ex10_4.htm


    
      	 	
              Exhibit
                10.4

            
	 	 
	 	
              For
                Internal Use:

            
	 	
              Grant
                Control #:  ______

            


    

    


    FORM
      OF EXECUTIVE RESTRICTED STOCK AGREEMENT

    (NET
      SALES GROWTH AND EARNINGS PER SHARE)

    


    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:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    For
      a
      fiscal year after the Company’s fiscal year 2008, (i) the Company’s net sales
      amount grows by not less than [Target Amount] over the net
      sales amount for the prior fiscal year; (ii) the Company’s earnings per share
      amount on a fully diluted basis, in accordance with U.S. Generally Accepted
      Accounting Principles (“GAAP”), and before extraordinary items (“Earnings Per
      Share”) grows by not less than [Target Amount]  over
      the Earnings Per Share for the prior fiscal year, which percentage must be
      higher on a percentage basis than the Company’s net sales growth for the same
      period; and (iii) the sum of the percentages for net sales amount growth and
      Earnings Per Share growth is equal to or greater than [Target
      Amount]  provided that, for the prior fiscal year against
      which performance of conditions (i), (ii), and (iii) are measured, the Company
      reports Earnings Per Share in excess of [Target
      Amount].

     

    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.

     

    
       

      
        2

        
          

        

      

      
        
        

      

    

    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.

     

    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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