Exhibit 10.26**RELEASE AGREEMENT**     ThisRelease Agreement (“Agreement”) is made and entered intothis 27th day of December,2006, by and between Cyberonics, Inc., a Delaware corporation, (“Company”) and Stanley Appel, anindividual residing in Houston, Texas (“Optionee”).     **Whereas**, Optionee serves as a member of the Company’s Board of Director and during suchtenure entered into an agreement with the Company granting options to Optionee on December 12,1996, as amended from time to time (singularly or collectively, the “Option Agreement(s)”); and     **Whereas**, under the Option Agreement(s), Optionee had a limited period of time to exerciseoutstanding, vested options under the Option Agreement(s) (singularly or collectively, the“Options”) which has previously been extended until December 31, 2006; and     **Whereas**, the Options are currently unexercisable because an exercise of such options wouldviolate applicable securities laws; and     **Whereas**, the Company’s Board of Directors has authorized the Company to further extend theperiod for Optionee’s exercise of the Options to thirty (30) days after the exercise of suchOptions would no longer violate applicable securities laws, all on the conditions set forth in thisAgreement;     **Now, Therefore**, for a good and valuable consideration, the receipt and sufficiency of which ishereby acknowledged, the parties agree as follows:     1. The Company agrees to execute amendments to the Option Agreement(s) extending the periodfor Optionee’s exercise of the Options to thirty (30) days from the date on which the exercise ofsuch Options would no longer violate applicable securities laws, all as set forth in the form ofagreement(s) attached hereto as Exhibit(s) A.     2. For and in consideration of the Company’s agreement in Paragraph 1, but if and only if theCompany removes all restrictions to Optionee’s exercise of the Options on or about the date thatthe exercise of such Options would no longer violate applicable securities laws, Optionee herebyreleases, remises, acquits, satisfies, and forever discharges the Company and its directors,officers, employees, shareholders, counsel and agents acting in their capacity as employees orrepresentatives of the Company from all, and all manner of, actions, disputes, causes of action,suits, debts, accounts, bills, interest, costs, agreements, judgments, executions, claims,counter-claims, cross claims, liabilities, losses, obligations and demands whatsoever, in law or inequity, at common law, statutory or otherwise, whether now existing or hereafter arising, known andunknown, that may arise or may have arisen, related in any way to the Option Agreement(s). Thisrelease shall be binding on the heirs, successors, and assigns of Optionee.     3. This Agreement shall be construed and enforced in accordance with and governed by the lawsof the State of Texas, without regard to principles of conflict of law otherwise applicable to suchdetermination.
 

 
     4. This Agreement contains the entire agreement relating to the subject matter hereof andsupersedes all prior agreements, understandings, negotiations, and discussion, oral or written,related to such subject matter. There are no warranties, representations, assurances, agreements,arrangements, or understandings, oral or written, relating to the subject matter that are not fullyexpressed and provided for herein, and the parties shall not be bound by or liable for any allegedstatement, assurance, warranty, representation, agreement, or understanding not so set forth.     5. This Agreement may be executed in multiple counterparts, each of which shall be deemed anoriginal, fully enforceable counterpart for all purposes hereof, but all of which shall beconstitute one and the same instrument.     IN WITNESS WHEREOF, the undersigned parties have executed this Agreement in one or morecounterparts.       OPTIONEE     CYBERONICS, INC.       /s/Stanley Appel   By:  /s/ John A. Riccardi       Stanley Appel, M.D.     John A. Riccardi      Vice President, FinancePage 2
 

 
**EXHIBIT A****Amendment to Stock Option Agreement and Notice**     This Amendment to Stock Option Agreement (the “Amendment”) is made on the ______ day ofDecember, 2006 by and between Cyberonics, Inc., a Delaware corporation (the “Company”) and StanleyAppel, an individual residing in Houston, Texas Optionee”).     **Whereas**, the Company and Optionee entered into a Stock Option Agreement having a grant date ofDecember 12, 1996, which agreement includes a Notice of Stock Option Grant (the “Agreement”); and     **Whereas**, the Company and Optionee previously agreed to amend the Agreement to extend theperiod for Optionee to exercise the option granted under the Agreement (the “Option”) to December31, 2006;     **Whereas**, the Option is currently unexercisable because an exercise of such right would violateapplicable securities laws; and     **Whereas**, the Company’s Board of Directors has authorized the Company to extend the period forOptionee’s exercise of the Option to thirty (30) days after the exercise of such Option would nolonger violate applicable securities laws, all on the conditions set forth in this Agreement;     **Now, Therefore**, for a good and valuable consideration, the receipt and sufficiency of which ishereby acknowledged, the parties agree as follows:     1. The paragraph entitled, “Termination Period,” under “Notice of Stock Option Grant” isdeleted in its entirety, and the following is substituted therefor:     “The Option may be exercised within thirty (30) days after the date on which the exercise ofsuch Option would no longer violate applicable securities laws.”     2. This Amendment supersedes all prior agreements, amendments, understandings, negotiations,and discussion, oral or written, related to such subject matter.     3. Except as expressly amended herein, the terms of the Agreement remain unchanged.       OPTIONEE     CYBERONICS, INC.           By:         Stanley Appel     John A. Riccardi      Vice President, Finance