ex10_6.htm


    EXHIBIT
      10.6

    


    CYBERONICS,
      INC.

    1998
      STOCK OPTION PLAN

    NOTICE
      OF STOCK OPTION GRANT

    (Standard
      Vesting)

    


    NAME:                      Randal
      L. Simpson

    


    You
      have
      been granted an option (the “Option“) to purchase Common Stock of
      Cyberonics, Inc. (the “Company”) as follows:

    


    
      	
              Date
                of Grant:

            	
              October
                22, 2007

            
	 	 
	
              Exercise
                Price:

            	
              $23.00

            
	 	 
	
              Number
                of Shares Subject to Option:

            	
              334

            
	 	 
	
              Type
                of Option:

            	
              Nonstatutory
                Stock Option

            
	 	 
	
              Vesting
                Start Date:

            	
              February
                1, 2000

            
	 	 
	
              Expiration
                Date:

            	
              February
                1, 2010

            
	 	 
	
              Exercise
                Schedule:

            	
              The
                Option shall be exercisable at any time prior to the Expiration Date
                or
                earlier termination as to shares which are vested in accordance with
                the
                Vesting Schedule below.

            
	 	 
	
              Termination
                Period:

            	
              Option
                may be exercised for up to 90 days after termination of employment
                or
                consulting relationship except as set out in Sections 7 and 8 of
                the Stock
                Option Agreement (but in no event later than the Expiration
                Date).

            
	 	 
	
              Vesting
                Schedule:

            	
              1/60th
                of the Shares subject to the Option shall vest each month after the
                Vesting Commencement Date until the Option is fully vested, subject
                to the
                Optionee continuing to be a Service Provider on such
                dates.

            


    

    


    OPTIONEE
      ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF
      IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE
      COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
      ACQUIRING SHARES HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
      THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    OPTION
      PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE
      ANY
      RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY,
      NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE’S OR THE COMPANY’S RIGHT TO
      TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY RELATIONSHIP AT ANY TIME, WITH OR
      WITHOUT CAUSE.

    


    By
      your
      signature and the signature of the Company’s representative below, you and the
      Company agree that this Option is granted under and governed by the terms and
      conditions of the Company’s 1998 Stock Option Plan and the Stock Option
      Agreement, all of which are attached and made a part of this
      document.

    


    
      	 	
              OPTIONEE:

            	 	
              CYBERONICS,
                INC.

            
	 	 	 	 
	 	 	 	 
	 	
              /s/
                Randal L. Simpson

            	 By:	
              /s/
                GEORGE E. PARKER III

            
	 	 	 	
              George
                E. Parker, III

            
	 	 	 	
              Vice
                President, Human Resources

            
	 	 	 	 
	 	
              Date:_____________________________________________________________

            	 Date:	
               

            
	 	 	 	 
	 	
              Address:

            	 	 
	 	 	 	 
	 	
               

            	 	 
	 	 	 	 
	 	
               

            	 	 
	 	 	 	 


    

    


    



    
      
        
        

      

      
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    Cyberonics,
      Inc.

     

    STOCK
      OPTION AGREEMENT

     

    1.           Grant
      of Option.  Cyberonics, Inc., a Delaware corporation (the
“Company”), hereby grants to the Optionee named in the
      Notice of Grant (the “Optionee”), an option (the
“Option”) to purchase a total number of shares of Common
      Stock (the
“Shares”) set forth in the Notice of Grant, at the
      exercise price per share set forth in the Notice of Grant (the
“Exercise Price”) subject to the terms, definitions
      and provisions of the Company’s 1998 Stock Option Plan (the
“Plan”) which is incorporated herein by
      reference.  Unless otherwise defined herein, the terms defined in the
      Plan shall have the same defined meanings in this Option.

     

    This
      Option is a Nonstatutory Stock Option, and is not intended to qualify as an
      Incentive Stock Option as defined in Section 422 of the Code.

     

    2.           Adjustments
      for Stock Splits, Recapitalization.

     

    (a)           The
      Exercise Price and number of Shares subject to this Option (as set forth on
      the
      Notice of Grant) shall be subject to adjustment as follows: If the Company
      at
      any time (i) subdivides (by any stock split, stock dividend or otherwise) the
      Common Stock into a greater number of shares, the Exercise Price in effect
      immediately prior to such subdivision will be proportionately reduced and the
      number of Shares issuable shall be proportionately increased, and (ii) if the
      Company at any time combines (by reverse stock split or otherwise) the Common
      Stock into a smaller number of shares, the Exercise Price in effect immediately
      prior to such combination will be proportionately increased and the number
      of
      Shares issuable shall be proportionately decreased.

     

    (b)           If
      at any time while this Option is outstanding there shall be any reclassification
      or conversion of the Common Stock into another class of securities (other than
      a
      sub-division or combination or shares provided for in the preceding paragraph),
      the Optionee shall thereafter be entitled to receive, during the term hereof
      and
      upon payment of the Exercise Price, the number of shares of stock to which
      a
      holder of the Common Stock would have been entitled upon such reclassification
      or conversion had the Optionee exercised this Option immediately prior to such
      reclassification or conversion.

     

    3.           Exercise
      of Option.  This Option shall be exercisable during its term in
      accordance with the Exercise Schedule set out in the Notice of Grant and with
      the provisions of Section 10 of the Plan as follows:

     

    (a)           Right
      to Exercise.

     

    (i)           This
      Option may not be exercised for a fraction of a share.

     

    (ii)           In
      the event of Optionee’s death, disability or other termination of employment,
      the exercisability of the Option is governed by Sections 6, 7 and 8
      below.

     

    (iii)           In
      no event may this Option be exercised after the Expiration Date of this Option
      as set forth in the Notice of Grant.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (b)           Method
      of Exercise.  This Option shall be exercisable by execution and
      delivery of the Exercise Notice and Stock Purchase Agreement (the “Exercise
      Notice”) in the form attached as Exhibit A.  Such written notice shall
      be signed by the Optionee and shall be delivered in person or by certified
      mail
      to the Secretary of the Company.  The written notice shall be
      accompanied by payment of the Exercise Price.  This Option shall be
      deemed to be exercised upon receipt by the Company of such written notice
      accompanied by the Exercise Price.

     

    4.           Method
      of Payment.  Payment of the Exercise Price shall be
      by:

     

    (i)           cash;
      or

     

    (ii)           check;
      or

     

    (iii)           delivery
      of a properly executed Exercise Notice together with such other documentation
      as
      the Administrator and the broker, if applicable, shall require to effect an
      exercise of the Option and immediate sale of the Shares through a broker which
      provides for delivery to the Company from the sale or loan proceeds of the
      Exercise Price; or

     

    (iv)           any
      combination of the foregoing methods of payment.

     

    5.           Restrictions
      on Exercise.  This Option may not be exercised if the issuance of
      such Shares upon such exercise or the method of payment of consideration for
      such shares would constitute a violation of any applicable federal or state
      securities or other law or regulation, including the requirements of any stock
      exchange upon which the Shares may then be listed and including any rule under
      Part 207 of Title 12 of the Code of Federal Regulations (“Regulation G”) as
      promulgated by the Federal Reserve Board.  As a condition to the
      exercise of this Option, the Company may require Optionee to make any
      representation and warranty to the Company as may be required by any applicable
      law or regulation.

     

    6.           Termination
      of Relationship.  In the event of termination of Optionee’s
      consulting relationship or Continuous Status as an Employee, Optionee may,
      to
      the extent otherwise so entitled at the date of such termination (the
“Termination Date”), exercise this Option during the
      Termination Period set out in the Notice of Grant.  To the extent that
      Optionee was not entitled to exercise this Option at the date of such
      termination, or if Optionee does not exercise this Option within the time
      specified herein, the Option shall terminate.

     

    7.           Disability
      of Optionee.  Notwithstanding the provisions of Section 6 above,
      in the event of termination of an Optionee’s consulting relationship or
      Continuous Status as an Employee as a result of total and permanent disability
      (as defined in Section 22(e)(3) of the Code), Optionee may, but only within
      twelve (12) months from the date of termination of employment (but in no event
      later than the Expiration Date of this Option as set forth in the Notice of
      Grant), exercise the Option to the extent otherwise so entitled at the date
      of
      such termination.: To the extent that Optionee was not entitled to exercise
      the
      Option at the date of termination, or if Optionee does not exercise such Option
      (to the extent otherwise so entitled) within the time specified herein, the
      Option shall terminate.

     


    
      
        
        

      

      
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    8.           Death
      of Optionee.  In the event of the death of Optionee during the term of
      this Option and while an Employee or Consultant or within ninety (90) days
      following termination of Optionee’s employment/consultancy relationship with the
      Company, this Option may be exercised at any time within twelve (12) months
      following the date of death (but in no event later than the Expiration Date),
      by
      Optionee’s estate or by a person who acquired the right to exercise the Option
      by bequest or inheritance, but only to the extent the Optionee could exercise
      the Option at the date of death.

     

    9.           Non-Transferability
      of Option.  This Option may not be transferred in any manner
      otherwise than by will or by the laws of descent or distribution and may be
      exercised during the lifetime of Optionee only by him.  The terms of
      this Option shall be binding upon the executors, administrators, heirs,
      successors and assigns of the Optionee.

     

    10.           Term
      of Option.  This Option may be exercised only prior to the
      Expiration Date set out in the Notice of Grant, and may be exercised during
      such
      term only in accordance with the Plan and the terms of this
      Option..

     

    11.           Tax
      Consequences.  Set forth below is a brief summary as of the date
      of this Option of some of the federal tax consequences of exercise of this
      Option and disposition of the Shares.  THIS SUMMARY IS NECESSARILY
      INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE, OPTIONEE
      SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF
      THE
      SHARES,

     

    (a)           Exercise
      of Option.  Upon exercise of this Option, the Optionee will be
      treated as having received compensation income (taxable at ordinary income
      tax
      rates) equal to the excess, if any, of the fair market value of the Shares
      on
      the date of exercise over the Exercise Price.  If Optionee is an
      employee, the Company will be required to withhold from Optionee’s compensation
      or collect from Optionee and pay to the applicable taxing authorities an amount
      equal to a percentage of this compensation income at the time of
      exercise.

     

    (b)           Disposition
      of Shares.  If Shares are held for at least one year, any gain
      realized on disposition of the Shares will be treated as long-term capital
      gain
      for federal income tax purposes.

     

    12.           Change
      of Control.  Notwithstanding anything in the Plan to the contrary,
      in the event of a Change of Control (as defined below), this Option shall
      automatically become fully vested and exercisable immediately prior to the
      Change of Control or for such earlier period as the Administrator may
      provide.  A “Change of Control” means the happening of any of the
      following events:

     

    (i)           the
      acquisition by any “person,” as such term is used in Sections 13(d) and 14(d) of
      the Securities Exchange act of 1934, as amended (the “Exchange Act”), other than
      the Company, a subsidiary of the Company or a Company employee benefit plan
      of
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange act),
      directly or indirectly, of securities of the Company representing 50% or more
      of
      the combined voting power of the Company’s then outstanding securities entitled
      to vote generally in the election of directors; or

     


    
      
        
        

      

      
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    (ii)           the
      consummation of a reorganization, merger, consolidation or other form of
      corporate transaction or series of transactions, in each case, with respect
      to
      which persons who were the shareholders of the Company immediately prior to
      such
      reorganization, merger or consolidation or other transaction do not, immediately
      thereafter, own more than 50% of the combined voting power entitle to vote
      generally in the election of directors of the reorganized, merged or
      consolidated company’s then outstanding voting securities in substantially the
      same proportions as their ownership immediately prior to such event,
      or

     

    (iii)           the
      sale or disposition by the Company of all or substantially all the Company’s
      assets; or

     

    (iv)           a
      change in the composition of the Board of Directors of the Company, as a result
      of which fewer than a majority of the directors are Incumbent
      Directors.  “Incumbent Directors” shall mean directors who either (A)
      are directors of the Company as of October 2, 2000, or (B) are elected, or
      nominated for election, thereafter to the Board of Directors of the Company
      with
      the affirmative votes of at least a majority of the Incumbent Directors at
      the
      time of such election or nomination, but “Incumbent Director” shall not include
      an individual whose election or nomination is in connection with (i) an actual
      or threatened election contest (as such terms are used in Rule 14a-11 of
      Regulation 14A promulgated under the Exchange Act) or an actual or threatened
      solicitation of proxies or consents by or on behalf of a Person other than
      the
      Board or (ii) a plan or agreement to replace a majority of the then Incumbent
      Directors; or

     

    (v)           the
      approval by the Board of Directors or the stockholders of the Company of a
      complete or substantially complete liquidation or dissolution of the
      Company.

     

    In
      addition to, or in lieu of, any provision of the Plan, the Administration,
      with
      the approval of a majority of the Incumbent Directors, may provide that this
      Option, if not exercised immediately prior to the Change of Control, shall
      (x)
      terminate on such Change of Control, unless such Change of Control is described
      in clause (iv) above, (y) be assumed by the successor (a parent thereof) in
      any
      such merger or other corporate transaction, or (z) be surrendered in exchange
      for equivalent substitution options or awards from the successor (or a parent
      thereof).

     

    OPTIONEE
      ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF
      IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE
      COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
      ACQUIRING SHARES HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
      THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN WHICH IS
      INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
      RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
      IT INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY’S RIGHT TO
      TERMINATE HIS OR HER EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
      CAUSE.

     


    
      
        
        

      

      
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    EXHIBIT
      A

     

    EXERCISE
      NOTICE AND STOCK PURCHASE AGREEMENT

     

    Cyberonics,
      Inc.

    100
      Cyberonics Boulevard

    Houston,
      Texas 77058

    


    Attention:
      Secretary

    


    1.           Exercise
      of Option.  Effective as of today, _______________, 20__, the
      undersigned (“Optionee”) hereby elects to exercise
      Optionee’s option to purchase ________ shares of the Common Stock (the
“Shares”) of Cyberonics, Inc. (the
“Company”) under and pursuant
      to the Company’s 1998
      Stock Option Plan, as amended (the “Plan”) and the
      Stock Option Agreement dated __________________ (the “Option
      Agreement”).

     

    2.           Representations
      of Optionee.

     

    (a)           Optionee
      acknowledges that Optionee has received, read and understood the Plan and the
      Option Agreement and agrees to abide by and be bound by their terms and
      conditions,

     

    (b)           Optionee
      understands that Optionee may suffer adverse tax consequences as a result of
      Optionee’s purchase or disposition of the Shares, Optionee represents that
      Optionee has consulted with any tax consultants Optionee deems advisable in
      connection with the purchase or disposition of the Shares and that Optionee
      is
      not relying on the Company for any tax advice.

     

    3.           Rights
      as Stockholder.  Subject to the terms and conditions of this
      Agreement, Optionee shall have all of the rights of a stockholder of the Company
      with respect to the Shares from and after the date that Optionee delivers full
      payment of the Exercise Price until such time as Optionee disposes of the
      Shares.

     

    4.           Successors
      and Assigns.  The Company may assign any of its rights under this
      Agreement to single or multiple assignees, and this Agreement shall inure to
      the
      benefit of the successors and assigns of the Company.  Subject to the
      restrictions on transfer herein set forth, this Agreement shall be binding
      upon
      Optionee and his or her heirs, executors, administrators, successors and
      assigns.

     

    5.           Arbitration.  Any
      dispute or claim arising out of or in connection with this Agreement shall
      be
      settled by binding arbitration.  Any such arbitration shall be
      conducted in accordance with the Rules of Conciliation and Arbitration of the
      American Arbitration Association and shall take place in Webster,
      Texas.  The arbitration shall be conducted by one arbitrator; provided
      that if the parties cannot agree on a single arbitrator, then the arbitration
      shall be conducted by a panel of three arbitrators, one selected by each party
      and the third selected by the other two arbitrators.  The
      determination of the arbitrator(s) shall be final and binding upon the
      parties.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    6.           Governing
      Law; Severability.  THIS AGREEMENT SHALL BE GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE EXCLUDING THAT
      BODY OF LAW PERTAINING TO CONFLICTS OF LAW.  Should any provision of
      this Agreement be determined by a court of law to be illegal or unenforceable,
      the other provisions shall nevertheless remain effective and shall remain
      enforceable.

     

    7.           Notices.  Any
      notice required or permitted hereunder shall be given in writing and shall
      be
      deemed effectively given upon personal delivery or upon deposit in the United
      States mail by certified mail, with postage and fees prepaid, addressed to
      the
      other party at its address as shown below beneath its signature, or to such
      other address as such party may designate in writing from time to time to the
      other party.

     

    8.           Further
      Instruments.  The parties agree to execute such further
      instruments and to take such further action as may be reasonably necessary
      to
      carry out the purposes and intent of this Agreement.

     

    9.           Delivery
      of Payment.  Optionee herewith delivers to the Company the full
      Exercise Price for the Shares.

     

    10.           Entire
      Agreement.  The Plan and Notice of Grant/Option Agreement are
      incorporated herein by reference.  This Agreement, the Plan and the
      Notice of Grant/Option Agreement constitute the entire agreement of the parties
      and supersede in their entirety all prior undertakings and agreements of the
      Company and Optionee with respect to the subject matter hereof.

     

    
      	
              Submitted
                by:

            	
              Accepted
                by:

            
	 	 
	
              OPTIONEE:

            	
              CYBERONICS,
                INC.

            
	 	 
	
              _____________________________________

            	
              By:___________________________________

            
	 	 
	 	
              Its:___________________________________

            
	 	 
	
              Address:

            	
              Address:

            
	 	 
	
              ______________________________________

            	
              100
                Cyberonics Blvd.

            
	 	
              Houston,
                TX 77058

            
	
              ______________________________________

            	 
	 	 
	 	 


    

    


     


    
      
        
        

      

      
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