| THIS AGREEMENT (the      “Agreement”), made and entered into effective as      of   August 1, 2007 (the “Effective Date”), is by and      between Cyberonics,      Inc., a Delaware corporation (the “Company”), and James Reinstein (the      “Employee”). |
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| WHEREAS, Employee is a      key employee of the Company; and                                                                                                                                                                                                                                                               |
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| WHEREAS, the Company      recognizes that the possibility of a Change of Control (as defined below)      of the Company is unsettling and may result in the departure of key      employees to the detriment of the Company and its stockholders;      and                                                                 |
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| WHEREAS, the Board of      Directors of the Company (the “Board”) has authorized this Agreement and      certain similar agreements in order to retain key employees to ensure the      continuity of its management;                                                                                          |
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| THEREFORE, for good and      valuable consideration, the receipt and sufficiency of which are hereby      acknowledged, the Company and Employee agree asfollows:                                                                                                                                                          |
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|                                                                                                                                                                                                                                                                                                                       | 1. | Term.  This      Agreement shall commence on the Effective Date and shall continue until      April 30, 2008; provided, however, that commencing on April 30, 2008 and      on each April 30th thereafter, the Term of this Agreement shall      automatically be extended for one additional year, unless at least six      months prior to such April 30 date the Board shall give written notice to      Employee that the Term of this Agreement shall cease to be so extended;      provided further, however, that if a Change of Control shall occur during      the Term, the Term shall automatically continue in effect for a period of      not less than one year from the date of such Change of      Control.  Notwithstanding the foregoing, except as provided in      Section 3, this Agreement shall automatically terminate on Employee’s      termination of employment; provided, however, termination of this      Agreement shall not alter or impair any rights of Employee arising      hereunder on or prior to such termination. |
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|                                                                                                                                                                                                                                                                                                                       | 2. | Change of      Control.  For purposes of this Agreement, a Change of      Control of the Company shall mean: |
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|                                                                                                                                                                                                                                                                                                                       |   | (i) | the      acquisition by any “person,” as such term is used in Sections 13(d) and      14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange      Act”), other than the Company, a subsidiary of the Company or a Company      employee benefit plan, of “beneficial ownership” (as defined in Rule 13d-3      under the Exchange Act), directly or indirectly, of securities of the      Company representing 50% or more of the combined voting power of the      Company’s then outstanding securities entitled to vote generally in the      election of directors; or |
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|                                                                                                                                                                                                                                                                                                                       |   | (ii) | the      consummation of a reorganization, merger, consolidation or other form of      corporate transaction or series of transactions, in each case, with      respect to which persons who were the shareholders of the Company      immediately prior to such reorganization, merger or consolidation or other      transaction do not, immediately thereafter, own more than 50% of the      combined voting power entitled to vote generally in the election of      directors of the reorganized, merged or consolidated company’s then      outstanding voting securities in substantially the same proportions as      their ownership immediately prior to such event; or |
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|                                                                                                                                                                                                                                                                                                                       |   | (iii) | the      sale or disposition by the Company of all or substantially all the      Company’s assets; or |
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|                                                                                                                                                                                                                                                                                                                       |   | (iv) | a      change in the composition of the Board, as a result of which fewer than a      majority of the directors are Incumbent Directors.  “Incumbent      Directors” shall mean directors who either (A) are directors of the      Company as of August 1, 2007, or (B) are elected, or nominated for      election, thereafter to the Board with the affirmative votes of at least a      majority of the Incumbent Directors at the time of such election or      nomination, but “Incumbent Director” shall not include an individual whose      election or nomination is in connection with (i) an actual or threatened      election contest (as such terms are used in Rule 14a-11 of Regulation 14A      promulgated under the Exchange Act) or an actual or threatened      solicitation of proxies or consents by or on behalf of a person other than      the Board or (ii) a plan or agreement to replace a majority of the then      Incumbent  Directors; or |
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|                                                                                                                                                                                                                                                                                                                       |   | (v) | the      approval by the Board or the stockholders of the Company of a complete or      substantially complete liquidation or dissolution of the      Company. |
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|                                                                                                                                                                                                                                                                                                                       | 3. | Termination on or Following a      Change of Control.  If a Change of Control occurs during      the Term, Employee shall be entitled to the benefits provided in Section 4      hereof if, during the Protected Period (as hereinafter defined), Employee      becomes disabled or Employee’s employment is terminated, unless such      termination is (a) due to Employee’s death, (b) by the Company either for      Cause or Employee’s Disability, or (c) by Employee for other than a Good      Reason. Anything in this Agreement to the contrary notwithstanding, if      Employee’s employment with the Company is terminated during the Term and      prior to the date on which a Change of Control occurs, and it is      reasonably demonstrated that such termination (i) was at the request of a      third party who has taken steps reasonably calculated to effect the Change      of Control, or (ii) otherwise arose in connection with or anticipation of      the Change of Control, then for all purposes of this Agreement the Change      of Control shall be deemed to have occurred on the date immediately prior      to the date of Employee’s termination and Employee shall be deemed      terminated by the Company during the Protected Period other than for      Cause.  For purposes of this Agreement, the “Protected Period”      shall mean the period of time beginning with the Change of Control and      ending on the first anniversary of such Change of Control or Employee’s      death, if earlier. |
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|                                                                                                                                                                                                                                                                                                                       |   | (i) | Disability.  If,      as a result of Employee’s incapacity due to physical or mental illness,      Employee shall have been absent from Employee’s duties with the Company on      a full-time basis for 150 consecutive calendar days, and within 30 days      after written Notice of Termination (as defined hereinafter) Employee      shall not have returned to the full-time performance of Employee’s duties,      the Company may terminate Employee’s employment for “Disability”;      provided, however, a termination of Employee’s employment for Disability      under this Agreement shall not alter or impair Employee’s rights as a      “disabled employee” under any of the Company’s employee benefit      plans. |
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|                                                                                                                                                                                                                                                                                                                       |   | (ii) | Cause.  The      Company may terminate Employee’s employment for Cause.  For the      purposes of this Agreement, the Company shall have “Cause” to terminate      Employee’s employment hereunder only upon (A) the willful and continued      failure by Employee to perform substantially Employee’s duties with the      Company, other than any such failure resulting from Employee’s incapacity      due to physical or mental illness, which continues unabated after a      written demand for substantial performance is delivered to Employee by the      Board that specifically identifies the manner in which the Board believes      that Employee has not substantially performed Employee’s duties or      (B) Employee willfully engaging in gross misconduct that is      materially and demonstrably injurious to the Company.  For      purposes of this paragraph, an act or failure to act on Employee’s part      shall be considered “willful” only if done or omitted to be done by      Employee otherwise than in good faith and without reasonable belief that      Employee’s action or omission was in the best interest of the      Company.  Notwithstanding the foregoing, Employee shall not be      deemed to have been terminated for Cause unless and until there shall have      been delivered to Employee a copy of a resolution duly adopted by the      affirmative vote of not less than three-quarters of the entire membership      of the Board, at a meeting of the Board called and held for such purpose      (after reasonable notice to Employee and an opportunity for Employee,      together with Employee’s counsel, to be heard before the Board), finding      that in the good faith opinion of the Board Employee was guilty of conduct      set forth in clauses (A) or (B) of this subsection (ii) and specifying the      particulars thereof in reasonable detail. |
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|                                                                                                                                                                                                                                                                                                                       |   | (iii) | Good      Reason.  Employee may terminate Employee’s employment for      Good Reason.  For purposes of this Agreement, “Good Reason”      shall mean the occurrence of any of the following without Employee’s      express written consent: |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (A)     an      adverse change (as determined by Employee in good faith, which      determination shall be controlling for all purposes under this Agreement)      in Employee’s (i) positions, duties, responsibilities or status with the      Company from that in effect immediately prior to the Change of Control, or      (ii) reporting responsibilities, titles or offices as in effect      immediately prior to the Change of Control; or any removal of Employee      from, or any failure to re-elect or appoint Employee to, any of such      responsibilities, titles, offices or positions, except in connection with      the termination of Employee’s employment for Cause or Disability, or as a      result of Employee’s death, or by Employee for other than a Good      Reason; |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (B)     a      reduction in Employee’s annual rate of base salary as in effect      immediately prior to the Change of Control or as the same may be increased      from time to time thereafter (the “Base Salary”); |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (C)     a      failure by the Company to continue the Company’s Annual Incentive      Compensation Plan as the same may be modified from time to time, but      substantially in the form in effect immediately prior to the Change of      Control (the “Bonus Plan”), or a failure by the Company to continue      Employee as a participant in the Bonus Plan in at least the same amount      (the “Bonus Amount” ) as Employee’s target bonus amount under the Bonus      Plan with respect to the fiscal year ending immediately prior to the      Change of Control or with respect to the current fiscal year if Employee      has been employed by the Company for a shorter period (Bonus Amounts      related to less than a full fiscal year shall be annualized for this      purpose); |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (D)     the      failure by the Company to continue in effect any other employee benefit or      compensation plan program or policy, in which Employee is participating      immediately prior to the Change of Control, unless the Company establishes      such new plans, programs or policies as is necessary to provide Employee      with substantially comparable benefits; the taking of any action by the      Company not required by law that would adversely affect Employee’s      participation in or reduce Employee’s benefits under any of such plans,      programs or policies or deprive Employee of any material fringe benefit      enjoyed by Employee immediately prior to the Change of      Control; |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (E)     the      Company’s requiring Employee to relocate to an office more than 25 miles      from the Company’s office to which Employee was assigned immediately prior      to the Change of Control, except for required travel on the Company’s      business to an extent substantially consistent with Employee’s business      travel obligations immediately prior to the Change of    Control; |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (F)     the      amendment, modification or repeal of any provision of the Company’s      Certificate of Incorporation, as amended, or the Bylaws of the Company      which was in effect immediately prior to such Change of Control, if such      amendment, modification or repeal would adversely effect Employee’s right      to indemnification by the Company; |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (G)     the      failure of the Company to obtain the assumption of this Agreement by any      successor as contemplated in Section 6 hereof; or |
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|                                                                                                                                                                                                                                                                                                                       |   |   | (H)     any      purported termination of Employee’s employment that is not effected      pursuant to a Notice of Termination satisfying the requirements of      subparagraph (iv) below and, if applicable, subparagraph (ii) above; and      for purposes of this Agreement, no such purported termination shall be      effective. |
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|                                                                                                                                                                                                                                                                                                                       |   | Employee’s      right to terminate employment for a Good Reason hereunder shall not be      affected by Employee’s incapacity due to a physical or mental illness nor      shall Employee’s continued employment following any circumstance that      constitutes a Good Reason hereunder, regardless of the length of such      continued employment, constitute a consent to or a waiver of Employee’s      rights hereunder with respect to such circumstance. |
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|                                                                                                                                                                                                                                                                                                                       |   | (iv) | Notice of      Termination.  Any termination by the Company pursuant to      subparagraphs (i) or (ii) above, or by Employee pursuant to      subparagraph (iii) above, shall be communicated by written Notice of      Termination to the other party hereto.  For purposes of this      Agreement, a “Notice of Termination” shall mean a notice that shall      indicate the specific termination provision in this Agreement relied upon      and shall set forth in reasonable detail the facts and circumstances      claimed to provide a basis for termination of Employee’s employment under      the provision so indicated. |
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|                                                                                                                                                                                                                                                                                                                       |   | (v) | Date of Termination.      “Date of Termination” shall mean (A) if Employee is terminated for      Disability, 30 days after Notice of Termination is given, provided that      Employee shall not have returned to the performance of Employee’s duties      on a full-time basis during such 30-day period, (B) if Employee’s      employment is terminated pursuant to subparagraph (iii) above, the date      specified in the Notice of Termination, (C) with respect to a termination      prior to a Change of Control, which is deemed to be after such Change of      Control as provided in Section 3, the date of such termination, and (D) if      Employee’s employment is terminated for any other reason on or after a      Change of Control, the date of such termination. |
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|                                                                                                                                                                                                                                                                                                                       | 4. | Compensation      During Disability or Upon Termination. |
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|                                                                                                                                                                                                                                                                                                                       |   | (i) | If,      during the Protected Period, Employee fails to perform Employee’s normal      duties as a result of incapacity due to physical or mental illness,      Employee shall continue during the period of such disability to receive      Employee’s full Base Salary and any awards, deferred and nondeferred,      payable during such period under the Bonus Plan, less any amounts paid to      Employee during such period of disability pursuant to the Company’s short      term disability or sick-leave program(s) until Employee’s employment is      terminated or such Disability ends.  This Section 4(i) shall not      reduce or impair Employee’s rights to terminate employment for a Good      Reason as otherwise provided herein. |
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|                                                                                                                                                                                                                                                                                                                       |   | (ii) | If,      during the Protected Period, Employee’s employment shall be terminated (x)      by the Company for Cause, (y) by Employee’s death, or (z) by Employee      other than for a Good Reason, the Company shall pay Employee’s earned but      unpaid Base Salary through the Date of Termination and the Company shall      have no further obligations to Employee under this    Agreement. |
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|                                                                                                                                                                                                                                                                                                                       |   | (iii) | If,      during the Protected Period, (1) the Company shall terminate Employee      other than for Cause or Disability or (2) Employee shall terminate      Employee’s employment for a Good Reason, the Company shall pay to      Employee, by certified or bank cashier’s check or wire transfer within      five business days after the Date of Termination, an amount equal to: (A)      three times the sum of Employee’s Base Salary and Bonus Amount; plus (B)      that portion of Employee’s Base Salary earned, and vacation pay vested for      the prior year and accrued for the current year to the Date of      Termination, but not paid or used, and all other amounts previously      deferred by Employee or earned but not paid as of such date under all      Company bonus or pay plans or programs. |
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|                                                                                                                                                                                                                                                                                                                       |   | (iv) | If      any payment due under the terms of this Agreement is not timely made or      otherwise withheld by the Company, its successors or assigns, interest      shall accrue on such payment at the highest maximum legal rate permissible      under applicable law from the date such payment first became due through      the date of payment thereof. |
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|                                                                                                                                                                                                                                                                                                                       |   | (v) | In      the event that any payment or benefit received or to be received by      Employee pursuant to the terms of this Agreement or any other plan,      arrangement or agreement with (A) the Company, (B) any Person whose      actions result in a “change in control” (for purposes of Section 280G of      the Internal Revenue Code (the “Code”)) or (C) any Person affiliated with      the Company or such Person) (all such payments and benefits being      hereinafter called “Total Payments”) would be subject to the excise tax      imposed under Section 280G of the Code, the Company shall pay to Employee      such additional amount (the “Gross-Up Payment”) such that the net amount      retained by Employee, after deduction of any excise tax imposed under      Section 4999 of the Code (the “Excise Tax”) on the Total Payments and all      federal, state and local taxes, including the Excise Tax, upon the      Gross-Up Payment, shall be equal to the Total Payments.  For      purposes of determining the amount of the Gross-Up Payment, Employee shall      be deemed to pay federal income tax at the highest marginal rate of      federal income taxation in the calendar year in which the Gross-Up Payment      is to be made and state and local income taxes at the highest marginal      rate of taxation in the state and locality of Employee’s residence on the      date on which the Gross-Up Payment is calculated for purposes of this      subparagraph.  In the event that the Excise Tax is subsequently      determined to be less than the amount taken into account hereunder,      Employee shall repay to the Company, at the time that the amount of such      reduction in Excise Tax is finally determined, the portion of the Gross-Up      Payment attributable to such reduction (plus that portion of the Gross-Up      Payment being repaid by Employee to the extent that such repayment results      in a reduction in Excise Tax and/or a federal, state or local income tax      deduction) plus interest on the amount of such repayment at the rate      provided in Section 1274(b)(2)(B) of the Code.  In the event      that the Excise Tax is determined to exceed the amount taken into account      hereunder (including by reason of any payment the existence or amount of      which cannot be determined at the time of the Gross-Up Payment), the      Company shall make an additional Gross-Up Payment in respect of such      excess (plus any interest, penalties or additions payable by Employee with      respect to such excess) at the time that the amount of such excess if      finally determined.  Employee and the Company shall each      reasonably cooperate with the other in connection with any administrative      or judicial proceedings concerning the existence or amount of liability      for Excise Tax with respect to the Total Payments.  The parties      intend that the Gross-Up Payment be determined in a manner that is most      favorable to Employee. |
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|                                                                                                                                                                                                                                                                                                                       | 5. | No Mitigation or      Offset.  The provisions of this Agreement are not      intended to, nor shall they be construed to, require that Employee      mitigate the amount of any payment provided for in this Agreement by      seeking or accepting other employment, nor shall the amount of any payment      provided for in this Agreement be reduced by any compensation earned by      Employee as the result of employment by another employer or      otherwise.  Without limitation of the foregoing, the Company’s      obligations to make the payments to Employee required under this Agreement      shall not be affected by any set off, counterclaim, recoupment, defense or      other claim, right or action that the Company may have against      Employee. |
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|                                                                                                                                                                                                                                                                                                                       | 6. | Successors;      Binding Agreement. |
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|                                                                                                                                                                                                                                                                                                                       |   | (i) | The      Company will require any successor, whether direct or indirect, by      purchase, merger, consolidation or otherwise, to all or substantially all      of the business and/or assets of the Company, by agreement in form and      substance reasonably satisfactory to Employee, expressly to assume and      agree to perform this Agreement in the same manner and to the same extent      as the Company would have been required if no such succession had taken      place.  Failure of the Company to obtain such agreement prior to      the effectiveness of any such succession shall be a breach of this      Agreement and shall entitle Employee to payment from the Company in the      same amount and on the same terms as Employee would be entitled hereunder      if Employee had terminated Employee’s employment for Good Reason, except      that for purposes of implementing the foregoing, the date on which any      such succession becomes effective shall be deemed the Date of      Termination.  As used in this Agreement, “Company” shall mean      the Company as hereinbefore defined and any successor to its business      and/or assets as aforesaid that executes and delivers the agreement      provided for in this Section 6 or which otherwise becomes bound by all the      terms and provisions of this Agreement by operation of  law. |
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|                                                                                                                                                                                                                                                                                                                       |   | (ii) | This      Agreement shall inure to the benefit of and be enforceable by Employee’s      personal or legal representatives, executors, administrators, successors,      heirs, distributees, devisees and legatees.  If Employee should      die while any amounts would still be payable to Employee hereunder if      Employee had continued to live, all such amounts shall be paid in      accordance with the terms of this Agreement to Employee’s beneficiary as      filed with the Company pursuant to this Agreement or, if there be no such      designated beneficiary, to Employee’s estate. |
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|                                                                                                                                                                                                                                                                                                                       | 7. | Notice.  All      notices, consents, waivers, and other communications required under this      Agreement must be in writing and will be deemed to have been duly given      when (a) delivered by hand (with written confirmation of receipt), (b)      sent by facsimile (with confirmation of receipt), provided that a copy is      mailed by certified mail, return receipt requested, or (c) when received      by the addressee, if sent by a nationally recognized overnight delivery      service, in each case to the appropriate addresses and facsimile numbers      set forth below (or to such other addresses and facsimile numbers as a      party may designate by notice to the other parties): |
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|                                                                                                                                                                                                                                                                                                                       | If      to the Company:  |
|                                                                                                                                                                                                                                                                                                                       |   | Cyberonics,      Inc.Vice      President, Human Resources100      Cyberonics BoulevardHouston,      TX  77058Facsimile      No.:  281-228-7535 |
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|                                                                                                                                                                                                                                                                                                                       | If      to Employee: |
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|                                                                                                                                                                                                                                                                                                                       |   | James      Reinstein311      Offerson Road #225Beaver      Creek, Colorado 81620  |
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|                                                                                                                                                                                                                                                                                                                       | 8. | Miscellaneous.  No      provisions of this Agreement may be modified, waived or discharged unless      such waiver, modification or discharge is agreed to in writing signed by      Employee and by the Chairman of the Board or an authorized officer of the      Company.  No waiver by either party hereto at any time of any      breach by the other party hereto of, or compliance with, any condition or      provision of this Agreement to be performed by such other party shall be      deemed a waiver of similar or dissimilar provisions or conditions at the      same or at any prior or subsequent time. |
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|                                                                                                                                                                                                                                                                                                                       | 9. | Validity.  The      interpretation, construction and performance of this Agree­ment shall      be governed by and construed and enforced in accordance with the laws of      the State of Texas without regard to conflicts of laws      principles.  The invalidity or unenforceability of any      provisions of this Agreement shall not affect the validity or      enforceability of any other provision of this Agreement, each of which      shall remain in full force and effect. |
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|                                                                                                                                                                                                                                                                                                                       | 10. | Counterparts.  This      Agreement may be executed in one or more counter­parts, each of which      shall be deemed to be an original but all of which together shall      constitute one and the same instrument. |
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|                                                                                                                                                                                                                                                                                                                       | 11. | Descriptive Headings.      Descriptive headings are for convenience only and shall not control      or affect the meaning or construction of any provision of this      Agreement. |
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|                                                                                                                                                                                                                                                                                                                       | 12. | Corporate      Approval.  This Agreement has been approved by the Board,      and has been duly executed and delivered by Employee and on behalf of the      Company by its duly authorized representative. |
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|                                                                                                                                                                                                                                                                                                                       | 13. | Disputes.  The      parties agree to resolve any claim or controversy arising out of or      relating to this Agreement by binding arbitration under the Federal      Arbitration Act before one arbitrator in the City of Houston, State of      Texas, administered by the American Arbitration Association under its      Commercial Arbitration Rules, and judgment on the award rendered by the      arbitrator may be entered in any court having jurisdiction      thereof.  The Company shall reimburse Employee, on a current      basis, for all legal fees and expenses incurred by Employee in connection      with any dispute arising under this Agreement, including, without      limitation, the fees and expenses of the arbitrator, unless the arbitrator      finds Employee brought such claim in bad faith, in which event each party      shall pay its own costs and expenses and Employee shall repay to the      Company any fees and expenses previously paid on Employee’s behalf by the      Company. The      parties stipulate that the provisions hereof shall be a complete defense      to any suit, action, or proceeding instituted in any federal, state, or      local court or before any administrative tribunal with respect to any      controversy or dispute arising during the period of this Agreement and      which is arbitrable as herein set forth.  The arbitration      provisions hereof shall, with respect to such controversy or dispute,      survive the termination of this Agreement. |
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|                                                                                                                                                                                                                                                                                                                       |   | IN WITNESS WHEREOF, the      Company and Employee have executed this Agreement in multiple counterparts      effective for all purposes as of the Effective  Date. |

|   |   | CYBERONICS,      INC. |
|--------|--------|-----------------------|
|   |   |                  |   |
|   |   | By:                   |   |
|   |   |                  | George      E. Parker III |
|   |   |                  | Interim      Chief Operating Officer |
|   |   |                  |   |
|   |   |                  |   |
|   |   | EMPLOYEE              |
|   |   |                  |   |
|   |   |                  |   |
|   |   |                  | James      Reinstein |
|   |   |                  |   |