<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT TO THE
CYBERONICS, INC. 1988 INCENTIVE STOCK PLAN
WHEREAS, there is reserved to the Board of Directors ("Board") of
Cyberonics, Inc. in Section 13 of the Cyberonics, Inc. 1988 Incentive Stock Plan
(the "Plan") the right to amend the Plan, subject to certain restrictions set
forth therein; and
WHEREAS, the Board deems it advisable to amend the Plan in the manner
hereafter set forth;
NOW, THEREFORE, the second paragraph of Section 11 of the Plan is
hereby amended effective as of October 2, 2000, to read as follows:
Notwithstanding anything in the Plan or any award agreement to the
contrary, in the event of a Change of Control (as defined below), all Options
and Stock Purchase Rights shall automatically become fully vested and
exercisable immediately prior to the Change of Control or for such earlier
period as the Committee 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
(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 entitled 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
<PAGE> 2
(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, unless prior to such date the Incumbent
Directors, by a majority vote, waive such changes in the Board of
Directors as constituting a Change of Control. "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 other provision of the Plan, the
Committee, with the approval of a majority of the Incumbent Directors, may
provide that all Options and Stock Purchase Rights 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).
Except as amended and modified hereby, the Plan shall continue in full
force and effect and the Plan and this amendment shall be read, take and
construed as one and the same instrument.
2
