EX-10.3






STOCK OPTION AGREEMENT AMENDMENT

AND

BONUS AGREEMENT




THIS STOCK OPTION AGREEMENT AMENDMENT AND BONUS AGREEMENT (the “Agreement”) is made this 28th
day of December, 2006 between Cyberonics, Inc. (the “Company”) and Richard Rudolph, M.D. (the
“Optionee”).



WHEREAS, the Company previously granted to the Optionee the options identified on attached
Schedule A (the “Options”) to purchase shares of the Company’s common stock under the Company’s
Stock Incentive Plan(s), as amended and restated, and as identified as such on Schedule A (the
“Plan(s)”).



WHEREAS, the Company and the Optionee entered into a formal Stock Option Agreement (the
“Option Agreement”) evidencing each such Option.



WHEREAS, in order to avoid adverse tax consequences under section 409A of the Internal Revenue
Code, the Optionee desires to amend each of the Options to increase the exercise price per share to
be in effect for the unexercised portion of that Option which is subject to section 409A and
identified as such on Schedule A (the “Covered Portion”) to the higher exercise price per share
indicated for that portion of such Option on Schedule A.



WHEREAS, in order to compensate the Optionee for the increased exercise prices to be in effect
for the Covered Portions of the Options, the Company is willing to pay the Optionee a special cash
bonus in a dollar amount equal to the aggregate increase to the exercise prices for the Covered
Portions of the Options listed on Schedule A, with the actual dollar of that bonus indicated as the
Total Bonus on Schedule A and payable as provided herein.



NOW THEREFORE, the parties hereby agree as follows:



1. Increased Exercise Price. The exercise price per share set forth in the Option
Agreement for each of the Options listed on Schedule A is hereby increased, with respect to the
shares subject to the Covered Portion of that Option, to the higher exercise price per share set
forth for that Option on Schedule A.



2. Bonus. The Optionee shall become entitled to receive a cash bonus from the Company
in the gross dollar amount indicated as his or her Total Bonus on attached Schedule A (the “Bonus”)
effective on the date of vesting, with payment as follows:



(i) the bonus payable with respect to shares that vest prior to January 1, 2008
will be paid on or about January 15, 2008, and



(ii) the bonus payable with respect to shares that vest on or after January 1, 2008
will be payable only if such shares vest and will be paid quarterly for the shares that
vested during the preceding fiscal quarter. Such payment will be made within 14 days
following the close of each fiscal quarter or, in the event of an acceleration of
vesting pursuant to the terms of any other agreement governing the vesting of the
options under the Option Agreements, within 14 days following the event.



Payment of the Bonus shall be subject to the Company’s collection of all applicable federal,
state and local income and employment withholding taxes, and the Optionee shall be paid only the
net amount of such bonus remaining after such taxes have been collected.



3. Entire Agreement. This Agreement, together with the Option Agreements (to the
extent not expressly amended in a separate amendment or amended hereby) and the Plan(s), represents
the entire agreement of the parties with respect to the subject matter hereof and the Bonus and
supersedes any and all previous contracts, arrangements or understandings between the parties with
respect to such Options and the Bonus. This Agreement may be amended at any time only by means of a
writing signed by the Optionee and an authorized officer of the Company.



4. Continuation of Option Agreements. Except for the foregoing increases to the
exercise prices per share for the Covered Portions of the Options, no other terms or provisions of
the Option Agreements for such Options or the applicable Plan(s) have been modified as a result of
this Agreement, and those terms and provisions shall continue in full force and effect.



IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year indicated
above.



CYBERONICS, INC.



	 	 	 
	By: /s/ John A. Riccardi

	 	

	 
	 	 
	 

	 
	 	 
	TITLE: Chief Financial Officer

	 
	 	 
	 

	 
	 	 
	OPTIONEE

	 	

	 
	 	 
	By:

	 	/s/ Richard L. Rudolph, M.D.
	
 
	 	 
	 
	 	 






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SCHEDULE A




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Number of	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Unexercised	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Exercise	 	Option Shares	 	Applicable	 	Increased	 	Aggregate	 	Potential
	 	 	 	 	 	 	Price Per	 	Which Vest After	 	Measurement	 	Exercise Price	 	Increase in	 	Retention
	Name	 	Plan	 	Grant Date	 	Share	 	12/31/2004	 	Date	 	Per Share	 	Exercise Price	 	Bonus
	Rudolph, Richard

	 	1997 Plan
	 	06/15/2004
	 	$	19.58	 	 	 	9,000	 	 	06/17/2004
	 	$	15.23	 	 	$	137,070.00	 	 	$	137,070.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







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