form10_61.htm


    EXHIBIT
10.61

     

    


      EMPLOYMENT
AGREEMENT

       

      


      


      


      
        	
                This
      Employment Agreement (the “Agreement”), entered into effective as of
      August 1, 2007 (the “Effective Date”), by and between Cyberonics, Inc.
      (the “Company”) and James Reinstein (“Employee”).

              
	 
      
	
                WITNESSETH:

              
	 
      	 
      	 
      	 
      
	
                WHEREAS,
      the Company desires to secure the experience, abilities and service of
      Employee by employing Employee upon the terms and conditions specified
      herein; and

              
	 
      	 
      	 
      	 
      
	
                WHEREAS,
      Employee is willing to enter into this Agreement upon the terms and
      conditions specified herein;

              
	 
      
	
                NOW,
      THEREFORE, in consideration of the premises, terms and provisions set
      forth herein, the mutual benefits to be gained by the performance thereof
      and other good and valuable consideration, the receipt and sufficiency of
      which are hereby acknowledged, the parties hereto agree as
      follows:

              
	 
      
	 
      
	 
      	
                SECTION
      1.

              	
                Employment.  The
      Company hereby employs Employee, and Employee hereby accepts such
      employment, all upon the terms and conditions set forth
      herein.

              
	 
      	 
      	 
      
	 
      	
                SECTION
      2.

              	
                Term.  Subject
      to the terms and conditions of this Agreement, unless sooner terminated
      pursuant to Section 5 of this Agreement, Employee shall be employed by the
      Company commencing on the Effective Date and terminating on June 1, 2009
      (the “Term”).  Termination of this Agreement shall not alter or
      impair any rights of Employee (or his beneficiaries or heirs) with respect
      to payments, benefits or other rights provided by the terms of this
      Agreement, arising before or after the end of the Term.

              
	 
      	 
      	 
      
	 
      	
                SECTION
      3.

              	
                Duties,
      Responsibilities and Location.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                A.  Capacity.  Employee
      shall serve as the Vice President, Global Sales and General Manager,
      International of the Company and shall report to the Chief Executive
      Officer of the Company.

              
	 
      	 
      	 
      
	 
      	 
      	 
      	
                B.  Full-Time
      Duties.  Employee shall devote his full business time,
      attention and energies to the business of the
      Company.  Notwithstanding anything herein to the contrary,
      Employee shall be allowed to (i) manage Employee’s personal investments
      and affairs and, (ii) with the written consent of the Chief Executive
      Officer of the Company, serve on boards or committees of civic or
      charitable organizations or trade associations, provided that such
      activities do not materially interfere with his performance of the duties
      and responsibilities of his position specified in Section
    3.A.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                C.  Offices.  Employee’s
      primary place of work shall be at the principal executive offices of the
      Company located in the greater Houston, Texas metropolitan area, but
      Employee shall be required to travel on a basis consistent with his
      position.

              
	 
      	 
      	 
      
	 
      	
                SECTION
      4.

              	
                Compensation.

              
	 
      	 
      	 
      
	 
      	 
      	 
      	
                A.  Base
      Salary.  During the Term, Employee shall receive an
      annual salary of $290,000 (the “Base Salary”) payable in accordance with
      the Company’s general payroll practices.  Employee’s Base Salary
      shall be reviewed prior to the beginning of each fiscal year of the
      Company for increase in the discretion of the Compensation Committee of
      the Board of Directors (“Compensation Committee”); provided, however, that
      the Base Salary, as it may be increased at any time, may not thereafter be
      decreased.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                B.  Annual Incentive
      Bonus.  During the Term, Employee shall be eligible to
      participate in the Annual CEO Direct Reports Bonus Plan, with a target
      bonus of 50% of Employee’s annual Base Salary.  A bonus, if
      earned, shall be payable as soon as reasonably practical following the
      completion of the applicable fiscal year.  Bonuses for Employee
      shall be based on the achievement of such Company, departmental and/or
      individual performance goals that may be established for the applicable
      bonus year by the Compensation Committee.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                C.  Annual
      Overachievement Bonus.  During the Term, Employee
      shall be eligible to participate in the Annual CEO Direct Reports
      Overachievement Bonus Plan as determined by the Compensation
      Committee.  Overachievement Bonuses shall be based on the
      Company’s overachievement of such Company, departmental and/or individual
      performance goals that may be established for the applicable bonus year by
      the Compensation Committee.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                D.  Equity
      Compensation.  In further consideration of the services
      rendered by Employee during the Employment Period, the Company shall grant
      Employee, consistent with the United States securities laws, one hundred
      thousand (100,000) shares of restricted stock (collectively, the “Initial
      Equity Grant”) to be issued from the Company’s Amended and Restated New
      Employee Equity Inducement Plan in two separate grants.  The
      Company shall grant the fifty thousand (50,000) of such restricted shares
      (the “Time-Vested Shares”) on the first quarterly grant date immediately
      following the Effective Date as determined under the Company’s Equity
      Incentives Grant Policy and any and all restrictions on the 12,500 of such
      Time-Vested Shares shall lapse on each of the first four anniversaries of
      the grant date.  The Company shall grant the remaining fifty
      thousand (50,000) shares of the Initial Equity Grant (the
      “Performance-Vested Shares”) on the quarterly grant date (as determined
      under its Equity Incentives Grant Policy) immediately following the
      establishment of the performance measures based upon the financial
      performance of the Company and upon qualitative measures as established by
      the Compensation Committee no later than one-hundred eighty (180) days
      from the Effective Date.  Employee will be eligible for grants
      of Company stock options (the “Options”) and other equity awards in the
      discretion of the Compensation Committee.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                E.  General
      Benefits.  Upon satisfying applicable eligibility
      requirements, if any, Employee will be eligible to participate in the
      Company’s qualified 401(k) plan, group health, group life insurance,
      accidental death and dismemberment, travel accident, long-term disability
      and short-term disability plans and other welfare and similar plans and
      vacation policies under terms generally applicable to other similarly
      situated employees of the Company and shall be eligible to receive all
      perquisites and other benefits provided or made available by the Company
      to other similarly situated executives of the Company.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                F.  Reimbursements.  Employee
      shall be entitled to receive prompt reimbursement by the Company in
      accordance with its business reimbursement policy in effect from time to
      time for all reasonable, out-of-pocket business expenses incurred by him
      in performing his duties under this Agreement upon the submission by
      Employee of such accounts and records as may be reasonably required under
      the Company’s business reimbursement policy.

              
	 
      	 
      	 
      	 
      
	 
      	 SECTION
      5.	
                 

              	
                Termination of
      Employment. Notwithstanding the provisions of Section 2, Employee’s
      employment hereunder may terminate under any of the following
      conditions:

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                A.  Death.  Employee’s
      employment under this Agreement shall terminate automatically upon his
      death.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                B.  Disability.  Employee’s
      employment under this Agreement may be terminated due to his
      Disability.  “Disability” shall mean Employee’s inability to
      substantially perform his duties hereunder for any period of at least 180
      consecutive days due to a physical or mental incapacity.  The
      date of termination due to Disability shall be the date Employee elects to
      terminate his employment service due to such Disability or, if earlier,
      the date the Board determines that Employee has met the definition of
      Disability and given written notice of such termination to
      Employee.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                C.  Termination by Company
      Without Cause.  The Company may terminate Employee’s
      employment hereunder without Cause (as hereinafter defined) on 30 days’
      prior written notice to Employee.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                D.  Termination by Company
      for Cause.  Employee’s employment hereunder may be
      terminated for Cause by the Company.  For purposes of this
      Agreement, “Cause” shall mean (i) the willful and continued failure by
      Employee to substantially perform Employee’s duties with the Company
      (other than any such failure resulting from Employee’s incapacity due to
      physical or mental illness), (ii) an act or acts of dishonesty taken by
      Employee and intended to result in personal enrichment of Employee at the
      expense of the Company, (iii) willful violation by Employee of Employee’s
      material obligations under this Agreement, (iv) willful violation by
      Employee of a material policy of the Company, including its policies
      regarding professional and ethical conduct, (v) Employee’s commission of
      one or more acts that constitute a felony, (vi) Employee is publicly
      censured by the Securities Exchange Commission, or (vii) Employee commits
      one or more acts of fraud as regards the Company.  For purposes
      of clause (i) of this definition, no act, or failure to act, on Employee’s
      part shall be deemed “willful” unless done, or omitted to be done, by
      Employee not in good faith and without reasonable belief that Employee’s
      act, or failure to act, was in the best interest of the
      Company.  The determination of whether Cause exists must be made
      by a resolution duly adopted by the affirmative vote of not less than a
      majority of the entire membership of the Board of Directors of the
      Company.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                E.  Termination by
      Employee.  Employee may terminate his employment
      hereunder at any time on 30 days’ prior written notice to the
      Board.

              
	 
      	 
      	 
      	 
      
	 
      	 SECTION
      6.	
                 

              	
                Payments Upon
      Termination.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                A.  Upon
      termination of Employee’s employment for any reason prior to the
      expiration of the Term, the Company shall be obligated to pay, and
      Employee shall be entitled to receive:

              
	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                1.  all
      accrued and unpaid Base Salary to the date of
  termination;

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                2.  any
      earned, but unpaid, bonuses for the bonus year ending prior to the date of
      termination;

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                3.  all
      incurred but unreimbursed business expenses for which Employee is entitled
      to reimbursement; and

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                4.  any
      benefits to which he is entitled under the terms of any applicable
      employee benefit plan or program, or applicable law.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                B.  Upon
      termination of Employee’s employment pursuant to Section 5.C., the Company
      shall be obligated to pay or provide, and Employee’s estate or beneficiary
      shall be entitled to receive:

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                1.  all
      of the amounts and benefits described in Section 6.A.;
  and

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                2.  either
      (a) a lump sum payment equal to 1.5 times the sum of (i) Employee’s Base
      Salary, plus (ii) the most recent annual bonus earned by Employee or (b) a
      lump sum payment equal to 1.5 times Employee’s Base Salary and, solely for
      purposes of determining Employee’s vesting under any Options, the number
      of shares that would become vested under such Options during the 12-month
      period following Employee’s termination date if Employee’s employment had
      continued during such period shall become vested on his termination of
      employment date, whichever of (a) or (b) is elected by Employee in writing
      to the Company within five days of his termination
date.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                C.  In
      the event of any termination of employment under Section 5, Employee shall
      be under no obligation to seek other employment, and there shall be no
      offset against amounts due Employee under this Agreement on account of any
      remuneration attributable to any subsequent employment or self-employment
      that he may obtain.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                D.  The
      Company and Employee have previously or contemporaneously with this
      Agreement entered into a Severance Agreement which provides certain
      payments and benefits to Employee upon a qualified termination of
      employment in connection with a change of control of the
      Company.  Notwithstanding anything in this Agreement to the
      contrary, to the extent Employee is entitled to receive any severance
      payment or benefits under the Severance Agreement any severance payment or
      benefits to which Employee is otherwise entitled to receive under this
      Agreement shall be reduced or offset by the severance payment or benefit
      payable under the Severance Agreement in such manner as is appropriate, as
      determined in good faith by the Board, to prevent a duplication of such
      payment and benefits.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 SECTION
      7.	
                 

              	
                Indemnification.  The
      Company agrees to indemnify Employee to the fullest extent permitted by
      applicable law with respect to any acts or non-acts he may have committed
      during the period which he was an officer, director and/or employee of the
      Company or any subsidiary or affiliate thereof, or of any other entity of
      which he served as an officer, director or employee at the request of the
      Company.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 SECTION
      8.	
                 

              	
                Covenants of
      Employee.  Employee covenants as
  follows:

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                A.  Confidentiality.  During
      and after his employment with the Company and its affiliates, Employee
      will hold in confidence all confidential information and will not disclose
      it to any person other than in connection with the performance of his
      duties and obligations hereunder, except with the specific prior written
      consent of the Board of Directors or the Chief Executive Officer;
      provided, however, that the parties agree that this Agreement does not
      prohibit the disclosure of confidential information where applicable law
      requires, including, but not limited to, in response of subpoenas and/or
      orders of a governmental agency or court of competent
      jurisdiction.  In the event that Employee is requested or
      becomes legally compelled under the terms of a subpoena or order issued by
      a court of competent jurisdiction or by a governmental body to make any
      disclosure of confidential information, Employee agrees that he will (i)
      immediately provide the Company with written notice of the existence,
      terms and circumstances, surrounding such request(s) so that the Company
      may seek an appropriate protective order or other appropriate remedy, (ii)
      cooperate with the Company in its efforts to decline, resist or narrow
      such requests and (iii) if disclosure of such confidential information is
      required in the opinion of counsel, exercise reasonable efforts to obtain
      an order or other reliable assurance that confidential treatment will be
      accorded to such disclosed information.  “Confidential
      information” means any and all intellectual property of the Company (or
      any of its affiliates), including but not limited to:  (a) trade
      secrets concerning the business and affairs of the Company (or any of its
      affiliates), product specifications, data, know-how, formulae,
      compositions, processes, designs, sketches, photographs, graphs, drawings,
      samples, inventions and ideas, past, current, and planned research and
      development, current and planned manufacturing or distribution methods and
      processes, customer lists, current and anticipated customer requirements,
      price lists, market studies, business plans, computer software and
      programs (including object code and source code), computer software and
      database technologies, systems, structures, and architectures (and related
      formulae, compositions, processes, improvements, devices, know-how,
      inventions, discoveries, concepts, ideas, designs, methods and
      information), and any other information, however documented, that is a
      trade secret under federal, state or other applicable law; and (b)
      information concerning the business and affairs of the Company (or any of
      its affiliates) (which includes historical financial statements, financial
      projections and budgets, historical and projected sales, capital spending
      budgets and plans, the names and backgrounds of key personnel, personnel
      training and techniques and materials), however documented; and notes,
      analysis, compilations, studies, summaries, and other material prepared by
      or for the Company (or any of its affiliates) containing or based, in
      whole or in part, on any information included in the
      foregoing.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                B.  Trade
      Secrets.  Any trade secrets of the Company will be
      entitled to all of the protections and benefits under the federal and
      state trade secret and intellectual property laws and any other applicable
      law.  If any information that the Company deems to be a trade
      secret is found by a court of competent jurisdiction not to be a trade
      secret for purposes of this Agreement, such information will,
      nevertheless, be considered confidential information for purposes of this
      Agreement, so long as it otherwise meets the definition of confidential
      information.  Employee hereby waives any requirement that the
      Company submit proof of the economic value of any trade secret or post a
      bond or other security.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                C.  Proprietary
      Items.  Employee will not remove from the Company’s
      premises (except to the extent such removal is for purposes of the
      performance of Employee’s duties at home or while traveling, or except as
      otherwise specifically authorized by the Company) any document, record,
      notebook, plan, model, component, device, or computer software or code,
      whether embodied in a disk or in any other form belonging to the Company
      or used in the Company’s business (collectively, the “Proprietary
      Items”).  All of the Proprietary Items, whether or not developed
      by Employee, are the exclusive property of the Company.  Upon
      termination of his employment, or upon the request of the Company during
      the Term, Employee will return to the Company all of the Proprietary Items
      and confidential information in Employee’s possession or subject to
      Employee’s control, and Employee shall not retain any copies, abstracts,
      sketches, or other physical embodiment, including electronic or otherwise,
      of any of the Proprietary Items or confidential
    information.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                D.  Non-Competition and
      Non-Interference.  During the period of his employment
      with the Company or its affiliates and for the one-year period after the
      termination of his employment with the Company and its affiliates,
      Employee will not, directly or indirectly:

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                1.  without
      the express prior written consent of the Board of Directors, own an
      interest in, manage, operate, join, control, lend money or render
      financial or other assistance to or participate in or be connected with,
      as an officer, employee, partner, stockholder, consultant or otherwise,
      any person that competes with the Company in the field of neurostimulation
      in a matter covered by a patent assigned to or held by the Company;
      provided, however, that following Employee’s termination of employment
      with the Company the foregoing restriction shall apply only to those areas
      where the Company is actually doing business on the date of such
      termination of employment; provided, further, that Employee may purchase
      or otherwise acquire for passive investment up to 3% of any class of
      securities of any such enterprise if such securities are listed on any
      national or regional securities exchange or have been registered under
      Section 12(g) of the Securities Exchange Act of 1934;

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                2.  whether
      for Employee’s own account or for the account of any other person, (except
      for the account of the Company and its affiliates), solicit Business from
      any person known by Employee to be a customer of the Company or its
      affiliates, whether or not Employee had personal contact with such person
      during Employee’s employment with the Company and its
      affiliates;

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                3.  whether
      for Employee’s own account or the account of any other person, (i)
      solicit, employ, or otherwise engage as an employee, independent
      contractor, or otherwise, any person who is an employee of the Company or
      an affiliate, or in any manner induce, or attempt to induce, any employee
      of the Company or its affiliate to terminate his employment with the
      Company or its affiliate; or (ii) interfere with the Company’s or its
      affiliate’s relationship with any person who at any time during the Term,
      was an employee, contractor, supplier, or customer of the Company or its
      affiliate; or

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                4.  at
      any time after the termination of his employment, disparage the Company or
      its affiliates or any shareholders, directors, officers, employees, or
      agents of the Company or any of its affiliates, so long as the Company
      does not disparage Employee.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                E.  Acknowledgements.  The
      Company acknowledges that it is providing Employee with confidential
      information in order for Employee to perform his duties under this
      Agreement.  Employee acknowledges that (a) the services to be
      performed by him under this Agreement are of a special, unique, unusual,
      extraordinary, and intellectual character, and (b) the provisions of this
      Section 8 are reasonable and necessary to protect the confidential
      information, goodwill and other business interests of the
      Company.  If any covenant in this Section 8 is held to be
      unreasonable, arbitrary, or against public policy, such covenant will be
      considered to be divisible with respect to scope, time, and geographic
      area, and such lesser scope, time, or geographic area, or all of them, as
      a court of competent jurisdiction may determine to be reasonable, not
      arbitrary, and not against public policy, will be effective, binding, and
      enforceable against Employee.  Employee hereby agrees that this
      covenant is a material and substantial part of this Agreement and that:
      (i) the geographic limitations are reasonable; (ii) the term of the
      covenant is reasonable; and (iii) the covenant is not made for the purpose
      of limiting competition per se and is reasonably related to a protectable
      business interest of the Company.  The period of time applicable
      to any covenant in this Section 8 will be extended by the duration of any
      violation by Employee of such covenant.  The provisions of this
      Section 8 shall survive the termination of the Term of this
      Agreement.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 SECTION
      9.	
                 

              	
                Injunctive Relief and Additional
      Remedy.  Employee acknowledges that the injury
      that would be suffered by the Company as a result of a breach of the
      provisions of Section 8 of this Agreement would be irreparable and that an
      award of monetary damages to the Company for such a breach would be an
      inadequate remedy.  Consequently, the Company will have the
      right, in addition to any other rights it may have, to obtain a temporary
      restraining order and/or injunctive relief to restrain any breach or
      threatened breach or otherwise to specifically enforce any provision of
      this Agreement.  Employee waives any requirement for the
      Company’s securing or posting of any bond in conjunction with any such
      remedies.  Employee further agrees to and hereby does submit to
      in personam jurisdiction before each and every court for that
      purpose.  Without limiting the Company’s rights under this
      Section or any other remedies of the Company, if Employee breaches any of
      the provisions of Section 8 and such breach is proven in a court of
      competent jurisdiction, the Company will have the right to cease making
      any payments or providing other benefits otherwise due Employee under this
      Agreement.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 SECTION
      10.	
                 

              	
                Amendment;
      Waiver.  The terms and provisions of this Agreement may
      be modified or amended only by a written instrument executed by each of
      the parties hereto, and compliance with the terms and provisions hereof
      may be waived only by a written instrument executed by each party entitled
      to the benefits thereof.  No failure or delay on the part of any
      party in exercising any right, power or privilege granted hereunder shall
      constitute a waiver thereof, nor shall any single or partial exercise of
      any such right, power or privilege preclude any other or further exercise
      thereof or the exercise of any other right, power or privilege granted
      hereunder.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 SECTION
      11.	
                 

              	
                Entire
      Agreement.  Except as contemplated herein, this Agreement
      constitutes the entire agreement between the parties with respect to the
      subject matter hereof and supersedes any and all prior or contemporaneous
      written or oral agreements, arrangements or understandings between the
      Company and Employee.

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 SECTION
      12.	
                 

              	
                Notices.  All
      notices or communications hereunder shall be in writing, addressed as
      follows or to any address subsequently provided to the other
      party:

              
	 
      	 
      	 
      	 
      	 
      
	 
      	
                To
      the Company:

                 

              
	 
      	 
      	
                Cyberonics,
      Inc.

                Attention:  Vice
      President of Human Resources

                100
      Cyberonics Blvd., Suite 600

                Houston,
      Texas  77058

              
	 
      	 
      	 
      	 
      
	 
      	
                To
      Employee:

              
	 
      	 
      	 
      	 
      
	 
      	 
      	
                James
      Reinstein

                311
      Offerson Road #255

                Beaver
      Creek, Colorado 81620

              
	 
      	 
      	 
      	 
      
	
                All
      such notices shall be conclusively deemed to be received and shall be
      effective, (i) if sent by hand delivery or overnight courier, upon
      receipt, (ii) if sent by telecopy or facsimile transmission, upon
      confirmation of receipt by the sender of such transmission or (iii) if
      sent by registered or certified mail, on the fifth day after the day on
      which such notice is mailed.

              
	 
      	 
      	 
      	 
      
	 
      	 SECTION
      13.	
                 

              	
                Severability.  In
      the event that any term or provision of this Agreement is found to be
      invalid, illegal or unenforceable, the validity, legality and
      enforceability of the remaining terms and provisions hereof shall not be
      in any way affected or impaired thereby, and this Agreement shall be
      construed as if such invalid, illegal or unenforceable provision had never
      been contained therein.

              
	 
      	 
      	 
      
	 
      	 SECTION
      14.	
                 

              	
                Binding Effect;
      Assignment.  This Agreement shall be binding upon and
      inure to the benefit of the parties and their respective successors and
      assigns (it being understood and agreed that, except as expressly provided
      herein, nothing contained in this Agreement is intended to confer upon any
      other person or entity any rights, benefits or remedies of any kind or
      character whatsoever).  No rights or obligations of the Company
      under this Agreement may be assigned or transferred by the Company except
      that such rights or obligations may be assigned or transferred pursuant to
      a merger or consolidation in which the Company is not the continuing
      entity, or the sale or liquidation of all or substantially all of the
      assets of the Company, provided that the assignee or transferee is the
      successor to all or substantially all of the assets of the Company and
      such assignee or transferee assumes the liabilities, obligations and
      duties of the Company, as contained in this Agreement, either
      contractually or as a matter of law.  The Company further agrees
      that, in the event of a sale of assets or liquidation as described in the
      preceding sentence, it shall take whatever action it legally can in order
      to cause such assignee or transferee to expressly assume the liabilities,
      obligations and duties of the Company hereunder.

              
	 
      	 
      	 
      
	 
      	 SECTION
      15.	
                 

              	
                Governing
      Law.  This Agreement shall be governed by and construed
      in accordance with the laws of the State of Texas (except that no effect
      shall be given to any conflicts of law principles thereof that would
      require the application of the laws of another
    jurisdiction).

              
	 
      	 
      	 
      
	 
      	 SECTION
      16.	
                 

              	
                Submission to
      Jurisdiction. EACH PARTY HEREBY IRREVOCABLY
      SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN
      HARRIS COUNTY, TEXAS, FOR THE PURPOSES OF ANY PROCEEDING ARISING OUT OF
      THIS AGREEMENT.

              
	 
      	 
      	 
      
	 
      	 SECTION
      17.	
                 

              	
                Headings.  The
      headings of the sections contained in this Agreement are for convenience
      only and shall not be deemed to control or affect the meaning or
      construction of any provision of this Agreement.

              
	 
      	 
      	 
      	 
      
	 
      	 SECTION
      18.	
                 

              	
                Tax
      Withholdings. The Company shall withhold from all payments
      hereunder all applicable taxes that it is required to withhold with
      respect to payments and benefits provided under this
      Agreement.

              
	 
      	 
      	 
      	 
      
	 
      	 SECTION
      19.	
                 

              	
                Counterparts.  This
      Agreement may be executed in one or more counterparts, each of which shall
      be deemed an original, but all of which together shall constitute one and
      the same instrument.

              
	 
      	 
      	 
      	 
      
	 
      	
                IN
      WITNESS WHEREOF, the undersigned have executed this Agreement effective as
      of the date set forth above.

              
	 
      	 
      	 
      	 
      


      

      


      
        	 
      	 
      	
                CYBERONICS,
      INC.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	
                By:

              	 
      
	 
      	 
      	 
      	
                George
      E. Parker III

              
	 
      	 
      	 
      	
                Interim
      Chief Operating Officer

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                EMPLOYEE

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                James
      Reinstein