INDEMNIFICATION AGREEMENT
Exhibit 10.66
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:
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.
(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.
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.
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 expensesincurred 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, 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.
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.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
| COMPANY: | ||||||
| Cyberonics, Inc. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| DIRECTOR: | ||||||
