exv10w32



 





Exhibit 10.32




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 Robert P. Cummins (“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:



     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, 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.




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          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 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 2(b) hereof, the Company has directors’ and officers’ 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 obligated under
Section 2(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
written notice of its election so to do. After delivery of such notice, approval of such
counsel by
Indemnitee and the retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee
with
respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ
his
counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of
counsel
by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the Company and
Indemnitee
in the conduct of any such defense, or (C) the Company shall not, in fact, have employed
counsel to
assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel
shall be
at the expense of the Company.




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     3. Additional
Indemnification Rights; Nonexclusivity.



          a. Scope. Notwithstanding any other provision of this Agreement, the Company
hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law,
notwithstanding
that such indemnification is not specifically authorized by the other provisions of this
Agreement,
the Company’s Certificate of Incorporation, the Company’s Bylaws, or by statute. In the event
of
any change, after the date of this Agreement, in any applicable law, statute, or rule that
expands the
right of a Delaware corporation to indemnify a member of its board of directors or an officer,
such
changes shall be, ipso facto, within the purview of Indemnitee’s rights and Company’s
obligations
under this Agreement. In the event of any change in any applicable law, statute, or rule that
narrows
the right of a Delaware corporation to indemnify a member of its board of directors or an
officer,
such changes, to the extent not otherwise required by such law, statute, or rule to be applied
to this
Agreement, shall have no effect on this Agreement or the parties’ rights and obligations
hereunder.




          b. Nonexclusivity. The indemnification provided by this Agreement shall not be
deemed exclusive of any rights to which Director or any other Indemnitee may be entitled under
the
Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of Delaware, or otherwise,
both as
to action in Director’s official capacity and as to action in another capacity while holding
such
office. The indemnification provided under this Agreement shall continue as to Director and
each
other Indemnitee for any action taken or not taken while Director is or was serving in an
indemnified
capacity even though he may have ceased to serve in such capacity at the time of any action,
suit, or
other covered proceeding.




     4. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement 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 the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such
expenses, judgments, fines, or penalties to which Indemnitee is entitled.



     5. Mutual Acknowledgment. Both the Company and Director acknowledge that in
certain instances Federal law or applicable public policy may prohibit the Company from
indemnifying its directors and officers under this Agreement or otherwise, in which event,
notwithstanding any other provisions of this Agreement to the contrary, the indemnification
provided
by this Agreement shall be limited to such extent as is necessary to comply with applicable
Federal
law or public policy. For example, the Company and Director acknowledge that the Securities
and
Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible
for
liabilities arising under certain federal securities laws, and federal
legislation prohibits
indemnification for certain violations of the Employee Retirement Income Security Act of 1974,
as
amended (“ERISA”). Director understands and acknowledges that in the event the Company
undertakes a public offering of its securities pursuant to a registration with the SEC, the
Company
may be required to undertake with the SEC to submit the question of indemnification to a court
in
certain circumstances for a determination of the Company’s right under public policy to
indemnify
Director or any other Indemnitee.



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     6. Directors and Officers Liability Insurance. The Company has applied for and will
use
its best efforts to obtain and maintain in force with a financially sound and reputable
insurer a
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 to
the Board of Directors. In all policies of directors and officers liability insurance,
Director and each
other Indemnitee shall be named as an insured in such a manner as to provide Director the same
rights 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 be
construed
as requiring the Company to do or fail to do any act in violation of applicable law. The
Company’s
inability, pursuant to court order, to perform its obligations under this Agreement shall not
constitute
a breach of this Agreement. The provisions of this Agreement shall be severable as provided in
this
Section 7. If this Agreement or any portion hereof shall be invalidated on any ground by any
court
of competent jurisdiction, then the Company shall nevertheless indemnify Director and each
other
Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall
not
have been invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in
accordance with its terms.



     8. Exceptions. Any other provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement:



          a. Claims Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought voluntarily by
Indemnitee and
not by way of defense, except with respect to proceedings brought to establish or enforce a
right to
indemnification under this Agreement or any other statute or law or otherwise as required
under
Section 145 of the Delaware General Corporation Law, but such indemnification or advancement
of
expenses may be provided by the Company in specific cases if the Board of Directors finds it
to be
appropriate;




          b. Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by
the Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret
this
Agreement, if a court of competent jurisdiction determines that each of the material
assertions made
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
type whatsoever (including, but not limited to, judgments, fines, ERISA, excise taxes or
penalties,
and amounts paid in settlement) that have been paid directly to Indemnitee by an insurance
carrier
under 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 of profits arising from the purchase and sale by Indemnitee of securities in violation
of
Section 16(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 to
the resulting corporation, any constituent corporation (including any constituent of a
constituent) 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 such
constituent corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent corporation if its separate
existence had continued.




          b. For purposes of this Agreement, references to “other enterprises” shall include employee
benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with
respect 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 imposes
duties on, or involves services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries 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 of
which shall constitute an original.



     11. Successors and Assigns. This Agreement shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of Director and each other Indemnitee
and their
respective estates, heirs, successors, legal representatives, and assigns.



     12. Attorneys’ Fees. In the event that any action is instituted by Indemnitee under
this
Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be
paid all
court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with
respect
to such action, unless as a part of such action, the court of competent jurisdiction
determines that
each of the material assertions made by Indemnitee as a basis for such action was not made in
good
faith or was frivolous. In the event of an action instituted by or in the name of the 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’s counterclaims and cross-claims
made
in such action), unless as a part of such action the court determines that each of
Indemnitee’s
material defenses to such action was made in bad faith or was frivolous.



     13. Notice. All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed duly given on the third business day after
the date
postmarked, if delivered by domestic certified or registered mail with postage prepaid, or, if
delivered by other means, on the date actual notice is received. Addresses for notice to
either party
are as shown on the signature page of this Agreement, or as subsequently modified by written
notice.



     14. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably
consent to the non-exclusive jurisdiction of the courts of the State of Delaware for all
purposes in
connection with any action or proceeding that arises out of or relates to this Agreement and
agree
that any action instituted under this Agreement may be brought in any court of competent
jurisdiction in the State of Delaware.



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     15. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND ITS PROVISIONS
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS BETWEEN
DELAWARE RESIDENTS 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 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
	 	 







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