CYBERONICS, INC. INDEMNIFICATION AGREEMENT
Exhibit 10.44
CYBERONICS, INC.
This Indemnification Agreement (“Agreement”) is made as of this 28th day of June, 1999, by
and between Cyberonics, Inc., a Delaware corporation (the
“Company”), and Xxxx X. Xxxxx
(“Indemnitee”).
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in obtaining
directors’ and officers’ liability insurance, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee 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, Indemnitee does not regard the current protection available as adequate under the
present circumstances, and Indemnitee and other officers and directors of the Company may not
be willing to 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 Indemnitee, 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 Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee is
or was a party or is threatened to be made a party to any threatened, pending or completed action
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 Indemnitee 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 Indemnitee while an officer or director or by reason of the fact that
Indemnitee 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 or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee 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 Indemnitee’s
conduct was unlawful. The termination of any action 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 (i) Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or
(ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe
that Indemnitee’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 proceeding 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 Indemnitee 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 Indemnitee while an officer or director or by reason of the
fact that Indemnitee 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 proceeding if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests
of the Company and its stockholders, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been finally adjudicated by court order or
judgment to be liable to the Company in the performance of Indemnitee’s duty to the Company and its
stockholders unless and only to the extent that the court in which such action or proceeding is or
was pending shall determine upon application that, in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for expenses and then only to the extent
that the court shall determine.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all expenses incurred by
Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or
criminal action or proceeding referenced in Section l(a) or (b) hereof (but not amounts actually
paid in settlement of any such action or proceeding). 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 twenty (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 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 be sought under
this Agreement, Notice to the Company shall be directed to the Chief Executive Officer 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
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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 forty-five (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 By-laws providing for indemnification, is not paid in
full by the Company within forty-five (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 or proceeding in
advance of its final disposition) that Indemnitee has not met the standards of conduct which 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 3(b) hereof, the Company has director and officer 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,
which 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
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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 By-laws or by statute. In the event of
any change, after the date of this Agreement, in any applicable law, statute or rule which expands
the right of a Delaware corporation to indemnify a member of its Board of Directors, an officer or
other corporate agent, 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 which narrows the right of a Delaware corporation to indemnify a member of its
Board of Directors, an officer or other corporate agent, 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 arid obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the Company’s Certificate of
Incorporation, its By-laws, any agreement, any vote of stockholders or disinterested Directors, the
Delaware Corporation Law or otherwise, both as to action in Indemnitee’s official capacity and as
to action in another capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken while 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 him in the investigation, defense, appeal or
settlement of any civil or criminal action 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.
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5. Mutual Acknowledgment. Both the Company and Indemnitee 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. Indemnitee understands and acknowledges
that the Company has undertaken or may be required in the future to undertake with the Securities
and Exchange Commission 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
Indemnitee.
6. Officer and Director Liability Insurance. The Company shall, from time to time,
make the good faith determination whether or not it is practicable for the Company to obtain and
maintain a policy or policies of insurance with reputable insurance companies providing the
officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the
Company’s performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance coverage against the
protection afforded by such coverage. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the Company’s directors, if
Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the
Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance are disproportionate
to the amount of coverage provided, if the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
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
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) Excluded Acts. To indemnify Indemnitee for any acts or omissions or transactions
from which a director may not be relieved of liability under the applicable law.
(b) 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
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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 has approved
the initiation or bringing of such suit; or
(c) 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; or
(d) 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) which have been paid directly to Indemnitee by an insurance carrier
under a policy of officers’ and directors’ liability
insurance maintained by the Company.
(e) 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 which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and employees or agents,
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 which 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.
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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 Indemnitee and Indemnitee’s estate,
heirs, 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 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 were
not made in good faith or were 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 costs and expenses, including reasonable 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 were made in bad faith or
were frivolous.
13. Notice. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and
acknowledged in writing as received by the addressee, on the date of such receipt, or (ii) if
mailed by domestic certified or registered mail with postage prepaid, on the third business day
after the date postmarked. 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 jurisdiction of the courts of the State of Delaware for all purposes in connection
with any action or proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be brought only in the state courts of 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.
16. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all documents required and shall do all acts that may be necessary to secure such rights
and to enable to corporation effectively to bring suit to enforce such rights.
17. Continuation of Indemnification. All agreements and obligations of the Company
contained herein shall continue during the period that Indemnitee is a director, officer or agent
of the
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Company and shall continue thereafter so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative, by reason of the fact that Indemnitee was serving
in the capacity referred to herein.
18. Amendment and Termination. Subject to Section 17, no amendment, modification,
termination or cancellation of this Agreement shall be effective unless in writing signed by both
parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
above written.
| CYBERONICS, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| Title: | ||||||
| Address: | 00000 Xxxxx Xxxxxx Xxxx., Xxxxx 000 Xxxxxxx, XX 00000 | |||||
AGREED TO AND ACCEPTED:
INDEMNITEE:
/s/ Xxxx X. Xxxxx 7/30/99
|
Address:
|
0000 Xxxx Xxxxx Xxxx. | |
| Xx. Xxxxxxxxxx, XX 00000 |
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