ex10_3.htm


    
      
        	 	
                Exhibit
                  10.3

              
	 	 
	 	
                For
                  Internal Use:

              
	 	
                Grant
                  Control #:  ______

              


      

      


      FORM
        OF EXECUTIVE RESTRICTED STOCK AGREEMENT

      


      (NET
        SALES)

      


      THIS
        RESTRICTED STOCK AGREEMENT (this “Agreement”) is made effective as of
        September 10, 2007 (the “Grant Date”), between CYBERONICS,
        INC., a Delaware corporation (the “Company”), and [NAME]
(the “Executive”).

       

      1.           Award.  Pursuant
        to the CYBERONICS, INC. AMENDED AND RESTATED NEW EMPLOYEE EQUITY
        INCENTIVE PLAN (the “Plan”), as
        of the Grant Date, [Number] shares (the “Restricted Shares”) of
        the Company’s common stock shall be issued as hereinafter provided in the
        Executive’s name subject to certain restrictions thereon.  The
        Executive hereby acknowledges receipt of a copy of the Plan and the Prospectus
        relating thereto pursuant to the Securities Act of 1933, and agrees that
        this
        award of Restricted Shares shall be subject to all of the terms and provisions
        of the Plan, including future amendments thereto, if any, pursuant to the
        terms
        thereof.  All dividends and other distributions on a Restricted Share
        shall be subject to the same Forfeiture Restrictions (as hereinafter defined)
        as
        are applicable to such Restricted Share.

       

      2.           Restricted
        Shares.  The Executive hereby accepts the Restricted
        Shares when issued and 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 the extent then subject to the Forfeiture Restrictions,
        and in
        the event of termination of the Executive’s service relationship with the
        Company (as provided in Section 5) for any reason other than as provided
        in
        Section 2(b), the Executive shall, for no consideration, forfeit to the Company
        all Restricted Shares then subject to the Forfeiture
        Restrictions.  The prohibition against transfer and the Executive’s
        obligation to forfeit and surrender the Restricted Shares to the Company
        upon
        the Executive’s termination of service are herein referred to as the “Forfeiture
        Restrictions.”  The Forfeiture Restrictions shall be binding upon and
        enforceable against any transferee of Restricted Shares.

       

      (b)           Vesting/Lapse
        of Forfeiture Restrictions.  For a period of five (5)
        years from the Grant Date, until the Restricted Shares are fully vested or
        forfeited and subject to the satisfaction of the tax liability under Section
        3
        by the Executive, the Restricted Shares shall vest and the Forfeiture
        Restrictions shall lapse on such vested shares upon the satisfaction of the
        following condition as determined by the Company:

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      The
        sum
        of four consecutive fiscal quarters of the Company’s net sales exceeds the sum
        of the previous four consecutive fiscal quarters of the Company’s net sales by
[Target Amount], provided that the first quarter fiscal year
        2008 is the first quarter eligible for the comparison.

       

      Notwithstanding
        the foregoing vesting schedule, the Forfeiture Restrictions shall lapse in
        full
        as to all of the Restricted Shares on the earlier of (i) a Change of Control
        (as
        defined in the Plan) or (ii) the termination of the Executive’s service
        relationship with the Company due to the Executive’s death.

       

      (c)           Certificates.  A
        certificate evidencing the Restricted Shares shall be issued by the Company
        in
        the Executive’s name, pursuant to which the Executive shall have all of 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 the Forfeiture Restrictions).  The Executive may not
        sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the
        stock
        until the Forfeiture Restrictions with respect to such shares have expired,
        and
        a breach of the terms of this Agreement shall cause a forfeiture of all then
        remaining Restricted Shares.  The certificate shall contain an
        appropriate endorsement reflecting the Forfeiture Restrictions.  The
        certificate shall be delivered upon issuance to the Secretary of the Company
        or
        to such other depository as may be designated by the Committee as a depository
        for safekeeping until the forfeiture of such Restricted Shares occurs or
        the
        Forfeiture Restrictions lapse pursuant to the terms of the Plan and this
        award.  On the date of this Agreement, the Executive shall, if
        required by the Committee, deliver to the Company a stock power, endorsed
        in
        blank, relating to the Restricted Shares.  Upon the lapse of the
        Forfeiture Restrictions without forfeiture of the Restricted Shares, the
        Company
        shall cause a new certificate or certificates to be issued without legend
        (except for any legend required pursuant to applicable securities laws or
        any
        other agreement to which the Executive is a party) in the name of the Executive
        in exchange for the certificate evidencing the Restricted Shares.

       

      (d)           Corporate
        Acts.  The existence of the Restricted Shares shall not
        affect in any way the right or power of the Board of Directors of the Company
        or
        the shareholders of the Company to make or authorize any adjustment,
        recapitalization, reorganization or other change in the Company’s capital
        structure or its business, any merger or consolidation of the Company, any
        issue
        of debt or equity securities, the dissolution or liquidation of the Company
        or
        any sale, lease, exchange or other disposition of all or any part of its
        assets
        or 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 of reorganization of the Company, but
        the
        stock, securities or other property received in exchange therefor shall also
        become subject to the Forfeiture Restrictions and provisions governing the
        lapsing of such Forfeiture Restrictions applicable to the original Restricted
        Shares for all purposes of this Agreement and the certificates representing
        such
        stock, securities or other property shall be legended to show such
        restrictions.

       


      
        
          
          

        

        
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      3.           Withholding
        of Tax.  To the extent that the receipt of the Restricted
        Shares or the lapse of any Forfeiture Restrictions results in
        compensation income to the Executive for federal or state income tax purposes,
        the Executive is responsible for taxes due from Executive on such compensation
        income. Executive agrees to remit estimated taxes to the Company prior to
        and as
        a condition of the receipt of the Restricted Shares or the lapse of any
        Forfeiture Rights becoming effective.  In the event that the estimated
        taxes are insufficient to satisfy the taxes actually due from Executive,
        Executive agrees to (1) remit funds to satisfy such taxes; or (2) specifically
        authorize the Company in writing to withhold from amounts otherwise due to
        the
        Executive.  To the maximum extent permitted by applicable law,
        Executive hereby authorizes such withholding.

       

      4.           Status
        of Stock.  The Executive agrees that the Restricted
        Shares issued under this Agreement will not be sold or otherwise disposed
        of in
        any manner which would constitute a violation of any applicable federal or
        state
        securities laws.  The Executive also agrees that (i)  the
        certificates representing the Restricted Shares may bear such legend or legends
        as the Committee deems appropriate in order to reflect the Forfeiture
        Restrictions and to assure compliance with applicable securities laws, (ii)
        the
        Company may refuse to register the transfer of the Restricted Shares on the
        stock transfer records of the Company if such proposed transfer would constitute
        a violation of the Forfeiture Restrictions or, in the opinion of counsel
        satisfactory to the Company, of any applicable securities law, and (iii)
        the
        Company may give related instructions to its transfer agent, if any, to stop
        registration of the transfer of the Restricted Shares.

       

      5.           Service
        Relationship.  For purposes of this Agreement, the
        Executive shall be considered to be in service to the Company as long as
        the
        Executive remains an Employee, an Officer, a Consultant or a Director (as
        those
        terms are defined in the Plan).  Nothing in the adoption of the Plan,
        nor the award of the Restricted Shares thereunder pursuant to this Agreement,
        shall confer upon the Executive the right to continued service by or with
        the
        Company.

       

      6.           Notices.  Any
        notices or other communications provided for in this Agreement shall be
        sufficient if in writing.  In the case of the Executive, such notices
        or communications shall be effectively delivered if hand delivered to the
        Executive at his principal place of employment or if sent by overnight courier,
        with confirmation, to the Executive at the last address the
        Executive has filed with the Company.  In the case of the Company,
        such notices or communications shall be effectively delivered if sent by
        overnight courier, with confirmation, to the Company at its principal executive
        offices.

       

      7.           Amendment.  This
        Agreement may not be modified in any respect by any verbal statement,
        representation or agreement made by the Executive or by any employee, officer,
        director, or representative of the Company or by any written agreement
        unless signed by the Executive and by an 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 of any successors to the Company and all persons lawfully
        claiming under the Executive.

       

      9.           Controlling
        Law.  This Agreement shall be governed by, and construed
        in accordance with, the laws of the State of Texas.


      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the Company has caused this Agreement to be duly
        executed by an officer thereunto duly authorized, and the Executive has executed
        this Agreement, all effective as of the Grant Date.

      


      
        	 	
                CYBERONICS,
                  INC.

              
	 	 
	 	 
	 	
                By:___________________________________

              
	 	
                      George
                  E. Parker, III

              
	 	
                      Vice
                  President, Human Resources

              
	 	
                      and
                  General Manager, Depression

              
	 	 
	 	
                EXECUTIVE

              
	 	 
	 	 
	 	
                ______________________________________

              
	 	
                [Name]

              


      


      
        
          
          

        

        
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      EXHIBIT
        TO FORM OF EXECUTIVE RESTRICTED STOCK AGREEMENT

      


      
        	
                Name

              	
                Number
                  of Shares

              
	 	 
	
                Daniel
                  J. Moore*

              	
                31,250

              
	 	 
	
                James
                  A. Reinstein

              	
                12,500

              
	 	 
	
                Gregory
                  H. Browne

              	
                 
                  7,500

              


      

      


      
 

       _______________ 
        *The
          Executive
          Restricted Stock Agreement between Cyberonics, Inc. and Daniel J. Moore
          contains
          language in Section 3 which authorizes Mr. Moore to elect to have the minimum
          withholding tax obligations of Cyberonics satisfied by having Cyberonics
          withhold from the Restricted Shares to be issued upon the lapse of the
          Forfeiture Restrictions on the Restricted Shares that number of Restricted
          Shares having a Fair Market Value that approximates, but is less than,
          the
          minimum amount required to be withheld.

      


      
        
          
          

        

        
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