**Exhibit 10.32****INDEMNIFICATION AGREEMENT**     This Indemnification Agreement (this “Agreement”) is executed on and effective as of August1, 2003 (the “Effective Date”), by and between Cyberonics, Inc., a Delaware corporation (the“Company”), and Robert P. Cummins (“Director”).     WHEREAS, the Company and Director 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 Director 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, Director does not regard the current protection available as adequate under thepresent circumstances, and Director 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 Director, 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 Director hereby agree as follows:     1. Indemnification.          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, 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 Director 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 Director while an officer or director or by reason of the fact that Director 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 Directoracted in good faith and in a manner Director 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 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 itsequivalent, shall not, of itself, create a presumption that Director did not act in good faith andin a manner that Director 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 Director’s conduct was unlawful.
 

 
          b. Proceedings By or in the Right of the Company. The Company shallindemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party toanythreatened, pending, or completed action or suit by or in the right of the Company or anysubsidiaryof the Company to procure a judgment in its favor by reason of the fact that Director is orwas adirector, officer, employee, or agent of the Company, or any subsidiary of the Company, byreasonof any action or inaction on the part of Director while an officer or director or by reason ofthe factthat Director 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, ineach case to the extent actually and reasonably incurred by Indemnitee in connection with thedefense or settlement of such action or suit, if Director acted in good faith and in a mannerDirectorreasonably believed to be in or not opposed to the best interests of the Company, except thatnoindemnification shall be made in respect of any claim, issue, or matter as to which Directorshallhave been adjudged to be liable to the Company unless and only to the extent that the Court ofChancery of the State of Delaware or the court in which such action or suit was brought shalldetermine 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 deemproper.          c. Mandatory Payment of Expenses. To the extent that Indemnitee has beensuccessful on the merits or otherwise in defense of any action, suit, or proceeding referredto inSections 1(a) and (b) or the defense of any claim, issue, or matter therein, Indemnitee shallbeindemnified against expenses (including attorneys’ fees) actually and reasonably incurred byIndemnitee in connection therewith.     2. Expenses: Indemnification Procedure.          a. Advancement of Expenses. The Company shall advance all expenses incurredby Indemnitee, and, to the fullest extent permitted by law, amounts paid in settlement byIndemnitee,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 undertakes torepaysuch amounts advanced only if, and to the extent that, it shall ultimately be determined thatIndemnitee is not entitled to be indemnified by the Company as authorized hereby. The advancestobe made hereunder shall be paid by the Company to Indemnitee within 20 days following deliveryofa written request therefor by Indemnitee to the Company.          b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedentto his or its right to be indemnified under this Agreement, give the Company notice in writingassoon as practicable of any claim made against Indemnitee for which indemnification will orcould besought 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 astheCompany shall designate in writing to Indemnitee. Notice shall be deemed received threebusinessdays 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 received by theCompany. In addition, Indemnitee shall give the Company such information and cooperation as itmay reasonably require and as shall be within Indemnitee’s power.
2

 
          c. Procedure. Any indemnification and advances provided for in Section 1 andthis Section 2 shall be made no later than 45 days after receipt of the written request ofIndemnitee.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 bytheCompany within 45 days after a written request for payment thereof has first been received bytheCompany, Indemnitee may, but need not, at any time thereafter bring an action against theCompanyto 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 bringingsuch action.It shall be a defense to any such action (other than an action brought to enforce a claim forexpensesincurred in connection with any action, suit, or proceeding in advance of its finaldisposition) thatIndemnitee has not met the standards of conduct that make it permissible under applicable lawforthe Company to indemnify Indemnitee for the amount claimed, but the burden of proving suchdefense shall be on the Company and Indemnitee shall be entitled to receive interim paymentsofexpenses pursuant to Subsection 2(a) unless and until such defense may be finally adjudicatedbycourt order or judgment from which no further right of appeal exists. It is the parties’intention thatif the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’sright toindemnification shall be for the court to decide, and neither the failure of the Company(including itsBoard of Directors, any committee or subgroup of the Board of Directors, independent legalcounsel,or its stockholders) to have made a determination that indemnification of Indemnitee is properin thecircumstances because Indemnitee has met the applicable standard of conduct required byapplicablelaw, nor an actual determination by the Company (including its Board of Directors, anycommitteeor subgroup of the Board of Directors, independent legal counsel, or its stockholders) thatIndemnitee has not met such applicable standard of conduct, shall create a presumption thatIndemnitee 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 pursuantto Section 2(b) hereof, the Company has directors’ and officers’ liability insurance ineffect, 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 shallthereaftertake all necessary or desirable action to cause such insurers to pay, on behalf of theIndemnitee, allamounts 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 underSection 2(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, ifappropriate, shall be entitled to assume the defense of such proceeding, with counsel approvedbyIndemnitee (whose approval shall not be unreasonably withheld), upon the delivery toIndemnitee ofwritten notice of its election so to do. After delivery of such notice, approval of suchcounsel 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 Indemniteewithrespect to the same proceeding, provided that (i) Indemnitee shall have the right to employhiscounsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment ofcounselby Indemnitee has been previously authorized by the Company, (B) Indemnitee shall havereasonably concluded that there may be a conflict of interest between the Company andIndemniteein the conduct of any such defense, or (C) the Company shall not, in fact, have employedcounsel toassume the defense of such proceeding, then the fees and expenses of Indemnitee’s counselshall beat the expense of the Company.
3

 
     3. AdditionalIndemnification Rights; Nonexclusivity.          a. Scope. Notwithstanding any other provision of this Agreement, the Companyhereby agrees to indemnify the Indemnitee to the fullest extent permitted by law,notwithstandingthat such indemnification is not specifically authorized by the other provisions of thisAgreement,the Company’s Certificate of Incorporation, the Company’s Bylaws, or by statute. In the eventofany change, after the date of this Agreement, in any applicable law, statute, or rule thatexpands 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’sobligationsunder this Agreement. In the event of any change in any applicable law, statute, or rule thatnarrowsthe 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 be appliedto thisAgreement, shall have no effect on this Agreement or the parties’ rights and obligationshereunder.          b. Nonexclusivity. The indemnification provided by this Agreement shall not bedeemed exclusive of any rights to which Director or any other Indemnitee may be entitled undertheCompany’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,both asto action in Director’s official capacity and as to action in another capacity while holdingsuchoffice. The indemnification provided under this Agreement shall continue as to Director andeachother Indemnitee for any action taken or not taken while Director is or was serving in anindemnifiedcapacity even though he may have ceased to serve in such capacity at the time of any action,suit, orother 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,for thetotal amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion ofsuchexpenses, judgments, fines, or penalties to which Indemnitee is entitled.     5. Mutual Acknowledgment. Both the Company and Director acknowledge that incertain instances Federal law or applicable public policy may prohibit the Company fromindemnifying its directors and officers under this Agreement or otherwise, in which event,notwithstanding any other provisions of this Agreement to the contrary, the indemnificationprovidedby this Agreement shall be limited to such extent as is necessary to comply with applicableFederallaw or public policy. For example, the Company and Director acknowledge that the SecuritiesandExchange Commission (the “SEC”) has taken the position that indemnification is not permissibleforliabilities arising under certain federal securities laws, and federallegislation prohibitsindemnification for certain violations of the Employee Retirement Income Security Act of 1974,asamended (“ERISA”). Director understands and acknowledges that in the event the Companyundertakes a public offering of its securities pursuant to a registration with the SEC, theCompanymay be required to undertake with the SEC to submit the question of indemnification to a courtincertain circumstances for a determination of the Company’s right under public policy toindemnifyDirector or any other Indemnitee.
4

 
     6. Directors and Officers Liability Insurance. The Company has applied for and willuseits best efforts to obtain and maintain in force with a financially sound and reputableinsurer adirectors, officers, and corporate liability insurance policy having a limit which theCompany,together with the Board of Directors, approves as providing coverage appropriate andacceptable tothe Board of Directors. In all policies of directors and officers liability insurance,Director and eachother Indemnitee shall be named as an insured in such a manner as to provide Director 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 beconstruedas requiring the Company to do or fail to do any act in violation of applicable law. TheCompany’sinability, pursuant to court order, to perform its obligations under this Agreement shall notconstitutea breach of this Agreement. The provisions of this Agreement shall be severable as provided inthisSection 7. If this Agreement or any portion hereof shall be invalidated on any ground by anycourtof competent jurisdiction, then the Company shall nevertheless indemnify Director and eachotherIndemnitee to the full extent permitted by any applicable portion of this Agreement that shallnothave been invalidated, and the balance of this Agreement not so invalidated shall beenforceable inaccordance with its terms.     8. Exceptions. Any other provision herein to the contrary notwithstanding, theCompany shall not be obligated pursuant to the terms of this Agreement:          a. Claims Initiated by Indemnitee. To indemnify or advance expenses toIndemnitee with respect to proceedings or claims initiated or brought voluntarily byIndemnitee andnot by way of defense, except with respect to proceedings brought to establish or enforce aright toindemnification under this Agreement or any other statute or law or otherwise as requiredunderSection 145 of the Delaware General Corporation Law, but such indemnification or advancementofexpenses may be provided by the Company in specific cases if the Board of Directors finds itto beappropriate;          b. Lack of Good Faith. To indemnify Indemnitee for any expenses incurred bythe Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpretthisAgreement, if a court of competent jurisdiction determines that each of the materialassertions madeby 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 anytype whatsoever (including, but not limited to, judgments, fines, ERISA, excise taxes orpenalties,and amounts paid in settlement) that have been paid directly to Indemnitee by an insurancecarrierunder 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 thepayment of profits arising from the purchase and sale by Indemnitee of securities in violationofSection 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successorstatute.     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,
5

 
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 Director and each other Indemniteeand theirrespective estates, heirs, successors, legal representatives, and assigns.     12. Attorneys’ Fees. In the event that any action is instituted by Indemnitee underthisAgreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to bepaid allcourt costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee withrespectto such action, unless as a part of such action, the court of competent jurisdictiondetermines thateach of the material assertions made by Indemnitee as a basis for such action was not made ingoodfaith or was frivolous. In the event of an action instituted by or in the name of the Companyunderthis Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shallbeentitled to be paid all court costs and expenses, including attorneys’ fees, incurred byIndemnitee indefense of such action (including with respect to Indemnitee’s counterclaims and cross-claimsmadein such action), unless as a part of such action the court determines that each ofIndemnitee’smaterial defenses to such action was made in bad faith or was frivolous.     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 afterthe datepostmarked, 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 toeither partyare 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 allpurposes inconnection with any action or proceeding that arises out of or relates to this Agreement andagreethat any action instituted under this Agreement may be brought in any court of competentjurisdiction in the State of Delaware.
6

 
     15. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND ITS PROVISIONSCONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS BETWEENDELAWARE RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN DELAWARE.[Signature page follows.]
7

 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.         COMPANY:    Cyberonics, Inc.           By: /s/ Pamela B. Westbrook Pamela B. Westbrook,      Secretary           CHAIRMAN & CHIEF EXECUTIVE OFFICER:             /s/ Robert P. Cummins Robert P. Cummins  
8