Exhibit No. 10.1

January 31, 2007

Steve Jennings
3114 Scenic Elm
Houston, TX 77059

Dear Steve:

This letter and its enclosures will provide you with important information
regarding your recent resignation from Cyberonics.

  •   Resignation Date: Your official resignation date will be March 2, 2007 and
you will receive your current base pay through this date. Please note, however,
that you will be relieved of all official duties as of January 31, 2007.

  •   Separation Pay: On or prior to March 7, 2007, you may elect to receive one
of the following:

            a lump sum payment equal to 1.5 times the sum of your Base Salary
plus the most recent annual bonus earned; or

            a lump sum payment equal to 1.5 times the sum of your Base Salary
and immediate vesting of all Options that would become vested in the twelve (12)
months beginning on March 2, 2007.

Please indicate your selection by initialing in the space provided and return
this letter to me no later than March 7, 2007.

  •   Stock Options: Please note that you must exercise any vested options
within ninety days (90) of your Termination Date (Grant Detail Report is
attached). You should note that the exercise of these options is currently
prohibited by the U.S. securities laws. This prohibition will be lifted when
Cyberonics is current on its filings with the Securities and Exchange
Commission. You can contact the Stock Option Call Center at (281) 727-5299 or
StockOptions@cyberonics.com for information on how to exercise vested stock
options. If you are designated as an “Insider” for the purpose of compliance
with the Insider Trading Policy, you will continue to be deemed an Insider as of
your Termination Date. As a result, if Cyberonics has imposed a restriction or
prohibition on trading company shares as of your Termination Date, you must wait
until Cyberonics lifts the current trading restriction or prohibition before you
can trade shares of Cyberonics stock.

  •   Health Care Benefits: Your Company-sponsored medical and dental benefits
will continue through the end of March, 2007. This medical benefit includes
access to the Employee Assistance Program. Should you need to contact an EAP
representative, you may do so at 1-888-238-6232.

  •   Continued Health Care Benefits: You have the right to continue coverage
under COBRA after the end of March, 2007. You will receive information regarding
on your right to extend your benefits under COBRA by separate correspondence.

  •   Other Benefits: You will find enclosed in this packet information on the
other benefit programs and the effect that your separation may have on your
benefits under these programs.

  •   Expenses: It remains essential that you timely submit expenses for
business reimbursements. For the next 30 days, you may submit expenses through
Concur via their website — https://my.concureworkplace.com. Cyberonics’ company
ID is cyfy48fzb8recwku. You must also submit the supporting receipts to Accounts
Payable. Please note that expense reports, complete with supporting
documentation, must be submitted within 30 days of the date that such expense is
incurred. If you have any questions regarding reimbursement of your expenses or
if you have trouble accessing Concur, please contact Accounts Payable at
(281) 228-7398 or AccountsPayable@cyberonics.com.

  •   Company Property: You are obligated to return all of the Company’s
property including, but not limited to, all confidential and/or proprietary
information, computer equipment, telephone/Blackberry, literature or materials.
These materials must be returned to the corporate office within five
(5) business days.

  •   Confidentiality Obligations: You are reminded that your Employment
Agreement has extensive covenants regarding confidentiality, trade secrets,
proprietary items, non-competition and non-interference that are valid and
remain in effect even after termination of employment. Please note that
Cyberonics will enforce its rights under the Employment Agreement to the fullest
extent allowed by the law.

  •   Employment Agreement: The compensation and benefits outlined herein are
offered in lieu of those set forth in that certain Employment Agreement dated
June 15, 2006 by and between Cyberonics, Inc. and you.

  •   Release: By signing in the space provided below and accepting the
consideration set forth herein, you, individually and on behalf of your heirs,
executors, administrators, successors and assigns, hereby fully and finally
RELEASES, ACQUITS and FOREVER DISCHARGES Cyberonics and its officers, directors,
shareholders, subsidiaries and other affiliates, predecessors and successors in
interest, agents and representatives, employees and insurers from all claims,
demands, liability and causes of action of whatsoever nature, whether in
contract or tort, whether pursuant to statute or common law including, but not
limited to, the Title VII Discrimination in Employment Act, the Americans With
Disabilities Act and the Age Discrimination in Employment Act, all as amended,
and any other applicable federal or state statutes arising out of or pertaining
to your employment with Cyberonics and any of its predecessors or affiliates.

We would like to thank you for your contributions to the organization and wish
you success in your future endeavors.

Sincerely,

    /s/ George E. Parker, III

    George E. Parker, III
Vice President, Human Resources

    Agreed to this      _6th     day of _February     , 2007.

         /s/ Steve Jennings     

    Steve Jennings