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                                                                     EXHIBIT 4.2

                          AMENDMENT TO RIGHTS AGREEMENT

            THIS AMENDMENT TO RIGHTS AGREEMENT (this  "Amendment"),  dated as of
July 3, 2003, is between  DATATEC  SYSTEMS,  INC., a Delaware  corporation  (the
"Company"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as rights agent (the
"Rights Agent").

                                   WITNESSETH

            WHEREAS,  the Company  and the Rights  Agent  entered  into a Rights
Agreement dated as of February 24, 1998 (the "Rights Agreement"); and

            WHEREAS,  the  Rights  Agreement  was  subsequently  amended  by  an
Amendment To Rights  Agreement dated as of April 3, 2002 between the Company and
the Rights Agent to amend the definition of "Acquiring Person;" and

            WHEREAS,  concurrently  with the execution  hereof,  the Company has
entered  into that  certain  Note  Purchase  Agreement by and among the Company,
Palladin  Partners  I,  L.P.,  Palladin  Multi-Strategy   Partners,  L.P.,  DeAM
Convertible  Arbitrage  Fund,  Ltd.,  Palladin  Overseas  Fund,  Ltd.,  Palladin
Opportunity  Fund,  LLC,  and  Palladin  Overseas   Multi-Strategy   Fund,  Ltd.
(collectively,  the  "Investors")  dated  as of  July  3,  2003  (the  "Purchase
Agreement"); and

            WHEREAS,  the  Board  of  Directors  of the  Company  has  approved,
authorized and adopted the Purchase Agreement and the transactions  contemplated
thereby; and

            WHEREAS, Section 27 of the Rights Agreement permits the amendment of
the Rights Agreement by the Board of Directors of the Company; and

            WHEREAS, pursuant to a resolution duly adopted on June 23, 2003, the
Board of Directors of the Company has adopted and  authorized  the  amendment of
the Rights Agreement to amend the definition of "Acquiring Person;" and

            WHEREAS,  the Board of  Directors  of the Company has  resolved  and
determined  that such  amendment is desirable and  consistent  with, and for the
purpose of  fulfilling,  the  objectives of the Board of Directors in connection
with the original adoption of the Rights Agreement.

            NOW, THEREFORE,

            1.  Section 1(a) of the Rights  Agreement  is hereby  amended in its
entirety to read as follows:

                (a) "Acquiring  Person" shall mean any Person (as such
            term is hereinafter  defined) who or which,  together with
            all   Affiliates   and   Associates  (as  such  terms  are
            hereinafter  defined)  of  such  Person,  after  the  date
            hereof, shall become the Beneficial Owner (as such term is
            hereinafter  defined) of 15% or more of the Common  Shares

            of the Company then outstanding, but shall not include the
            Company,  any  Subsidiary  (as  such  term is  hereinafter
            defined) of the Company,  any employee benefit plan of the
            Company or of any Subsidiary of the Company, or any entity
            holding  Common Shares for or pursuant to the terms of any
            such plan.  Notwithstanding  the foregoing,  neither Ralph
            Glasgal  nor  Christopher  J.  Carey,  shall be  deemed an
            Acquiring  Person  for  any  purpose  of  this  Agreement,
            provided,   that  each  such  Person   together  with  his
            Affiliates does not become the Beneficial  Owner of 20% or
            more of the  outstanding  shares  of  Common  Stock of the
            Company;   and  neither  Halifax  Fund,   L.P.,   Palladin
            Opportunity  Fund,  L.L.C.,  Palladin  Partners  I,  L.P.,
            Palladin Multi-Strategy  Partners,  L.P., DeAM Convertible
            Arbitrage Fund,  Ltd.,  Palladin  Overseas Fund, Ltd., nor
            Palladin  Overseas  Multi-Strategy  Fund,  Ltd.  shall  be
            deemed  an  Acquiring  Person  for  any  purpose  of  this
            Agreement.

                Notwithstanding the foregoing,  no Person shall become
            an "Acquiring  Person" as the result of an  acquisition of
            Common Shares by the Company which, by reducing the number
            of shares outstanding,  increases the proportionate number
            of shares beneficially owned by such Person to 15% or more
            of the  Common  Shares of the  Company  then  outstanding;
            provided,  however,  that if a  Person  shall  become  the
            Beneficial  Owner of 15% or more of the  Common  Shares of
            the Company then  outstanding by reason of share purchases
            by the Company and shall,  after such share  purchases  by
            the Company, become the Beneficial Owner of any additional
            Common  Shares of the  Company,  then such Person shall be
            deemed to be an "Acquiring  Person."  Notwithstanding  the
            foregoing,  if the  Board  of  Directors  of  the  Company
            determines in good faith that a Person who would otherwise
            be an  "Acquiring  Person,"  as  defined  pursuant  to the
            foregoing  provisions  of this  paragraph  (a), has become
            such inadvertently, and such Person divests as promptly as
            practicable  a sufficient  number of Common Shares so that
            such Person would no longer be an  "Acquiring  Person," as
            defined  pursuant  to the  foregoing  provisions  of  this
            paragraph  (a), then such Person shall not be deemed to be
            an "Acquiring Person" for any purposes of this Agreement.

            2. This Amendment to the Rights  Agreement  shall be effective as of
the date of this Amendment,  and all references to the Rights  Agreement  shall,
from and after such time, be deemed to be references to the Rights  Agreement as
amended hereby.

            3. The  undersigned  officer of the Company  certifies  by execution
hereof that this Amendment is in compliance  with the terms of Section 27 of the
Rights Agreement.

            4. This  Amendment  may be executed  in any number of  counterparts,
each of such  counterparts  shall for all  purposes be deemed to be an original,
and all  such  counterparts  shall  together  constitute  but  one and the  same
instrument. If any term, provision, covenant or restriction of this Amendment is
held by a court of  competent  jurisdiction  or other  authority  to be invalid,
illegal, or unenforceable, the remainder of the terms, provisions, covenants and
restrictions  of this Amendment  shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

                                       2

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.

                                           DATATEC SYSTEMS, INC.

                                           By:    /s/ Mark J. Hirschhorn
                                                --------------------------------
                                           Name:  Mark J. Hirschhorn
                                           Title: CFO

                                           CONTINENTAL STOCK TRANSFER & TRUST
                                           COMPANY

                                           By:    /s/ Roger Bernhammer
                                                --------------------------------
                                           Name:       R. Bernhammer
                                           Title:      Vice Pres.

                                      3<PAGE>

                                                                   EXHIBIT 10.14

                              EMPLOYMENT AGREEMENT

         This Employment Agreement ("Agreement") made and entered into effective
as of June 1, 2003 (the "Effective Date") by and between Cyberonics, Inc. (the
"Company"), a Delaware corporation, and Robert P. Cummins (the "Executive").

         WHEREAS, the Company desires to secure the continued employment of the
Executive in accordance herewith and the Executive is willing to commit to be
employed by the Company on the terms and conditions set forth herein and thus to
forgo opportunities elsewhere;

         NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:

         1.       Employment and Term.

                  (a)      Employment. The Company agrees to employ the
         Executive, and the Executive agrees to be employed by the Company, in
         accordance with the terms and provisions of this Agreement during the
         Employment Period (as defined below).

                  (b)      Term. Subject to earlier termination as provided in
         Section 5, the term of the Executive's employment under this Agreement
         shall commence as of the Effective Date and shall continue until the
         fifth anniversary of the Effective Date (such term being referred to
         hereinafter as the "Employment Period"); provided, however, that
         commencing on the fifth anniversary of the Effective Date (and on each
         anniversary thereafter) the Employment Period automatically shall be
         extended for one additional year, unless six months prior to such
         anniversary date the Company or the Executive shall give written notice
         to the other party that it or the Executive, as the case may be, does
         not wish to so extend this Agreement. However, in the event of a Change
         in Control (as defined below) during the Employment Period, in no event
         shall the Employment Period end prior to the first anniversary of such
         Change in Control.

         2.       Duties and Powers of Executive.

                  (a)      Duties. During the Employment Period the Executive
         shall serve as the Chairman of the Board of Directors and the Chief
         Executive Officer of the Company with such authority, duties, powers
         and responsibilities as are normally attributable to such positions and
         with such other duties and responsibilities as may be from time to time
         reasonably assigned to the Executive by the Board of Directors of the
         Company (the "Board").

                  (b)      Attention. Except as provided below, during the
         Employment Period the Executive shall devote the Executive's full
         attention and time during normal business hours to the business and
         affairs of the Company and, to the extent necessary to discharge the
         responsibilities assigned to the Executive under this Agreement, use
         the Executive's best efforts to carry out such responsibilities
         faithfully and efficiently. It shall not be considered a violation of
         the foregoing for the Executive to (i) serve on industry, civic or
         charitable boards

<PAGE>

         or committees, (ii) manage the Executive's personal investments, or
         (iii) with the consent of the Board, serve on the boards of other
         businesses, so long as such activities do not interfere with the
         performance of the Executive's duties in accordance with this
         Agreement. In no event shall such activities by the Executive be deemed
         to interfere with the Executive's duties hereunder until the Executive
         has been notified in writing thereof by the Board and given a
         reasonable period in which to cure such interference.

         3.       Place of Employment. The Executive's place of employment
hereunder shall be at the Company's principal executive offices in the greater
Houston, Texas area.

         4.       Compensation.

                  (a)      Base Salary. During the Employment Period, the
         Executive's annual base salary ("Annual Base Salary") shall be $395,000
         payable in accordance with the Company's general payroll practices.

                  (b)      Annual Bonus. During the Employment Period, the
         Executive will annually be eligible to earn a bonus (the "Annual
         Bonus") up to 100% of his Annual Base Salary based upon the Company's
         achievement of the annual Net Sales, Earnings per Share and Cash Flow
         objectives included in the annual budget approved by the Board and the
         achievement of one or more qualitative objectives as established at the
         beginning of each year by the Compensation Committee of the Board. For
         Annual Bonus purposes, each of the Company's objectives shall receive
         at least a 15% weighting and the qualitative objectives will together
         receive a maximum 40% weighting as established at the beginning of each
         year by the Compensation Committee of the Board.

                  (c)      Annual Overachievement Bonus. During the Employment
         Period, the Executive will annually be eligible to earn an
         overachievement bonus (the "Overachievement Bonus") based upon the
         Company's overachievement of the annual Net Sales, Earnings per Share
         and Cash Flow objectives included in the annual budget approved by the
         Board. Each objective will receive a maximum weighting of 40% and a
         minimum weighting of 25% as determined annually at the beginning of
         each year by the Compensation Committee of the Board. The calculation
         of the Annual Overachievement Bonus will be done in a manner consistent
         with the calculation used to determine the Fiscal 2003 Overachievement
         Bonus.

                  (d)      Equity Compensation. On the Effective Date the
         Executive shall be granted an option with respect to 250,000 shares
         under the Company's 1997 Stock Option Plan.

                  (e)      Retirement and Welfare Benefit Plans. During the
         Employment Period, the Executive shall be eligible to participate in
         all savings, retirement and welfare benefit plans, practices, policies
         and programs applicable generally to employees and/or senior executives
         of the Company, subject to meeting the general eligibility requirements
         of such plans or programs.

                  (f)      Expenses. The Company shall promptly reimburse the
         Executive for all reasonable business expenses, including those for
         travel and entertainment, properly incurred

                                       -2-

<PAGE>

         by the Executive in the performance of his duties hereunder in
         accordance with policies established from time to time by the Company.

                  (g)      Fringe Benefits and Perquisites. During the
         Employment Period, the Executive shall be entitled to receive fringe
         benefits and perquisites in accordance with the plans, practices,
         programs and policies of the Company from time to time in effect, and
         which are commensurate with the Executive's positions.

         5.       Termination of Employment.

                  (a)      Death or Disability. The Executive's employment shall
         terminate upon the Executive's death or, at the election of the Board
         or the Executive, by reason of his Disability (as defined below) during
         the Employment Period; provided, however, that the Board may not
         terminate the Executive's employment hereunder by reason of Disability
         unless at the time of such termination there is no reasonable
         expectation that the Executive will return to work on a substantially
         full-time basis within the next one hundred eighty day period. For
         purposes of this Agreement, Disability shall mean the Executive is
         receiving long-term disability benefits under the Company's long-term
         disability plan.

                  (b)      By the Company for Cause. The Company may terminate
         the Executive's employment during the Employment Period for Cause (as
         defined below). For purposes of this Agreement, "Cause" shall mean (i)
         the willful and continued failure by the Executive to substantially
         perform the Executive's duties with the Company (other than any such
         failure resulting from the Executive's incapacity due to physical or
         mental illness or any such actual or anticipated failure after the
         issuance of a Notice of Termination for Good Reason by the Executive
         pursuant to Section 5(d)), (ii) the Executive's commission of one or
         more acts that constitute a felony or a misdemeanor involving moral
         turpitude, (iii) the Executive is publicly censured by the Securities
         Exchange Commission, or (iv) the Executive 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 the Executive's part shall be
         deemed "willful" unless done, or omitted to be done, by the Executive
         not in good faith and without reasonable belief that the Executive'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 two-thirds of the
         entire membership of the Board at a meeting of the Board that was
         called for the purpose of considering such termination (after
         reasonable notice to the Executive and an opportunity for the
         Executive, together with the Executive's counsel, to be heard before
         the Board and, if possible, to cure the breach that was the alleged
         basis for Cause) finding that, in the good faith opinion of the Board,
         the Executive was guilty of conduct and specifying the particulars
         thereof in detail.

                  (c)      By the Company without Cause or by the Executive
         without Good Reason. Notwithstanding any other provision of this
         Agreement, the Company, by action of the Board, may terminate the
         Executive's employment other than for Cause during the Employment
         Period and the Executive may similarly terminate his employment for
         other than Good Reason during the Employment Period.

                                       -3-

<PAGE>

                  (d)      By the Executive for Good Reason. The Executive may
         terminate his employment during the Employment Period for Good Reason
         (as defined below). For purposes of this Agreement, "Good Reason" shall
         mean the occurrence, without the written consent of the Executive, of
         any one of the following acts by the Company, or failures by the
         Company to act, unless such act or failure to act is corrected prior to
         the Date of Termination (as defined below) specified in the Notice of
         Termination (as defined below) given in respect thereof:

                           (i)      an adverse change in the Executive's title,
                  status, authority, duties, or responsibilities;

                           (ii)     any failure by the Company to continue in
                  effect any material incentive compensation or employee benefit
                  plan or arrangement (unless replacement plans providing the
                  Executive with substantially similar benefits are adopted)
                  (herein referred to as "Benefit Plans")) or the taking of any
                  action by the Company that would adversely affect the
                  Executive's participation in any such Benefit Plan or
                  materially reduce the Executive's incentive compensation
                  opportunities or employee benefits under such Benefit Plan, as
                  the case may be;

                           (iii)    any purported termination of the Executive's
                  employment that is not effected pursuant to a Notice of
                  Termination satisfying the requirements of Section 5(g); for
                  purposes of this Agreement, no such purported termination
                  shall be effective;

                           (iv)     the failure by the Company to obtain a
                  satisfactory agreement from any successor of the Company
                  requiring such successor to assume and agree to perform the
                  Company's obligations under this Agreement, as contemplated in
                  Section 14; or

                           (v)      the failure by the Company to comply with
                  any material provision of this Agreement.

                  The Executive's continued employment following any act or
         omission to act constituting Good Reason hereunder shall not constitute
         the Executive's consent to, or a waiver of the Executive's rights with
         respect to, such act or failure to act. The Executive's right to
         terminate the Executive's employment for Good Reason shall not be
         affected by the Executive's incapacity due to physical or mental
         illness. Following a Change in Control (as defined below) the
         Executive's determination that an act or failure to act constitutes
         Good Reason shall be presumed to be valid unless such determination is
         deemed by an arbitrator pursuant to Section 9 be unreasonable and not
         to have been made in good faith by the Executive.

                  (e)      Termination by Mutual Agreement. The parties may
         mutually agree that the Executive's employment shall terminate during
         the Employment Period by evidencing their agreement in writing that
         expressly acknowledges it is mutual. Such a mutual termination shall
         not be treated hereunder as a unilateral termination of employment by
         either party.

                                       -4-

<PAGE>

                  (f)      Change in Control. For purposes of this Agreement, a
         Change of Control of the Company shall mean:

                           (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

                           (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

                           (iii)    the sale or disposition by the Company of
                  all or substantially all the Company's assets; or

                           (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
                  October 2, 2000, 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

                           (v)      the approval by the Board or the
                  stockholders of the Company of a complete or substantially
                  complete liquidation or dissolution of the Company.

                  (g)      Notice of Termination. During the Employment Period,
         any purported termination of the Executive's employment (other than by
         reason of death) shall be communicated by written Notice of Termination
         from one party hereto to the other party hereto (or, if by mutual
         agreement by a joint written agreement) in accordance with Section
         14(b). 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, if any, and shall set forth in reasonable
         detail the facts and circumstances claimed to provide a basis for
         termination of the Executive's employment under the provision so
         indicated.

                                       -5-

<PAGE>

                  (h)      Date of Termination. "Date of Termination", with
         respect to any purported termination of the Executive's employment
         during the Employment Period, shall mean the date specified in the
         Notice of Termination (which, in the case of a termination by the
         Company for reasons other than Cause or a termination by the Executive
         shall not be less than 30 days from the date such Notice of Termination
         is given).

         6.       Obligations of the Company Upon Termination.

                  (a)      Termination by the Company Other than for Cause,
         Death or Disability or Termination for Good Reason. During the
         Employment Period, if the Company shall terminate the Executive's
         employment other than for Cause, death or Disability or the Executive
         shall terminate his employment for Good Reason, the Company shall pay
         to the Executive the amounts described in this Section 6 (hereinafter
         referred to as the "Severance Payments") and the Executive shall become
         vested in all stock options or other equity based instruments as
         provided below. The amounts specified in this Section 6(a) shall be
         paid within five business days after the Date of Termination.

                           (i)      Lump Sum Payment. The Company shall pay to
                  the Executive a lump sum amount in cash equal to the greater
                  of (1) three times the sum of (x) the Executive's Annual Base
                  Salary and (y) an Annual Bonus equal to 100% of such Annual
                  Base Salary, and (2) sum of the amount of Annual Base Salary
                  that would be payable to the Executive if the Employment
                  Period continued through its then term ("Remaining Term"), and
                  an Annual Bonus for such Remaining Term equal to 100% of the
                  Annual Base Salary that would be payable for such period.

                           (ii)     Accrued Obligations. The Company shall pay
                  the Executive a lump sum amount in cash equal to the sum of
                  (A) the Executive's earned Annual Base Salary through the Date
                  of Termination to the extent not theretofore paid, (B) an
                  amount equal to any Annual Bonus and Overachievement Bonus
                  earned with respect to fiscal years ended prior to the year
                  that includes the Date of Termination to the extent not
                  theretofore paid, and (C) an Annual Bonus for the fiscal year
                  that includes the Date of Termination equal to 100% of his
                  Annual Base Salary multiplied by a fraction, the numerator of
                  which shall be the number of days from the beginning of such
                  fiscal year to and including the Date of Termination and the
                  denominator of which shall be 365. (The amounts specified in
                  clauses (A), (B) and (C) shall be hereinafter referred to as
                  the "Accrued Obligations").

                           (iii)    Accelerated Vesting and Payment of Stock
                  Options and Other Equity Based Instruments. All stock options
                  and other equity based instruments held by Executive shall
                  immediately vest and become fully exercisable or payable, as
                  the case may be, as of the Date of Termination. In addition,
                  all of the Executive's stock options and equity based
                  instruments shall remain exercisable through the 180th day
                  following the end of the Remaining Term; provided, however,
                  that in no event shall the options remain outstanding for
                  longer than their original term.

                                       -6-

<PAGE>

                  (b)      Termination by the Company for Cause or by the
         Executive Other than for Good Reason. If the Executive's employment
         shall be terminated for Cause during the Employment Period, or if the
         Executive terminates his employment during the Employment Period other
         than for Good Reason, the Company shall have no further obligations to
         the Executive under this Agreement other than the Accrued Obligations.

                  (c)      Termination due to Death or Disability. If the
         Executive's employment shall terminate by reason of death or
         Disability, the Company shall pay the Executive or his estate, as the
         case may be, the Accrued Obligations. Such payments shall be in
         addition to those rights and benefits to which the Executive or his
         estate may be entitled under the relevant Company benefit plans or
         programs. In addition, all stock options and equity based instruments
         held by the Executive shall immediately vest and become fully
         exercisable or payable, as the case may be, as of the Date of
         Termination. In addition, all of the Executive's stock options and
         equity based instruments shall remain exercisable through the 180th day
         following the end of the Remaining Term; provided, however, that in no
         event shall the options remain outstanding for longer than their
         original term.

                  (d)      Mutual Termination of Employment. If the Executive's
         employment shall terminate due to the mutual written agreement of the
         parties, the Company shall pay the Executive an amount in cash equal to
         the sum of (1) his Annual Base Salary plus an Annual Bonus equal to
         100% of his Annual Base Salary and (2) the Accrued Obligations. In
         addition, all stock options and equity based instruments held by the
         Executive shall immediately vest and become fully exercisable or
         payable, as the case may be, as of the Date of Termination. In
         addition, all of the Executive's stock options and equity based
         instruments shall remain exercisable through the 180th day following
         the end of the Remaining Term; provided, however, that in no event
         shall the options remain outstanding for longer than their original
         term.

                  (e)      Gross Up Payment. In the event that any payment or
         benefit received or to be received by the Executive (whether pursuant
         to the terms of this Agreement or any other plan, arrangement or
         agreement with (A) the Company, (B) any Person (as defined in Section
         5(e)) 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 "Payments") would be subject to
         the excise tax imposed by Section 4999 of the Code (or any interest or
         penalties with respect to such excise tax (collectively, the "Excise
         Tax")), then, the Company shall pay to the Executive an additional
         amount (the "Gross-Up Payment") such that after payment by the
         Executive of all taxes (including any interest or penalties imposed
         with respect to such taxes), including any Excise Tax, imposed on the
         Gross-Up Payment, the Executive retains an amount of the Gross-Up
         Payment equal to the Excise Tax imposed upon the Payments. For purposes
         of determining the amount of the Gross-Up Payment, the Executive 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 the Executive's
         residence on the date on which the Gross-Up Payment is calculated for
         purposes of this section, net of the maximum reduction in federal
         income taxes which could be obtained from

                                       -7-

<PAGE>

         deduction of such state and local taxes. In the event that the Excise
         Tax is subsequently determined to be less than the amount taken into
         account hereunder, the Executive 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
         the Executive 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 the Executive with respect
         to such excess) at the time that the amount of such excess if finally
         determined. The Executive 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 Payments. It is understood that the
         application of this Section 6 and Section 280G may have differing
         interpretations; however, the parties intend that the Gross-Up Payment
         be determined in a manner that is most favorable to the Executive.

                  (f)      Any delay by the Company in paying any amount due the
         Executive under this Agreement shall bear interest at the maximum
         nonusurious rate from the date such payment was due until paid.

         7.       Nonexclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the Company and for which
the Executive may qualify, nor shall anything herein limit or otherwise
adversely affect such rights as the Executive may have under any other contract
or agreement entered into after the Effective Date with the Company. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any benefit, plan, policy, practice or program of, or any contract
or agreement entered into with the Company shall be payable in accordance with
such benefit, plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.

         8.       Full Settlement; No Mitigation. The Company's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other clam, right or action which the Company may have
against the Executive or others, provided that nothing herein shall preclude the
Company from separately pursuing recovery from the Executive based on any such
claim. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts (including amounts for
damages for breach) payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment.

         9.       Arbitration. Any dispute about the validity, interpretation,
effect or alleged violation of this Agreement (an "arbitrable dispute") must be
submitted to confidential arbitration in Houston, Texas. Arbitration shall take
place before an experienced employment arbitrator licensed to practice

                                       -8-

<PAGE>

law in such state and selected in accordance with the rules of the Model
Employment Arbitration Procedures of the American Arbitration Association.
Arbitration shall be the exclusive remedy of any arbitrable dispute. Should any
party to this Agreement pursue any arbitrable dispute by any method other than
arbitration, the other party shall be entitled to recover from the party
initiating the use of such method all damages, costs, expenses and attorneys'
fees incurred as a result of the use of such method. Notwithstanding anything
herein to the contrary, nothing in this Agreement shall purport to waive or in
any way limit the right of any party to seek to enforce any judgment or decision
on an arbitrable dispute in a court of competent jurisdiction. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts in Houston, Texas, for the purposes of any proceeding arising out of this
Agreement.

         10.      Confidentiality. The Company agrees to provide the Executive,
in the course of his employment with the Company, with non-public privileged or
confidential information and trade secrets concerning the operations, future
plans and methods of doing business of the Company, its subsidiaries and
affiliates ("Proprietary Information"); and the Executive agrees that it would
be extremely damaging to the Company, its subsidiaries and affiliates if such
Proprietary Information were disclosed to a competitor of the Company, its
subsidiaries and affiliates or to any other person or corporation. In
consideration for the Company providing such Proprietary Information to the
Executive, the Executive agrees that all Proprietary Information divulged to the
Executive is in confidence and further agrees to keep all Proprietary
Information secret and confidential (except for such information which is or
becomes publicly available other than as a result of a breach by the Executive
of this provision) without limitation in time. In view of the nature of the
Executive's employment and the Proprietary Information the Executive has
acquired during the course of such employment, the Executive likewise agrees
that the Company, its subsidiaries and affiliates would be irreparably harmed by
any disclosure of Proprietary Information in violation of the terms of this
paragraph and that the Company, its subsidiaries and affiliates shall therefore
be entitled to preliminary and/or permanent injunctive relief prohibiting the
Executive from engaging in any activity or threatened activity in violation of
the terms of this Section and to any other relief available to them. Inquiries
regarding whether specific information constitutes Proprietary Information shall
be directed to the Board, provided that the Company shall not unreasonably
classify information as Proprietary Information.

         11.      Non-Solicitation of Employees. The Executive recognizes that
he will be provided confidential information about other employees of the
Company, its subsidiaries and affiliates relating to their education,
experience, skills, abilities, compensation and benefits, and inter-personal
relationships with customers of the Company, its subsidiaries and affiliates and
recognizes that such information is not generally known, is of substantial value
to the Company, its subsidiaries and affiliates in developing their business and
in securing and retaining customers, and has been and will be acquired by him
because of his business position with the Company, its subsidiaries and
affiliates. Accordingly, in consideration of the Proprietary Information and
other benefits provided to the Executive under this Agreement, the Executive
agrees that, during the Employment Period and for the Restricted Period (as
defined in Section 12), he will not, directly or indirectly, solicit or recruit
any employee of the Company, its subsidiaries or affiliates on whose behalf he
is acting as an agent, representative or employee and that he will not convey
any such confidential information or trade secrets about other employees of the
Company, its subsidiaries and affiliates to any other person; provided, however,
that it shall not constitute a solicitation or recruitment of employment in

                                       -9-

<PAGE>

violation of this Section to discuss employment opportunities with any employee
of the Company, its subsidiaries or affiliates who has either first contacted
the Executive or regarding whose employment the Executive has discussed with and
received the written approval of the Chairman of the Board prior to making such
solicitation or recruitment In view of the nature of the Executive's employment
with the Company, the Executive likewise agrees that the Company, its
subsidiaries and affiliates would be irreparably harmed by any solicitation or
recruitment in violation of the terms of this paragraph and that the Company,
its subsidiaries and affiliates shall therefore be entitled to preliminary
and/or permanent injunctive relief prohibiting the Executive from engaging in
any activity or threatened activity in violation of the terms of this Section
and to any other relief available to them.

         12.      Noncompetition.

                  (a)      In consideration for the Company's providing the
         Executive with Confidential Information during the Employment Period
         and the other benefits provided by this Agreement, the Executive agrees
         that while employed by the Company and for the Restricted Period (as
         defined below), the Executive shall not, unless the Executive receives
         the prior written consent of the Board, 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 Company patent; provided, however, that following
         the Executive'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. The Restricted Period shall be (i) the one-year period
         following the mutual termination of the Executive's employment and (ii)
         in all other cases, the period beginning on the Date of Termination and
         ending one year after the end of the Remaining Term.

                  (b)      The Executive has carefully read and considered the
         provisions of this Section 12 and, having done so, agrees that the
         restrictions set forth in this Section 12 (including the Restricted
         Period, scope of activity to be restrained and the geographical scope)
         are fair and reasonable and are reasonably required for the protection
         of the interests of the Company, its officers, directors, employees,
         creditors and shareholders. The Executive understands that the
         restrictions contained in this Section 12 may limit his ability to
         engage in a business similar to the Company's business, but
         acknowledges that he will receive sufficiently high remuneration and
         other benefits from the Company hereunder to justify such restrictions.

                  (c)      It is specifically agreed that the Restricted Period
         following termination of employment, during which the agreements and
         covenants of the Executive made in Sections 11 and 12 shall be
         effective, shall be computed by excluding from such computation any
         time which the Executive is in violation of the provisions of such
         Sections.

                  (d)      In the event that any provision of this Section 12
         relating to the Restricted Period and/or the areas of restriction shall
         be declared by a court of competent jurisdiction to exceed the maximum
         time period or areas such court deems reasonable and enforceable, the

                                      -10-

<PAGE>

         Restricted Period and/or areas of restriction deemed reasonable and
         enforceable by the court shall become and thereafter be the maximum
         time period and/or areas.

         13.      Legal Fees. The Company shall promptly pay all legal fees and
expenses (including, without limitation, fees and expenses in connection with
any arbitration) incurred by the Executive in disputing in good faith any issue
arising under this Agreement relating to the termination of the Executive's
employment or in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement.

         14.      Successors.

                  (a)      Assignment by Executive. This Agreement is personal
         to the Executive and without the prior written consent of the Company
         shall not be assignable by the Executive otherwise than by will or the
         laws of descent and distribution. This Agreement shall inure to the
         benefit of and be enforceable by the Executive's legal representatives.

                  (b)      Successors and Assigns of Company. This Agreement
         shall inure to the benefit of and be binding upon the Company, its
         successors and assigns.

                  (c)      Assumption. The Company shall 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 to assume expressly and agree in writing prior to such
         succession to perform this Agreement in the same manner and to the same
         extent that the Company would be required to perform it if no such
         succession had taken place. A copy of such agreement shall be furnished
         to the Executive. As used in this Agreement, "Company" shall mean the
         Company as hereinbefore defined and any successor to its businesses
         and/or assets as aforesaid that assumes and agrees to perform this
         Agreement by operation of law or otherwise. Any failure of the Company
         to timely obtain such agreement shall be a material breach of this
         Agreement.

         15.      Miscellaneous.

                  (a)      Governing Law. This Agreement shall be governed by
         and construed in accordance with the laws of the State of Texas,
         without reference to its principles of conflict of laws. The captions
         of this Agreement are not part of the provisions hereof and shall have
         no force or effect. This Agreement may not be amended, modified,
         repealed, waived, extended or discharged, except by an agreement in
         writing signed by the party against whom enforcement of such amendment,
         modification, repeal, waiver, extension or discharge is sought. No
         person, other than pursuant to a resolution of the Board or a committee
         thereof, shall have authority on behalf of the Company to agree to
         amend, modify, repeal, waive, extend or discharge any provision of this
         Agreement or anything in reference thereto.

                  (b)      Notices. All notices and other communications
         hereunder shall be in writing and shall be given by hand delivery to
         the other party or by registered or certified mail, return receipt
         requested, postage prepaid, addressed, in either case, to the Company's
         headquarters or to such other address as either party shall have
         furnished to the other in writing in

                                      -11-

<PAGE>

         accordance herewith. Notices and communications shall be effective when
         actually received by the addressee.

                  (c)      Severability. The invalidity or unenforceability of
         any provision of this Agreement shall not affect the validity or
         enforceability of any other provision of this Agreement.

                  (d)      Taxes. The Company may withhold from any amounts
         payable or benefits provided under this Agreement such federal, state
         or local taxes as shall be required to be withheld pursuant to any
         applicable law or regulation.

                  (e)      No Waiver. The Executive's or the Company's failure
         to insist upon strict compliance with any provision hereof or any other
         provision of this Agreement or the failure to assert any right that the
         Executive or the Company may have hereunder, including, without
         limitation, the right of the Executive to terminate employment for Good
         Reason pursuant to Section 5 of this Agreement.

                  (f)      Entire Agreement; Effect on Stock Awards. This
         instrument contains the entire agreement of the Executive and the
         Company with respect to the subject matter hereof, and all promises,
         representations, understandings, arrangements and prior agreements
         between the parties with respect to the subject matter hereof,
         including without limitation that certain Severance Agreement between
         the parties dated May 1, 2001, are terminated hereby. The provisions of
         this Agreement concerning the accelerated vesting and extended period
         for exercise of Company stock options and other stock incentive awards
         shall be deemed to modify any such options and awards outstanding as of
         the Effective Date and shall be incorporated by reference into any such
         grants made after the Effective Date; the intent of the parties being
         that, in the event of any language in any plan or award agreement in
         conflict herewith or to the contrary, the terms of this Agreement shall
         control as to the vesting and exercisability of all outstanding and
         future stock options and stock incentive awards granted to the
         Executive.

                                      -12-

<PAGE>

         IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed effective for all purposes as of the Effective Date.

CYBERONICS, INC.                                     CYBERONICS, INC.

By: /s/ Tony Coelho
    ---------------------------------------
Tony Coelho
Chairman of the Compensation Committee
Member of the Board of Directors

                                                     EXECUTIVE

                                                     /s/ Richard P. Cummins
                                                     ---------------------------
                                                     Robert P. Cummins

                                      -13-

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