REGISTRATION RIGHTS AGREEMENT

between

CYBERONICS, INC.

and

THE INITIAL PURCHASER NAMED HEREIN

Dated September 27, 2005

Registration Rights Agreement (this “Agreement”), dated as of September 27,
2005, between Cyberonics, Inc., a Delaware corporation (together with any
successor entity, the “Issuer”) and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation (the “Initial Purchaser”).

Pursuant to the Purchase Agreement, dated September 21, 2005, between the Issuer
and the Initial Purchaser (the “Purchase Agreement”), the Initial Purchaser has
agreed to purchase from the Issuer up to $125,000,000 in aggregate principal
amount of 3.0% Convertible Senior Subordinated Notes Due 2012 (the “Notes”). The
Notes will be convertible into fully paid, nonassessable shares of common stock,
par value $0.01 per share, of the Issuer (the “Common Stock”) on the terms, and
subject to the conditions, set forth in the Indenture (as defined herein). To
induce the Initial Purchaser to purchase the Notes, the Issuer has agreed to
provide the registration rights set forth in this Agreement pursuant to the
Purchase Agreement.

The parties hereby agree as follows:

SECTION 1. Definitions. As used in this Agreement, the following capitalized
terms shall have the following meanings:

Advice: As defined in Section 4(c)(ii) hereof.

Agreement: As defined in the preamble hereto.

Business Day: A day other than a Saturday or Sunday or any federal holiday in
the United States.

Commission: Securities and Exchange Commission.

Common Stock: As defined in the preamble hereto.

Damages Payment Date: Each Interest Payment Date.

Effectiveness Period: As defined in Section 2(a)(iii) hereof.

Effectiveness Target Date: As defined in Section 2(a)(ii) hereof.

Exchange Act: Securities Exchange Act of 1934, as amended.

Holder: A Person who owns, beneficially or otherwise, Transfer Restricted
Securities.

Indenture: The Indenture, dated as of September 27, 2005, between the Issuer and
Wells Fargo Bank, National Association, as trustee, pursuant to which the Notes
are to be issued, as such Indenture is amended, modified or supplemented from
time to time in accordance with the terms thereof.

Initial Purchaser: As defined in the preamble hereto.

Interest Payment Date: As defined in the Indenture.

Issuer: As defined in the preamble hereto.

Liquidated Damages: As defined in Section 3(a) hereof.

Majority of Holders: Holders holding over 50% of the aggregate principal amount
of Notes outstanding; provided, however, that, for purpose of this definition, a
holder of shares of Common Stock which constitute Transfer Restricted Securities
and were issued upon conversion of the Notes shall be deemed to hold an
aggregate principal amount of Notes (in addition to the aggregate principal
amount of Notes held by such holder) equal to the aggregate principal amount of
Notes converted by such Holder into such shares of Common Stock.

NASD: National Association of Securities Dealers, Inc.

Notes: As defined in the preamble hereto.

Offering Memorandum: The offering memorandum of the Issuer, dated as of
September 21, 2005, relating to the Notes.

Person: An individual, partnership, corporation, unincorporated organization,
trust, joint venture or a government or agency or political subdivision thereof.

Prospectus: The prospectus included in a Shelf Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.

Purchase Agreement: As defined in the preamble hereto.

Questionnaire Deadline: As defined in Section 2(b) hereof.

Record Holder: With respect to any Damages Payment Date, each Person who is a
Holder of Notes on the record date with respect to the Interest Payment Date on
which such Damages Payment Date shall occur.

Registration Default: As defined in Section 3(a) hereof.

Securities Act: Securities Act of 1933, as amended.

Shelf Filing Deadline: As defined in Section 2(a)(i) hereof.

Shelf Registration Statement: As defined in Section 2(a)(i) hereof.

Suspension Period: As defined in Section 4(b)(i) hereof.

TIA: Trust Indenture Act of 1939, as in effect on the date the Indenture is
qualified under the TIA.

Transfer Restricted Securities: Each Note and each share of Common Stock issued
upon conversion of Notes until the earlier of:

(i) the date on which such Note or such share of Common Stock issued upon
conversion has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement;

(ii) the date on which such Note or such share of Common Stock issued upon
conversion is transferred in compliance with Rule 144 under the Securities Act
or may be sold or transferred pursuant to Rule 144(k) under the Securities Act
(or any other similar provision then in force); or

(iii) the date on which such Note or such share of Common Stock issued upon
conversion ceases to be outstanding (whether as a result of redemption,
repurchase and cancellation, conversion or otherwise).

Underwritten Registration or Underwritten Offering: A registration in which
securities of the Issuer are sold to an underwriter for reoffering to the
public.

SECTION 2. Shelf Registration.

(a) The Issuer shall:

(i) not later than 290 days after the date hereof (the “Shelf Filing Deadline”),
cause to be filed a registration statement pursuant to Rule 415 under the
Securities Act (the “Shelf Registration Statement”), which Shelf Registration
Statement shall provide for resales of all Transfer Restricted Securities held
by Holders that have provided the information required pursuant to the terms of
Section 2(b) hereof;

(ii) use its reasonable best efforts to cause the Shelf Registration Statement
to be declared effective by the Commission no later than 380 days after the date
hereof (the “Effectiveness Target Date”); and

(iii) use its reasonable best efforts to keep the Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Section 4(b) hereof to the extent necessary to ensure that it (A) is
available for resales by the Holders of Transfer Restricted Securities entitled
to the benefit of this Agreement and (B) conforms with the requirements of this
Agreement and the Securities Act and the rules and regulations of the Commission
promulgated thereunder as announced from time to time for a period (the
“Effectiveness Period”) of:

(1) two years after the date hereof; or

(2) such shorter period that will terminate when (x) all of the Holders of
Transfer Restricted Securities are able to sell all Transfer Restricted
Securities immediately without restriction pursuant to Rule 144(k) under the
Securities Act or any successor rule thereto, (y) when all Transfer Restricted
Securities have ceased to be outstanding (whether as a result of redemption,
repurchase and cancellation, conversion or otherwise) or (z) all Transfer
Restricted Securities registered under the Shelf Registration Statement have
been sold.

(b) Subject to Section 2(c) below, no Holder may include any of its Transfer
Restricted Securities in the Shelf Registration Statement pursuant to this
Agreement unless such Holder furnishes to the Issuer in writing, prior to or on
the 10th Business Day after receipt of a request therefor (the “Questionnaire
Deadline”), such information as the Issuer may reasonably request, including the
information specified in the form of questionnaire attached as Annex A to the
Offering Memorandum, for use in connection with the Shelf Registration Statement
or the Prospectus or preliminary Prospectus included therein and in any
application to be filed with or under state securities laws. In connection with
all such requests for information from Holders in addition to that set forth in
Annex A to the Offering Memorandum, the Issuer shall notify such Holders of the
requirements set forth in the preceding sentence.

(c) Beginning on the date the Shelf Registration Statement is declared
effective, if necessary to identify such Holder as a selling securityholder in
the Shelf Registration Statement, the Issuer shall:

(i) (1) if permitted by the Commission to file a prospectus supplement, within
10 Business Days of receipt of a completed questionnaire, together with such
other information as the Issuer may reasonably request, file with the Commission
a supplement to the related Prospectus, or

(2) within 30 days of receipt of a completed questionnaire, together with such
other information as the Issuer may reasonably request, file with the Commission
a post-effective amendment to the Shelf Registration Statement or file any other
document required under the Securities Act, and use its reasonable best efforts
to cause such post-effective amendment to be declared effective under the
Securities Act as promptly as is practicable, but in any event by the date that
is 45 days after the date such post-effective amendment is required by this
clause to be filed;

(ii) provide such Holder copies of any documents filed pursuant to
Section 2(c)(i); and

(iii) notify such Holder as promptly as practicable after (i) the filing of such
prospectus supplement pursuant to Section 2(c)(i)(1), or (ii) the effectiveness
under the Securities Act of any post-effective amendment filed pursuant to
Section 2(c)(i)(2);

provided that if such questionnaire is delivered during a Suspension Period, the
Issuer shall so inform the Holder delivering such questionnaire and shall take
the actions set forth in clauses (i), (ii) and (iii) above within 5 Business
Days after expiration of the Suspension Period; provided further that in no
event shall the Issuer be required to file a post-effective amendment to the
Shelf Registration Statement for the purpose of naming Holders as selling
securityholders pursuant to Section 2(c)(i)(2) until the date that is 30 days
after the date the Issuer shall have received questionnaires from Holders of
Transfer Restricted Securities holding an aggregate of at least $10 million
aggregate principal amount of Transfer Restricted Securities; and provided
further that in no event will the Issuer be required to file a post-effective
amendment to the Shelf Registration Statement more frequently than once per
fiscal quarter. In connection with all such requests for information from
Holders in addition to that set forth in Annex A to the Offering Memorandum, the
Issuer shall notify such Holders of the requirements set forth in the preceding
sentence.

SECTION 3. Liquidated Damages.

(a) If:

(i) the Shelf Registration Statement is not filed with the Commission prior to
or on the Shelf Filing Deadline;

(ii) the Shelf Registration Statement has not been declared effective by the
Commission prior to or on the Effectiveness Target Date;

(iii) subject to the provisions of Section 4(b)(i) hereof, the Shelf
Registration Statement is filed and declared effective but, during the
Effectiveness Period, shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within five Business
Days by a post-effective amendment to the Shelf Registration Statement or a
report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act that cures such failure and, in the case of a post-effective
amendment, is itself immediately declared effective; or

(iv) prior to or on the 45th, 60th or 90th day, as the case may be, of any
Suspension Period, such suspension has not been terminated;

(each such event referred to in foregoing clauses (i) through (iv), a
“Registration Default”), the Issuer hereby agrees to pay liquidated damages
(“Liquidated Damages”) from and including the day following the Registration
Default to but excluding the day on which the Registration Default has been
cured in respect of the Notes, to each holder of Notes, (x) with respect to the
first 90-day period during which a Registration Default shall have occurred and
be continuing, in an amount per year equal to an additional 0.25% of the
principal amount of the Notes and (y) with respect to the period commencing on
the 91st day following the day the Registration Default shall have occurred and
be continuing, in an amount per year equal to an additional 0.50% of the
principal amount of the Notes; provided that in no event shall Liquidated
Damages accrue at a rate per year exceeding 0.50% of the principal amount of the
Notes.

(b) All accrued Liquidated Damages shall be paid in arrears to Record Holders by
the Issuer on each Damages Payment Date by wire transfer of immediately
available funds or by federal funds check. Following the cure of all
Registration Defaults relating to any particular Note, the accrual of Liquidated
Damages with respect to such Note will cease. In no event shall Liquidated
Damages be paid to any Holder of a Note that has converted such Note into Common
Stock.

All obligations of the Issuer set forth in this Section 3 that are outstanding
with respect to any Transfer Restricted Security at the time such security
ceases to be a Transfer Restricted Security shall survive until such time as all
such obligations with respect to such Transfer Restricted Security shall have
been satisfied in full.

A Holder shall only be entitled to Liquidated Damages pursuant to
Section 3(a)(iii) or Section 3(a)(iv) if such Holder shall have returned a
completed questionnaire to the Issuer, together with such other information as
the Issuer may reasonably request.

The Liquidated Damages set forth above shall be the exclusive monetary remedy
available to the Holders of Notes for such Registration Default.

SECTION 4. Registration Procedures.

(a) In connection with the Shelf Registration Statement, the Issuer shall comply
with all the provisions of Section 4(b) hereof and shall use its reasonable best
efforts to effect such registration to permit the resale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof, and pursuant thereto, shall as expeditiously as possible
prepare and file with the Commission a Shelf Registration Statement relating to
registration on any appropriate form under the Securities Act.

(b) In connection with the Shelf Registration Statement and any Prospectus
required by this Agreement to permit the resale of Transfer Restricted
Securities, the Issuer shall:

(i) Subject to any notice by the Issuer in accordance with this Section 4(b) of
the existence of any fact or event of the kind described in
Section 4(b)(iii)(D), use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective during the Effectiveness Period.
Upon the occurrence of any event that would cause the Shelf Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not be effective and usable for resale of
Transfer Restricted Securities during the Effectiveness Period, the Issuer shall
file promptly an appropriate amendment to the Shelf Registration Statement or a
report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act, in the case of clause (A), correcting any such misstatement
or omission, and, in the case of either clause (A) or (B), use its reasonable
best efforts to cause any such amendment to be declared effective and the Shelf
Registration Statement and the related Prospectus to become usable for their
intended purposes as soon as practicable thereafter. Notwithstanding the
foregoing, the Issuer may suspend the effectiveness of the Shelf Registration
Statement by written notice to the Holders for a period not to exceed 45 days in
any 90-day period or an aggregate of 90 days in any 12-month period (each such
period, a “Suspension Period”) if, in the Issuer’s reasonable judgment, it
possesses material non-public information the disclosure of which would have a
material adverse effect on the business of the Issuer (and its subsidiaries, if
any, taken as a whole); provided, however, that in the event the disclosure
relates to a previously undisclosed proposed or pending material business
transaction, the disclosure of which would impede the Issuer’s ability to
consummate such transaction, the Issuer may extend a Suspension Period from
45 days to 60 days.

(ii) Prepare and file with the Commission such post-effective amendments to the
Shelf Registration Statement as may be necessary to keep the Shelf Registration
Statement effective during the Effectiveness Period; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Securities Act in a
timely manner; and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by the Shelf Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in the Shelf Registration
Statement or Prospectus supplement.

(iii) Advise the selling Holders that have provided the information required by
Section 4(d) of this Agreement, the Initial Purchaser, and the underwriter(s),
if any, promptly (but in any event within five Business Days) and, if requested
by such Persons, confirm such advice in writing:

(A) with respect to the Shelf Registration Statement or any post-effective
amendment thereto, when the same has become effective, and when the Prospectus
or any Prospectus supplement or post-effective amendment has been filed,

(B) of any request by the Commission for amendments to the Shelf Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto,

(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Shelf Registration Statement under the Securities Act or of
the suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, or

(D) of the existence of any fact or the happening of any event, during the
Effectiveness Period, that makes any statement of a material fact made in the
Shelf Registration Statement or the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Shelf Registration
Statement or the Prospectus in order to make the statements therein not
misleading.

If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Issuer shall use its
reasonable best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.

(iv) Furnish to each of the selling Holders that have provided the information
required by Section 4(d) of this Agreement, the underwriter(s), if any, before
filing with the Commission, a copy of the Shelf Registration Statement and
copies of any Prospectus included therein or any amendments or supplements to
the Shelf Registration Statement or Prospectus (other than documents
incorporated by reference after the initial filing of the Shelf Registration
Statement), which documents will be subject to the review of such Holders, the
Initial Purchaser and underwriter(s), if any, for a period of at least ten
Business Days, and the Issuer will not file any Shelf Registration Statement or
Prospectus or any amendment or supplement to the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference) to which a selling
Holder of Transfer Restricted Securities covered by the Shelf Registration
Statement, the Initial Purchaser, or the underwriter(s), if any, shall
reasonably object within five Business Days after the receipt thereof. A selling
Holder, the Initial Purchaser, or underwriter, if any, shall be deemed to have
reasonably objected to such filing if the Shelf Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission.

(v) If the selling Holders propose to make an underwritten public offering of
the Transfer Restricted Securities, subject to the proviso contained in
Section 4(b)(ix), make available at reasonable times for inspection by one or
more representatives of the selling Holders, designated in writing by a Majority
of Holders whose Transfer Restricted Securities are included in the Shelf
Registration Statement, any underwriter participating in any distribution
pursuant to the Shelf Registration Statement and any attorney or accountant
retained by such selling Holders or any of the underwriter(s), all financial and
other records, pertinent corporate documents and properties of the Issuer as
shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the Issuer’s officers, directors, managers
and employees to supply all information reasonably requested by any such
representative or representatives of the selling Holders, underwriter, attorney
or accountant in connection with the Shelf Registration Statement after the
filing thereof and before its effectiveness; provided, however, that any
information designated by the Issuer as confidential at the time of delivery of
such information shall be kept confidential by the recipient thereof.

(vi) If requested by any selling Holders, the Initial Purchaser or the
underwriter(s), if any, promptly incorporate in the Shelf Registration Statement
or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders, the Initial Purchaser, and
such underwriter(s), if any, may reasonably request to have included therein,
including, without limitation: (1) information relating to the “Plan of
Distribution” of the Transfer Restricted Securities, (2) information with
respect to the principal amount of Notes or number of shares of Common Stock
being sold to such underwriter(s), if any, (3) the purchase price being paid
therefor and (4) any other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as reasonably
practicable after the Issuer is notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment. Notwithstanding the
foregoing, the Issuer will only be required to file a post-effective amendment
to the Shelf Registration Statement when it has received questionnaires from
Holders holding an aggregate of at least $10,000,000 aggregate principal amount
of the Notes, and in no event will the Issuer be required to file a
post-effective amendment to the Shelf Registration Statement more frequently
than once per fiscal quarter.

(vii) Furnish to each selling Holder, the Initial Purchaser, and each of the
underwriter(s), if any, without charge, at least one copy of the Shelf
Registration Statement, as first filed with the Commission, and of each
amendment thereto (and any documents incorporated by reference therein or
exhibits thereto (or exhibits incorporated in such exhibits by reference) as
such Person may request).

(viii) Deliver to each selling Holder, the Initial Purchaser, and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons reasonably may request; subject to any notice by the Issuer in
accordance with this Section 4(b) of the existence of any fact or event of the
kind described in Section 4(b)(iii)(D), the Issuer hereby consents to the use of
the Prospectus and any amendment or supplement thereto by each of the selling
Holders and each of the underwriter(s), if any, in connection with the offering
and the sale of the Transfer Restricted Securities covered by the Prospectus or
any amendment or supplement thereto.

(ix) If an underwriting agreement is entered into and the registration is an
Underwritten Registration, the Issuer shall:

(A) upon request, furnish to each selling Holder and the underwriter(s), if any,
in such substance and scope as they may reasonably request and as are
customarily made by issuers to underwriters in primary underwritten offerings,
upon the date of closing of any sale of Transfer Restricted Securities in an
Underwritten Registration: (1) a certificate, dated the date of such closing,
signed by the Chief Financial Officer of the Issuer confirming, as of the date
thereof, the matters set forth in Section 5(f) of the Purchase Agreement and
such other matters as such parties may reasonably request; (2) opinions, each
dated the date of such closing, of counsel to the Issuer covering such of the
matters set forth in the exhibits to the Purchase Agreement referred to in
Sections 5(a) through 5(d) thereof as are customarily covered in legal opinions
to underwriters in connection with primary underwritten offerings of securities;
and (3) customary comfort letters, dated the date of such closing, from the
Issuer’s independent registered public accounting firm (and from any other
accountants whose report is contained or incorporated by reference in the Shelf
Registration Statement), in the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in connection with
primary underwritten offerings of securities;

(B) set forth in full in the underwriting agreement, if any, indemnification
provisions and procedures which provide rights no less protective than those set
forth in Section 6 hereof with respect to all parties to be indemnified;

(C) deliver such other documents and certificates as may be reasonably requested
by such parties to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the selling Holders pursuant to this clause (ix);

provided, however, that the Issuer shall not be required to facilitate an
Underwritten Offering, as set forth in this subsection (ix), pursuant to the
Shelf Registration Statement by any Holders unless the offering relates to at
least $50,000,000 principal amount of the Transfer Restricted Securities.

(x) Before any public offering of Transfer Restricted Securities, cooperate with
the selling Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s), if any, may reasonably request and use its
best reasonable efforts to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the Shelf Registration Statement; provided,
however, that the Issuer shall not be required (A) to register or qualify as a
foreign corporation or a dealer of securities where it is not now so qualified
or to take any action that would subject it to the service of process in any
jurisdiction where it is not now so subject or (B) to subject itself to taxation
in any such jurisdiction if they are not now so subject.

(xi) Cooperate with the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and, when issued to the purchasers of
Transfer Restricted Securities pursuant to the Shelf Registration Statement, not
bearing any restrictive legends (unless required by applicable securities laws);
and enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the selling Holders or the underwriter(s), if any,
may request at least two Business Days before any sale of Transfer Restricted
Securities made by the selling Holders or such underwriter(s).

(xii) Use its reasonable best efforts to cause the Transfer Restricted
Securities covered by the Shelf Registration Statement to be registered with or
approved by such other U.S. governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s), if any,
to consummate the disposition of such Transfer Restricted Securities.

(xiii) Subject to Section 4(b)(i) hereof, if any fact or event contemplated by
Section 4(b)(iii)(D) hereof shall exist or have occurred, use its reasonable
best efforts to prepare a supplement or post-effective amendment to the Shelf
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.

(xiv) Provide CUSIP numbers for all Transfer Restricted Securities not later
than the effective date of the Shelf Registration Statement and provide the
Trustee under the Indenture with certificates for the Notes that are in a form
eligible for deposit with The Depository Trust Company.

(xv) Cooperate with respect to any filings required to be made with the NASD and
in the performance of any due diligence investigation by any underwriter that is
required to be retained in accordance with the rules and regulations of the
NASD.

(xvi) Otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission and all reporting requirements under the
rules and regulations of the Exchange Act.

(xvii) Cause the Indenture to be qualified under the TIA not later than the
effective date of the Shelf Registration Statement required by this Agreement,
and, in connection therewith, cooperate with the Trustee and the holders of
Notes to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its reasonable best efforts to cause the Trustee thereunder to
execute all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner.

(xviii) Cause all Transfer Restricted Securities covered by the Shelf
Registration Statement to be listed or quoted, as the case may be, on each
securities exchange or automated quotation system on which similar securities
issued by the Issuer are then listed or quoted.

(xix) Make available to each Holder upon written request by the Holder each
document filed with the Commission pursuant to the requirements of Section 13
and Section 15 of the Exchange Act after the effective date of the Shelf
Registration Statement if such documents are not otherwise publicly available.

(xx) Use its reasonable best efforts to obtain a waiver from each person who
would otherwise have the right to have securities of the Issuer (other than
Transfer Restricted Securities) registered on the Shelf Registration Statement
required by this Agreement. To the extent the Issuer does not receive such
waivers, it will use its reasonable best efforts to obtain the consent of such
persons from whom waivers are not obtained to file a separate registration
statement with respect to all such other registrable securities, rather than
include them in the Shelf Registration Statement and, upon receipt of such
consent, to register such registrable securities in accordance therewith.

(c) Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Issuer of the existence of any fact of the
kind described in Section 4(b)(iii)(D) hereof, such Holder will, and will use
its reasonable best efforts to cause any underwriter(s) in an Underwritten
Offering to, forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the Shelf Registration Statement until:

(i) such Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 4(b)(xiii) hereof; or

(ii) such Holder is advised in writing (the “Advice”) by the Issuer that the use
of the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Issuer, each Holder will (A) deliver to the Issuer (at the
Issuer’s expense) all copies, other than permanent file copies then in such
Holder’s possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice of suspension
or (B) destroy all copies in such Holder’s possession and provide a certificate
to the Issuer confirming such destruction.

(d) Each Holder who intends to be named as a selling Holder in the Shelf
Registration Statement shall furnish to the Issuer in writing, prior to or on
the 10th Business Day after receipt of a request therefor as set forth in a
questionnaire, such information regarding such Holder and the proposed
distribution by such Holder of its Transfer Restricted Securities as the Issuer
may reasonably request for use in connection with the Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. The form of
the questionnaire is attached as Annex A to the Offering Memorandum. Holders
that do not complete the questionnaire and deliver it to the Issuer shall not be
named as selling securityholders in the Prospectus or preliminary Prospectus
included in the Shelf Registration Statement and therefore shall not be
permitted to sell any Transfer Restricted Securities pursuant to the Shelf
Registration Statement. Each Holder who intends to be named as a selling Holder
in the Shelf Registration Statement shall promptly furnish to the Issuer in
writing such other information as the Issuer may from time to time reasonably
request in writing. Each Holder as to which the Shelf Registration Statement is
being effected agrees to furnish promptly to the Issuer all information required
to be disclosed in order to make information previously furnished to the Issuer
by such Holder not materially misleading.

SECTION 5. Registration Expenses.

(a) All expenses incident to the Issuer’s performance of or compliance with this
Agreement shall be borne by the Issuer regardless of whether a Shelf
Registration Statement becomes effective, including, without limitation:

(i) all registration and filing fees and expenses (including filings made by any
Initial Purchaser, Holders or underwriters with the NASD);

(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws;

(iii) all reasonable expenses of printing (including printing of Prospectuses
and certificates for the Common Stock to be issued upon conversion of the
Notes), messenger and delivery services and telephone;

(iv) all reasonable fees and disbursements of counsel to the Issuer and, subject
to Section 5(b) below, the Holders of Transfer Restricted Securities;

(v) all application and filing fees in connection with listing (or authorizing
for quotation) the Common Stock on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and

(vi) all fees and disbursements of independent registered public accounting firm
of the Issuer (including the expenses of any special audit and comfort letters
required by or incident to such performance).

The Issuer shall bear its internal expenses (including, without limitation, all
salaries and expenses of their officers and employees performing legal,
accounting or other duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by the Issuer.

(b) In connection with the review of the Shelf Registration Statement and other
documents referred to in this Agreement, the Issuer shall, against a reasonably
detailed invoice therefor, reimburse the Initial Purchaser, and the Holders of
Transfer Restricted Securities being registered pursuant to the Shelf
Registration Statement, for the reasonable fees and disbursements of not more
than one counsel, which shall be Shearman & Sterling LLP, or such other counsel
as may be chosen by a Majority of Holders for whose benefit the Shelf
Registration Statement is being prepared.

SECTION 6. Indemnification and Contribution.

(a) The Issuer agrees to indemnify and hold harmless each Initial Purchaser (and
each of their directors, officers and employees), each Holder whose securities
are included in a Shelf Registration Statement (and each of their directors,
officers and employees), each Person who participates as an underwriter (any
such Person being an “Underwriter”) and each Person, if any, who controls any
Initial Purchaser, Holder or Underwriter within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, arising out of any untrue statement or alleged untrue statement of
a material fact contained in such Shelf Registration Statement (or any amendment
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission;
provided, however, that (subject to Section 6(d) below) any such settlement is
effected with the written consent of the Issuer; and

(iii) against any and all expense whatsoever, as incurred (including the fees
and disbursements of counsel chosen by any indemnified party), reasonably
incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraph (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Issuer by the
Initial Purchaser, such Holder or such Underwriter expressly for use in a Shelf
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) and (y) with respect to any untrue statement or
omission or alleged untrue settlement or omission made in any preliminary
prospectus relating to the Shelf Registration Statement, the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of any Holder
from whom the person asserting any such losses, claims, damages or liabilities
purchased the Transfer Restricted Securities concerned, to the extent that a
prospectus relating to such Transfer Restricted Securities was required to be
delivered by such Holder under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder results
from the fact that there was not sent or given to such person, at or prior to
the written confirmation of the sale of such Transfer Restricted Securities to
such person, a copy of the final prospectus if (1) the Issuer had previously
furnished copies thereof to such Holder and (2) such loss, claim, damage or
liability of such Holder resulted from an untrue statement or omission or
alleged untrue settlement or omission contained in or omitted from the
preliminary prospectus which was corrected in the final prospectus; provided
further, however, that this indemnity agreement will be in addition to any
liability which the Issuer may otherwise have to such Indemnified Party.

(b) Each Holder whose securities are included in a Shelf Registration Statement,
severally but not jointly, agrees to indemnify and hold harmless the Issuer (and
its directors, officers and employees), the Initial Purchaser (and each of their
directors, officers and employees), each Underwriter (and each of their
directors, officers and employees) and the other selling Holders (and each of
their directors, officers and employees) and each Person, if any, who controls
the Issuer, the Initial Purchaser, any Underwriter or any other selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, arising out of, any untrue statements or alleged untrue statement
in the Shelf Registration Statement (or any amendment or supplement thereto) or
the Prospectus (or any amendment or supplement thereto), or the omission or any
alleged omission therefrom, of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Holder; and

(iii) against any and all expense whatsoever, as incurred (including the fees
and disbursements of counsel chosen by the Issuer), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under clauses (i) or (ii) above;

provided, however, that the Holder’s indemnification obligations under this
Section 6(b) apply only to any untrue statement, alleged untrue statement,
omission or alleged omission which was made in reliance upon and in conformity
with written information furnished to the Issuer by the Holder expressly for use
in the Registration Statement.

(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action or proceeding commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.

(d) If at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.

(e) If the indemnification provided for in this Section 6 is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Issuer from the offering and sale of the
Transfer Restricted Securities on the one hand and a Holder with respect to the
sale by the Holder of the Transfer Restricted Securities on the other hand; or
(ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party or
parties on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.

The relative benefits received by the Issuer on the one hand and a Holder on the
other hand with respect to such offering and such sale shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Notes
purchased under the Purchase Agreement (before deducting expenses) received by
the Issuer, as set forth in the Offering Memorandum on the one hand bear to the
total net proceeds received by such Holder with respect to its sale of Transfer
Restricted Securities on the other. The relative fault of the indemnifying party
or parties on the one hand and the indemnified party or parties on the other
hand shall be determined by reference to, among other things, whether any such
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or parties on the one hand or the indemnified party or
parties on the other hand and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 6. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 6 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

Notwithstanding the provisions of this Section 6, no Holder shall be required to
contribute any amount in excess of the amount by which the total price at which
the Transfer Restricted Securities purchased by it were resold exceeds the
amount of any damages which such Holder has otherwise been required to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. The Holders’ obligations to contribute as provided in this Section
6(e) are several and not joint. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

For purposes of this Section 6, each Person, if any, who controls an Initial
Purchaser, a Holder or an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Initial Purchaser, such Holder or such Underwriter, and
each director of the Issuer, and each Person, if any, who controls the Issuer
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Issuer.

SECTION 7. Rule 144A. In the event the Issuer is not subject to Section 13 or
15(d) of the Exchange Act, the Issuer hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make available
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.

SECTION 8. Participation in Underwritten Registrations. No Holder may
participate in any Underwritten Registration hereunder unless such Holder:

(i) agrees to sell such Holder’s Transfer Restricted Securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements, and

(ii) completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.

SECTION 9. Selection of Underwriters. Subject to the proviso contained in
Section 4(b)(ix), the Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by a Majority of Holders
whose Transfer Restricted Securities are included in such offering; provided
that such investment bankers and managers must be reasonably satisfactory to the
Issuer.

SECTION 10. Miscellaneous.

(a) Remedies. The Issuer acknowledges and agrees that any failure by the Issuer
to comply with its obligations under Section 2 hereof may result in material
irreparable injury to the Initial Purchaser or the Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the Initial
Purchaser or any Holder may obtain such relief as may be required to
specifically enforce the Issuer’s obligations under Section 2 hereof. The Issuer
further agrees to waive the defense in any action for specific performance that
a remedy at law would be adequate.

(b) Adjustments Affecting Transfer Restricted Securities. The Issuer shall not,
directly or indirectly, take any action with respect to the Transfer Restricted
Securities as a class that would adversely affect the ability of the Holders to
include such Transfer Restricted Securities in a registration undertaken
pursuant to this Agreement.

(c) No Inconsistent Agreements. The Issuer will not, on or after the date of
this Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. In addition, the Issuer shall
not, on or after the date hereof, grant to any of its security holders (other
than the holders of Transfer Restricted Securities in such capacity) the right
to include any of its securities in the Shelf Registration Statement provided
for in this Agreement other than the Transfer Restricted Securities. Except as
disclosed in the Offering Memorandum, the Issuer has not previously entered into
any agreement (which has not expired or been terminated) granting any
registration rights with respect to its securities to any Person which rights
conflict with the provisions hereof.

(d) Amendments and Waivers. This Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Issuer has obtained the written consent of a
Majority of Holders.

(e) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:

(i) if to a Holder, at the address set forth on the records of the registrar
under the Indenture or the transfer agent of the Common Stock, as the case may
be; and

(ii) if to the Issuer:

Cyberonics, Inc.
100 Cyberonics Boulevard
Houston, Texas 77058
Attention: General Counsel

With a copy (which shall not constitute notice) to:

Vinson & Elkins L.L.P.
First City Tower
1001 Fannin Street, Suite 2300
Houston, Texas 77002-6760
Attention: David Oelman, Esq.

All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next Business Day,
if timely delivered to an air courier guaranteeing overnight delivery.

(f) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including,
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that (i) this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder and (ii) nothing contained
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities, in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement.

(g) Counterparts. This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

(h) Securities Held by the Issuer or Their Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Transfer Restricted Securities
is required hereunder, Transfer Restricted Securities held by the Issuer or its
“affiliates” (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

(i) Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

(j) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.

(k) Severability. If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.

(l) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Issuer with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

Very truly yours,

CYBERONICS, INC.

         
 
  By:/s/ David S. Wise  
     

 
  Name:
Title:   David S. Wise
Vice President, General Counsel &
Secretary
 
        Agreed and accepted as of the date first
   
 
       
above written:
 
 

 
        MERRILL LYNCH, PIERCE, FENNER & SMITH
   
 
       
INCORPORATED
 
 

 
       
By: /s/ Edward D. Baxter
 
 
 
   
Name:
Title:
  Edward D. Baxter
Director  

 
       

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