WHEREAS, the
Company and Officer 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 Officer 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, Officer
does not regard the current protection available as adequate under
the present circumstances, and Officer 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 Officer, 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 Officer hereby agree as follows:
a.
Third Party Proceedings . The Company shall indemnify
Officer and any partnership, corporation, trust, or other entity of
which Officer is or was a partner, stockholder, trustee, director,
officer, employee, or agent (Officer 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 Officer 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 Officer while an officer or director or by reason of
the fact that Officer 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 Officer acted in good faith and in a manner Officer
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 Officer’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 Officer did not act in good faith
and in a manner that Officer 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 Officer’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 Officer 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 Officer
while an officer or director or by reason of the fact that Officer
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 Officer
acted in good faith and in a manner Officer 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 Officer 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.
2
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, or its stockholders) to have
made a determination that indemnification
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