**Exhibit 10.61****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’ andofficers’ liability insurance, the increases in the cost of such insurance, and the generallimitations in the coverage of such insurance;     WHEREAS, the Company and Officer further recognize the substantial increase in corporatelitigation in general, subjecting officers and directors to expensive litigation risks at the sametime as the availability and coverage of liability insurance has been severely limited;     WHEREAS, Officer does not regard the current protection available as adequate under thepresent circumstances, and Officer and other officers and directors of the Company may not bewilling 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 qualifiedindividuals, such as Officer, to serve as officers and directors of the Company and to indemnifyits 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:     1. Indemnification.          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, orother entity being referred to as an “Indemnitee”) if Indemnitee is or was a party or isthreatened 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 rightof the Company) by reason of the fact that Officer is or was a director, officer, employee, oragent of the Company, or any subsidiary of the Company, by reason of any action or inaction on thepart of Officer while an officer or director or by reason of the fact that Officer is or wasserving at the request of the Company as a director, officer, employee, or agent of anothercorporation, partnership, joint venture, trust, or other enterprise, against expenses (includingattorneys’ fees), judgments, fines, and amounts paid in settlement (if such settlement is approvedin advance by the Company, which approval shall not be unreasonably withheld) actually andreasonably incurred by Indemnitee in connection with such action, suit, or proceeding, if Officeracted in good faith and in a manner Officer reasonably believed to be in or not opposed to thebest interests of the Company, and, with respect to any criminal action or proceeding, had noreasonable 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 itsequivalent, shall not, of itself, create a presumption that Officer did not act in good faith andin a manner that Officer reasonably believed to be in or not opposed to the best interests of theCompany, and, with respect to any criminal action or proceeding, had reasonable cause to believethat Officer’s conduct was unlawful.
 

 
          b. Proceedings By or in the Right of the Company. The Company shall indemnifyIndemnitee 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 theCompany 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 anyaction or inaction on the part of Officer while an officer or director or by reason of the factthat Officer is or was serving at the request of the Company as a director, officer, employee, oragent of another corporation, partnership, joint venture, trust, or other enterprise, againstexpenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid insettlement, in each case to the extent actually and reasonably incurred by Indemnitee in connectionwith the defense or settlement of such action or suit, if Officer acted in good faith and in amanner 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 whichOfficer shall have been adjudged to be liable to the Company unless and only to the extent that theCourt of Chancery of the State of Delaware or the court in which such action or suit was broughtshall determine upon application that, despite the adjudication of liability but in view of all thecircumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for suchexpenses 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 onthe 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 indemnifiedagainst expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee inconnection therewith.     2. Expenses; Indemnification Procedure.          a. Advancement of Expenses. The Company shall advance all expenses incurred byIndemnitee, 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 criminalaction, suit, or proceeding referenced in Section 1(a) or (b) hereof. Indemnitee hereby undertakesto repay such amounts advanced only if, and to the extent that, it shall ultimately be determinedthat Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advancesto be made hereunder shall be paid by the Company to Indemnitee within 20 days following deliveryof a written request therefor by Indemnitee to the Company.          b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent tohis or its right to be indemnified under this Agreement, give the Company notice in writing assoon as practicable of any claim made against Indemnitee for which indemnification will or couldbe sought under this Agreement. Notice to the Company shall be directed to the President of theCompany at the address shown on the signature page of this Agreement, or such other address as theCompany shall designate in writing to Indemnitee. Notice shall be deemed received three businessdays after the date postmarked if sent by domestic certified or registered mail, properlyaddressed; otherwise notice shall be deemed received when such notice shall actually be receivedby the Company. In addition, Indemnitee shall give the Company such information and cooperation asit may reasonably require and as shall be within Indemnitee’s power.
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          c. Procedure. Any indemnification and advances provided for in Section 1 and thisSection 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’sCertificate of Incorporation or Bylaws providing for indemnification, is not paid in full by theCompany within 45 days after a written request for payment thereof has first been received by theCompany, Indemnitee may, but need not, at any time thereafter bring an action against the Companyto recover the unpaid amount of the claim and, subject to Section 12 of this Agreement, Indemniteeshall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing suchaction. It shall be a defense to any such action (other than an action brought to enforce a claimfor expenses incurred in connection with any action, suit, or proceeding in advance of its finaldisposition) that Indemnitee has not met the standards of conduct that make it permissible underapplicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden ofproving such defense shall be on the Company and Indemnitee shall be entitled to receive interimpayments of expenses pursuant to Subsection 2(a) unless and until such defense may be finallyadjudicated by court order or judgment from which no further right of appeal exists. It is theparties’ intention that if the Company contests Indemnitee’s right to indemnification, the questionof Indemnitee’s right to indemnification shall be for the court to decide, and neither the failureof the Company (including its Board of Directors, any committee or subgroup of the Board ofDirectors, independent legal counsel, or its stockholders) to have made a determination thatindemnification of Indemnitee is proper in the circumstances because Indemnitee has met theapplicable standard of conduct required by applicable law, nor an actual determination by theCompany (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 applicablestandard of conduct, shall create a presumption that Indemnitee has or has not met the applicablestandard of conduct.          d. Notice to Insurers. If, at the time of the receipt of a notice of a claim pursuantto Section 2(b) hereof, the Company has directors’ and officers’ liability insurance in effect, theCompany shall give prompt notice of the commencement of such proceeding to the insurers inaccordance with the procedures set forth in the respective policies. The Company shall thereaftertake 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 obligated under Section2(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate,shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee(whose approval shall not be unreasonably withheld), upon the delivery to Indemnitee of writtennotice of its election so to do. After delivery of such notice, approval of such counsel byIndemnitee and the retention of such counsel by the Company, the Company will not be liable toIndemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee withrespect to the same proceeding, provided that (i) Indemnitee shall have the right to employ hiscounsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counselby Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonablyconcluded that there may be a conflict of interest between the Company and Indemnitee in theconduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assumethe defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at theexpense of the Company.
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     3. Additional Indemnification Rights; Nonexclusivity.          a. Scope. Notwithstanding any other provision of this Agreement, the Company herebyagrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding thatsuch indemnification is not specifically authorized by the other provisions of this Agreement, theCompany’s Certificate of Incorporation, the Company’s Bylaws, or by statute. In the event of anychange, after the date of this Agreement, in any applicable law, statute, or rule that expands theright of a Delaware corporation to indemnify a member of its board of directors or an officer, suchchanges shall be, *ipso facto,*within the purview of Indemnitee’s rights and Company’s obligationsunder this Agreement. In the event of any change in any applicable law, statute, or rule thatnarrows the right of a Delaware corporation to indemnify a member of its board of directors or anofficer, such changes, to the extent not otherwise required by such law, statute, or rule to beapplied to this Agreement, shall have no effect on this Agreement or the parties’ rights andobligations hereunder.          b. Nonexclusivity. The indemnification provided by this Agreement shall not be deemedexclusive of any rights to which Officer or any other Indemnitee may be entitled under theCompany’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders ordisinterested directors, the General Corporation Law of the State of Delaware, or otherwise, bothas to action in Officer’s official capacity and as to action in another capacity while holdingsuch office. The indemnification provided under this Agreement shall continue as to Officer andeach other Indemnitee for any action taken or not taken while Officer is or was serving in anindemnified capacity even though he may have ceased to serve in such capacity at the time of anyaction, suit, or other covered proceeding.     4. Partial Indemnification. If Indemnitee is entitled under any provision of thisAgreement to indemnification by the Company for some or a portion of the expenses, judgments,fines, or penalties actually or reasonably incurred by Indemnitee in the investigation, defense,appeal, or settlement of any civil or criminal action, suit, or proceeding, but not, however, forthe total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion ofsuch expenses, judgments, fines, or penalties to which Indemnitee is entitled.     5. Mutual Acknowledgment. Both the Company and Officer acknowledge that in certaininstances Federal law or applicable public policy may prohibit the Company from indemnifying itsdirectors and officers under this Agreement or otherwise, in which event, notwithstanding any otherprovisions of this Agreement to the contrary, the indemnification provided by this Agreement shallbe limited to such extent as is necessary to comply with applicable Federal law or public policy.For example, the Company and Officer acknowledge that the Securities and Exchange Commission (the“SEC”) has taken the position that indemnification is not permissible for liabilities arising undercertain federal securities laws, and federal legislation prohibits indemnification for certainviolations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Officerunderstands and acknowledges that in the event the Company undertakes a public offering of itssecurities pursuant to a registration with the SEC, the Company may be required to undertake withthe SEC to submit the question of indemnification to a court in certain circumstances for adetermination of the Company’s right under public policy to indemnify Officer or any otherIndemnitee.
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     6. Directors and Officers Liability Insurance. The Company has applied for and willuse its best efforts to obtain and maintain in force with a financially sound and reputable insurera directors, officers, and corporate liability insurance policy having a limit which the Company,together with the Board of Directors, approves as providing coverage appropriate and acceptable tothe Board of Directors. In all policies of directors and officers liability insurance, Officer andeach other Indemnitee shall be named as an insured in such a manner as to provide Officer the samerights and benefits as are accorded to the most favorably insured of the Company’s directors.     7. Severability. Nothing in this Agreement is intended to require or shall beconstrued as requiring the Company to do or fail to do any act in violation of applicable law. TheCompany’s inability, pursuant to court order, to perform its obligations under this Agreement shallnot constitute a breach of this Agreement. The provisions of this Agreement shall be severable asprovided in this Section 7. If this Agreement or any portion hereof shall be invalidated on anyground by any court of competent jurisdiction, then the Company shall nevertheless indemnifyOfficer and each other Indemnitee to the full extent permitted by any applicable portion of thisAgreement that shall not have been invalidated, and the balance of this Agreement not soinvalidated shall be enforceable in accordance with its terms.     8. Exceptions. Any other provision herein to the contrary notwithstanding, the Companyshall not be obligated pursuant to the terms of this Agreement:          a. Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee withrespect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way ofdefense, except with respect to proceedings brought to establish or enforce a right toindemnification under this Agreement or any other statute or law or otherwise as required underSection 145 of the Delaware General Corporation Law, but such indemnification or advancement ofexpenses may be provided by the Company in specific cases if the Board of Directors finds it to beappropriate;          b. Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by theIndemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret thisAgreement, if a court of competent jurisdiction determines that each of the material assertionsmade by the Indemnitee in such proceeding was not made in good faith or was frivolous;          c. Insured Claims. To indemnify Indemnitee for expenses or liabilities of any typewhatsoever (including, but not limited to, judgments, fines, ERISA, excise taxes or penalties, andamounts paid in settlement) that have been paid directly to Indemnitee by an insurance carrierunder a policy of officers’ and directors’ liability insurance maintained by the Company; or          d. Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment ofprofits arising from the purchase and sale by Indemnitee of securities in violation of Section16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.     9. Construction of Certain Phrases.          a. For purposes of this Agreement, references to the “Company” shall include, in addition tothe resulting corporation, any constituent corporation (including any constituent of aconstituent) absorbed in a consolidation or merger, so that if Indemnitee is or was a director,officer,
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employee, or agent of such constituent corporation, or is or was serving at the request of suchconstituent corporation as a director, officer, employee, or agent of another corporation,partnership, joint venture, trust, or other enterprise, Indemnitee shall stand in the sameposition under the provisions of this Agreement with respect to the resulting or survivingcorporation as Indemnitee would have with respect to such constituent corporation if its separateexistence had continued.          b. For purposes of this Agreement, references to “other enterprises” shall include employeebenefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee withrespect to an employee benefit plan; and references to “serving at the request of the Company”shall include any service as a director, officer, employee, or agent of the Company that imposesduties on, or involves services by, such director, officer, employee, or agent with respect to anemployee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faithand in a manner Indemnitee reasonably believed to be in the interest of the participants andbeneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner“not opposed to the best interests of the Company” as referred to in this Agreement.     10. Counterparts. This Agreement may be executed in one or more counterparts, each ofwhich shall constitute an original.     11. Successors and Assigns. This Agreement shall be binding upon the Company and itssuccessors and assigns, and shall inure to the benefit of Officer and each other Indemnitee andtheir respective estates, heirs, successors, legal representatives, and assigns.     12. Attorneys’ Fees. In the event that any action is instituted by Indemnitee underthis Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to bepaid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemniteewith respect to such action, unless as a part of such action, the court of competent jurisdictiondetermines that each of the material assertions made by Indemnitee as a basis for such action wasnot made in good faith or was frivolous. In the event of an action instituted by or in the name ofthe Company under this Agreement or to enforce or interpret any of the terms of this Agreement,Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees,incurred by Indemnitee in defense of such action (including with respect to Indemnitee’scounterclaims and cross-claims made in such action), unless as a part of such action the courtdetermines that each of Indemnitee’s material defenses to such action was made in bad faith or wasfrivolous.     13. Notice. All notices, requests, demands, and other communications under thisAgreement shall be in writing and shall be deemed duly given on the third business day after thedate postmarked, if delivered by domestic certified or registered mail with postage prepaid, or, ifdelivered by other means, on the date actual notice is received. Addresses for notice to eitherparty are as shown on the signature page of this Agreement, or as subsequently modified by writtennotice.     14. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocablyconsent to the non-exclusive jurisdiction of the courts of the State of Delaware for all purposesin connection with any action or proceeding that arises out of or relates to this Agreement andagree that any action instituted under this Agreement may be brought in any court of competentjurisdiction in the State of Delaware.
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     15. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND ITS PROVISIONS CONSTRUED INACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS BETWEEN DELAWARERESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN DELAWARE.[Signature page follows.]
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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the EffectiveDate.         COMPANY:    Cyberonics, Inc.           By: /s/ Robert P. Cummins             Robert P. Cummins,      Chief Executive Officer           OFFICER:           /s/ David S. Wise         David S. Wise  
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