ex10_5.htm


    
      EXHIBIT
        10.5

      


      STOCK
        OPTION AMENDMENT

      AND

      CASH
        BONUS AGREEMENT

       

      AGREEMENT
        made by Cyberonics, Inc. (the “Company”) which shall be effective on the date
        executed by a validly-authorized officer of the Company.

       

      WHEREAS,
        the Company previously granted to the optionee listed on the attached
        Schedule I (the “Optionee”) the options identified on
Schedule I (the “Options”) to purchase shares
        of the
        Company’s common stock under one or more of the Company’s employee stock
        incentive plans (individually, a “Plan”).

       

      WHEREAS,
        the Company and Optionee entered into a Notice of Stock Option Grant
        and/or Stock Option Agreement (collectively, the “Option Agreement”) evidencing
        each such Option.

       

      WHEREAS,
        in order to avoid potential adverse tax consequences under section
        409A
        of the Internal Revenue Code, 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 I (the “Covered Portion”) to the higher
        exercise price per share indicated for the Covered Portion of such Option
        on
Schedule I.

       

      WHEREAS,
        in order to compensate Optionee for the increased exercise prices
        to be
        in effect for the Covered Portions of the Options, the Company is willing
        to pay
        Optionee a special cash bonus in a dollar amount equal to the aggregate increase
        in the exercise prices for the Covered Portion of the Options as indicated
        on
Schedule I.

       

      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 I 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
        I.

       

      2.           Cash
        Bonus.  Optionee shall become entitled
        to receive a cash bonus from the Company (the “Cash Bonus”) in the gross dollar
        amount indicated as his or her Total Cash Bonus on attached Schedule
        I.  Payment shall be made on the Company’s first regular
        payroll date in January 2008.  However, the Cash Bonus shall be
        subject to the Company’s collection of all applicable federal, state and local
        income and employment withholding taxes, and Optionee shall be paid only
        the net
        amount of such bonus remaining after such taxes have been
        collected.  Optionee need not remain in the Company’s employ to
        receive the Cash Bonus.

       

      3.           Entire
        Agreement.  This Agreement, together
        with the Option Agreements (to the extent not expressly amended hereby) and
        the
        applicable Plan under which each Option is outstanding, represents the entire
        agreement of the parties with respect to the Options, the Covered Portions
        thereof and the Cash Bonus and supersedes any and all previous contracts,
        arrangements or understandings between the parties with respect to such Options
        and the Cash Bonus.  This Agreement may be amended at any time only by
        means of a writing signed by 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 Plans have been modified as a result of this Agreement, and those
        terms and provisions shall continue in full force and effect.

       

      IN
        WITNESS WHEREOF, this Agreement has been executed on behalf of
        Cyberonics, Inc. by a duly-authorized officer on the date indicated
        below.

       

      
        	 	
                CYBERONICS,
                  INC.

              
	 	 
	 	
                /s/
                  GEORGE E. PARKER, III

              
	 	
                By:  George
                  E. Parker, III

              
	 	
                TITLE:  VP,
                  Human Resources

              
	 	
                DATED:  October
                  22, 2007

              


      


      
        
          
          

        

        
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                SCHEDULE
                  I

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Name

              	
                Plan

              	
                Grant
                  Date

              	 	
                ExercisePrice
                  

                Per
                  Share

              	 	 	
                Number
                  of Unexercised Options vested after 12/31/04 subject to
                  409A

              	 	
                Applicable
                  Measurement Date

              	 	
                Increased
                  Exercise Price 

                Per
                  Share

              	 	 	
                Aggregate
                  Increase in Price

                Exercise

              	 	 	
                Cash
                  

                Bonus
                  **

              	 
	 	 
	
                Simpson,
                  Randal

              	
                1996
                  Plan

              	
                01/24/02

              	 	$	
                12.45

              	 	 	 	
                417

              	 	
                02/12/02

              	 	$	
                2.06

              	 	 	$	
                859.02

              	 	 	$	
                859.02

              	 
	
                Simpson,
                  Randal

              	
                1996
                  Plan

              	
                07/24/02

              	 	$	
                9.96

              	 	 	 	
                9,334

              	 	
                08/12/02

              	 	$	
                4.82

              	 	 	$	
                44,989.88

              	 	 	$	
                44,989.88

              	 
	 	 
	 	 	 	
                Total

              	 	 	$	
                45,848.90

              	 
	 
	 	
                **
                  The Cash Bonus will be paid on the Company's first regular payroll
                  date in
                  January 2008.

              


      

      



      
        
          
          

        

        
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