Exhibit 10.7       For Internal Use:    Grant Control #:       **DIRECTOR RESTRICTED STOCK AGREEMENT**     **THIS RESTRICTED STOCK AGREEMENT**(this “Agreement”) is made effective as of XXXX 1, 200X(the “Grant Date”), between **CYBERONICS, INC.**, a Delaware corporation (the “Company”), and                     (“Director”), a member of the Board of Directors.     1. **Award**. Pursuant to the **CYBERONICS, INC. 1997 STOCK PLAN,**as amended (the “Plan”),as of the Grant Date [                    ] shares (the “Restricted Shares”) of the Company’s common stockshall be issued as hereinafter provided in the Director’s name subject to certain restrictionsthereon. The Director hereby acknowledges receipt of a copy of the Plan and the Prospectusrelating thereto pursuant to the Securities Act of 1933, and agrees that this award of RestrictedShares shall be subject to all of the terms and provisions of the Plan, including future amendmentsthereto, if any, pursuant to the terms thereof. All dividends and other distributions on aRestricted Share shall be subject to the same Forfeiture Restrictions (as hereinafter defined) asare applicable to such Restricted Share.     2. **Restricted Shares**. The Director hereby accepts the Restricted Shares when issuedand agrees with respect thereto as follows:     (a) **Forfeiture Restrictions**. The Restricted Shares may not be sold, assigned,pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of to theextent then subject to the Forfeiture Restrictions, and in the event of termination of theDirector’s service relationship with the Company (as provided in Section 5) for any reasonother than as provided in Section 2(b), the Director shall, for no consideration, forfeit tothe Company all Restricted Shares then subject to the Forfeiture Restrictions. Theprohibition against transfer and the Director’s obligation to forfeit and surrender theRestricted Shares to the Company upon the Director’s termination of service are hereinreferred to as the “Forfeiture Restrictions.” The Forfeiture Restrictions shall be bindingupon and enforceable against any transferee of Restricted Shares.     (b) **Vesting/Lapse of Forfeiture Restrictions**. Until the Restricted Shares arefully vested or forfeited, on each anniversary of the Grant Date, so long as the Directorcontinues in a service relationship with the Company (as provided in Section 5) and subjectto the satisfaction of the tax liability under Section 3 on such anniversary date, 25% ofthe Restricted Shares shall vest and the Forfeiture Restrictionsshall lapse on such vested shares. The number of shares that vest as of each anniversary date will be rounded down tothe nearest whole share, with any remaining shares vesting on the final installment.Notwithstanding the foregoing vesting schedule, the Forfeiture Restrictions shall lapse infull as to all of the Restricted Shares on the earlier of (i) a Change of Control (asdefined in the Plan) or (ii) the termination of the Director’s service relationship with theCompany due to the Director’s death.     (c) **Certificates**. A certificate evidencing the Restricted Shares shall beissued by the Company in the Director’s name, pursuant to which the Director shall have allof the rights of a shareholder of the Company with respect to the Restricted Shares,including, without limitation, voting rights and the right to receive dividends (provided,
 

 
however, that dividends paid in shares of the Company’s stock shall be subject to theForfeiture Restrictions). The Director may not sell, transfer, pledge, exchange,hypothecate or otherwise dispose of the stock until the Forfeiture Restrictions with respectto such shares have expired, and a breach of the terms of this Agreement shall cause aforfeiture of all then remaining Restricted Shares. The certificate shall contain anappropriate endorsement reflecting the Forfeiture Restrictions. The certificate shall bedelivered upon issuance to the Secretary of the Company or to such other depository as maybe designated by the Compensation Committee of the Board of Directors (the “Committee”) as adepository for safekeeping until the forfeiture of such Restricted Shares occurs or theForfeiture Restrictions lapse pursuant to the terms of the Plan and this award. On the dateof this Agreement, the Director shall, if required by the Committee, deliver to the Companya stock power, endorsed in blank, relating to the Restricted Shares. Upon the lapse of theForfeiture Restrictions without forfeiture of the Restricted Shares, the Company shall causea new certificate or certificates to be issued without legend (except for any legendrequired pursuant to applicable securities laws or any other agreement to which the Directoris a party) in the name of the Director in exchange for the certificate evidencing theRestricted Shares.     (d) **Corporate Acts**. The existence of the Restricted Shares shall not affect inany way the right or power of the Board of Directors of the Company or the shareholders ofthe Company to make or authorize any adjustment, recapitalization, reorganization or otherchange in the Company’s capital structure or its business, any merger or consolidation ofthe Company, any issue of debt or equity securities, the dissolution or liquidation of theCompany or any sale, lease, exchange or other disposition of all or any part of its assetsor business or any other corporate act or proceeding. The prohibitions of Section 2(a)hereof shall not apply to the transfer of Restricted Shares pursuant to a plan ofreorganization of the Company, but the stock, securities or other property received inexchange therefor shall also become subject to the Forfeiture Restrictions and provisionsgoverning the lapsing of such Forfeiture Restrictions applicable to the original RestrictedShares for all purposes of this Agreement and the certificates representing such stock,securities or other property shall be legended to show such restrictions.     3. **Withholding of Tax**. To the extent that the receipt of the Restricted Shares or thelapse of any Forfeiture Restrictions results in compensation income to the Director for federal orstate income tax purposes, the Director is responsible for taxes due from Director on suchcompensation income. Director agrees to remit estimated taxes to the Company prior to and as acondition of the receipt of the Restricted Shares or the lapse of any Forfeiture Rights becomingeffective. In the event that the estimated taxes are insufficient to satisfy the taxes actuallydue from Director, Director agrees to (1) remit funds to satisfy such taxes; or (2) specificallyauthorize the Company in writing to withhold from amounts otherwise due to the Director. To themaximum extent permitted by applicable law, Director hereby authorizes such withholding.     4. **Status of Stock**. The Director agrees that the Restricted Shares issued under thisAgreement will not be sold or otherwise disposed of in any manner which would constitute aviolation of any applicable federal or state securities laws. The Director also agrees that (i)the certificates representing the Restricted Shares may bear such legend or legends as theCommittee deems appropriate in order to reflect the Forfeiture Restrictions and to assurecompliance with
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applicable securities laws, (ii) the Company may refuse to register the transfer of theRestricted Shares on the stock transfer records of the Company if such proposed transfer wouldconstitute a violation of the Forfeiture Restrictions or, in the opinion of counsel satisfactory tothe Company, of any applicable securities law, and (iii) the Company may give related instructionsto its transfer agent, if any, to stop registration of the transfer of the Restricted Shares.     5. **Service Relationship**. For purposes of this Agreement, the Director shall beconsidered to be in service to the Company as long as the Director remains a Director, aConsultant, or an Employee (as those terms are defined in the Plan). Nothing in the adoption ofthe Plan, nor the award of the Restricted Shares thereunder pursuant to this Agreement, shallconfer upon the Director the right to continued service by or with the Company.     6. **Notices**. Any notices or other communications provided for in this Agreement shallbe sufficient if in writing. In the case of the Director, such notices or communications shall beeffectively delivered if hand delivered to the Director at his principal place of employment or ifsent by overnight courier, with confirmation, to the Director at the last address the Director hasfiled with the Company. In the case of the Company, such notices or communications shall beeffectively delivered if sent by overnight courier, with confirmation to the Company at itsprincipal executive offices.     7. **Amendment**. This Agreement may not be modified in any respect by any verbalstatement, representation or agreement made by the Director or by any employee, officer, director,or representative of the Company or by any written agreement unless signed by the Director and byan officer of the Company who is expressly authorized by the Company to execute such document.     8. **Binding Effect**. This Agreement shall be binding upon and inure to the benefit ofany successors to the Company and all persons lawfully claiming under the Director.     9. **Controlling Law**. This Agreement shall be governed by, and construed in accordancewith, the laws of the State of Texas.     **IN WITNESS WHEREOF**, the Company has caused this Agreement to be duly executed by an officerthereunto duly authorized, and the Director has executed this Agreement, all effective as of theGrant Date.         **CYBERONICS, INC.**           By:      Name:      Title:             **NAME**              
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**SCHEDULE OF DIRECTORS**Guy C. Jackson