Document:

EX-10.1

Exhibit 10.1

CONSENT AND AMENDMENT AGREEMENT

THIS CONSENT AND AMENDMENT AGREEMENT is made and entered into effective as of December 29,
2006 (this “Consent”) by and among CYBERONICS, INC. (the “Borrower”), MERRILL LYNCH
CAPITAL, a division of Merrill Lynch Business Financial Services Inc., individually as a Lender, as
Administrative Agent, Sole Bookrunner and Sole Lead Arranger (the “Administrative Agent”)
and the Lenders now or from time to time party to the Credit Agreement referenced below (the
“Lenders”). All capitalized terms used but not defined herein shall have the meanings
given to such terms in the Credit Agreement (as defined below).

RECITALS

A. Borrower entered into a certain Credit Agreement dated as of January 13, 2006 among
Borrower, Administrative Agent and the Lenders party thereto (as amended, supplemented, restated or
otherwise modified from time to time, the “Credit Agreement”).

B. The Credit Agreement requires the Borrower to (a) comply with applicable Laws, including
the filing of its annual report on Form 10-K, quarterly financial reports on Form 10-Q, proxy
statement and registration statements (“SEC Filings”), and (b) satisfy all applicable
listing criteria for the Principal Stock market on which the Borrower’s common stock is listed;

C. The Credit Agreement also requires the Borrower to deliver, on an ongoing basis, certain
financial information that is prepared in compliance with GAAP.

D. The Borrower has received notice that the Securities and Exchange Commission is conducting
an informal inquiry and has received a subpoena from the Office of the United States Attorney for
the Southern District of New York regarding its stock option granting practices, and the Audit
Committee of the Borrower’s Board of Directors has undertaken an independent investigation of such
options practices.

E. The Borrower obtained an extension from the Securities and Exchange Commission until
December 31, 2006 to file its annual report on Form 10-K for the fiscal year ended April 28, 2006
(the “2006 Annual Report”).

F. The Audit Committee of the Borrower’s Board of Directors has completed its own independent
investigation, but the resulting remedial action has made Borrower unable to file its 2006 Annual
Report with the Securities and Exchange Commission on or before December 31, 2006.

G. Borrowers have informed Administrative Agent that it will not be able to file on a timely
basis its 2006 Annual Report with the Securities and Exchange Commission until on or before January
8, 2006.

H. Further, Borrowers have also informed Administrative Agent that it will not be able to file
on a timely basis the Form 10-Q with the Securities and Exchange Commission for the periods ended
July 28, 2006 and October 27, 2006 until on or before February 28, 2007 (with the 2006 Annual
Report, the “SEC Reports”).

I. The Borrower has requested that the Administrative Agent and Lenders consent to the
extension of time for filing the SEC Reports and delivery of the related financial statements as
required by the Credit Agreement.

NOW, THEREFORE, in consideration of the foregoing, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

(1) Subject to Section 2 below, the Borrower, Administrative Agent and Lenders hereby consent
to and agree that:

(a) Notwithstanding anything to the contrary in the Credit Agreement, including without
limitation in Sections 4.1(a), 4.1(e), 4.5 and 11.1(b), Borrower shall have until January 8,
2007 to deliver the 2006 Annual Report to Administrative Agent and file the 2006 Annual
Report with the Securities and Exchange Commission, and during such period such delay in
filing the 2006 Annual Report shall not constitute an “Event of Default” pursuant to the
Credit Agreement.

(b) Notwithstanding anything to the contrary in the Credit Agreement, including without
limitation in Sections 4.1(a), 4.1(e), 4.5 and 11.1(b), Borrower shall have until February
28, 2007 to deliver the SEC Reports (other than the 2006 Annual Report) to Administrative
Agent and file the SEC Reports (other than the 2006 Annual Report) with the Securities and
Exchange Commission, and during such period such delay in filing the SEC Reports (other than
the 2006 Annual Report) shall not constitute an “Event of Default” pursuant to the Credit
Agreement.

(c) Notwithstanding anything to the contrary contained in Section 11.1(bb) of the
Credit Agreement, Borrower’s failure to be in compliance with the Nasdaq Stock Market, Inc.
listing standards, due solely to Borrower’s failure to timely file or deliver the SEC
Reports on or prior to December 31, 2006, will not constitute an “Event of Default” pursuant
to the Credit Agreement.

(d) Notwithstanding anything to the contrary contained in Section 11.1(e) of the Credit
Agreement, Borrower shall have until February 28, 2007 to file the registration statement
required by the Registration Agreement dated February 28, 2007 between the Borrower and the
“Initial Purchaser” named therein, and such default under the Registration Agreement shall
not constitute an “Event of Default” pursuant to the Credit Agreement unless such
registration statement is not filed on or prior February 28, 2007.

(e) Notwithstanding anything to the contrary contained in Section 4.1(b)(v) of the
Credit Agreement, the Compliance Certificates delivered by Borrower may include the
following footnote: “The Audit Committee of the Borrower’s Board of Directors is conducting
an independent internal investigation of the Borrower’s stock option grants, procedures, and
practices, including compliance with Generally Accepted Accounting Principles and all
applicable statutes, rules, and regulations. The Securities and Exchange Commission and the
Department of Justice are conducting their own investigations of the same matters. The
financial statement accompanying this certificate may change upon the conclusion of these
investigations and our analysis of the results of the investigations.” The existence of
such footnote shall not be construed as or deemed an acceptance by Administrative Agent or
Lenders of any restatement of financial statements or reports that may be required upon the
conclusion of such investigations or construed as or deemed a waiver of any Defaults or
Event of Defaults resulting from any such restatement or reports.

(f) Administrative Agent acknowledges that Borrower has received a notice of default
and demand letters from Wells Fargo Bank National Association (“Trustee”), in connection
with the Indenture dated September 27, 2005 (“Indenture”), between Borrower, as issuer and
Trustee as a result of the failure to timely file and deliver the SEC Reports (the “Alleged
Indenture Default”). Borrower disputes that such a default has occurred under the Indenture
and has filed an action for declaratory judgment. So long as there is no determination by a
court and Borrower has not otherwise acknowledged that a default has occurred under the
Indenture, Administrative Agent will not declare an Event of Default under the Credit
Agreement solely as a result of the Alleged Indenture Default.

(g) Notwithstanding anything to the contrary in the Credit Agreement, until such time
as the SEC Reports have been delivered to Administrative Agent and the notice of the Alleged
Indenture Default has been withdrawn by the Trustee or a court has determined that the
Alleged Indenture Default has not occurred under the Indenture to Administrative Agents
satisfaction, the Revolving Loan Outstandings shall not at any time exceed $7,500,000 in the
aggregate. The limitation on Revolving Loan Borrowings provided for in this paragraph shall
not in any way limit or reduce any charge, fee or other sum due to Administrative Agent or
Lenders under the Credit Agreement. For the avoidance of doubt, Administrative Agent and
Borrower agree that notwithstanding the prohibition on the Revolving Loan Outstandings in
excess of $7,500,000 as set forth above, as of February 1, 2007 and thereafter, Borrower
shall pay an Unused Line Fee on a Minimum Loan Balance of $10,000,000 pursuant to Section
2.3(b) of the Credit Agreement.

(2) The Administrative Agent’s and Lenders’ consent and agreement to each of the provisions of
Section 1 above constitutes an amendment to the Credit Agreement.

(3) In consideration for the accommodations and amendments made herein, Borrower agrees to pay
to Administrative Agent an “Amendment Fee” in the amount of Fifteen Thousand Dollars
($15,000), which fee is fully earned and non-refundable upon the effectiveness hereof. Borrower
authorizes Administrative Agent to charge the loan for the payment of such Amendment Fee.

(4) The effectiveness of this Consent is conditioned upon each of Administrative Agent and
Borrower receiving one (1) counterpart hereof duly executed by the Borrower and the Administrative
Agent. This Consent shall be binding on all parties to the Credit Agreement and their successors
and assigns upon the effectiveness hereof.

(5) Borrower covenants, confirms and agrees that as security for the repayment of the
Obligations, and any extensions, renewals, replacements, restructurings, or modifications thereof,
Lenders have, and shall continue to have, a continuing first perfected lien on and security
interest in all of the Collateral (as defined in the Credit Agreement). Borrower acknowledges and
agrees that nothing herein contained in any way impairs Lenders’ rights or priority in such
security.

(6) The execution, delivery and effectiveness of this Consent shall not operate as a waiver of
any Event of Default under the Finance Documents, of any event which with the passage of time or
the giving of notice or both would constitute an Event of Default, nor does it obligate
Administrative Agent, or Lenders to agree to any further modifications of the terms of any of the
Finance Documents or constitute a waiver of any other rights or remedies of Administrative Agent or
Lenders.

(7) The parties hereto hereby acknowledge and agree that, except as specifically modified
hereby, the Credit Agreement shall remain in full force and effect in accordance with its terms.
The Credit Agreement and this Consent shall be read, taken, together and construed as one and the
same instrument.

(8) This Consent may be executed in any number of counterparts, all of which taken together
shall constitute one agreement, and any of the parties hereto may execute this Consent by signing
any such counterpart.

(9) THIS CONSENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, AND SHALL FURTHER BE SUBJECT TO
THE PROVISIONS OF SECTION 14 (GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY
TRIAL WAIVER) IN THE CREDIT AGREEMENT.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have executed this Consent and Amendment
Agreement to be effective as provided herein.

CYBERONICS, INC., a Delaware corporation

By:     /s/ Reese S. Terry, Jr.     

Reese S. Terry, Jr.

Interim Chief Executive Officer

MERRILL LYNCH CAPITAL, a division of Merrill

Lynch Business Financial Services Inc., as Lender and as

Administrative Agent

	 	 	 
	By /s/ Paula K. Berry

	 	

	 
	 	 
	 

	 
	 	 
	Name:

	 	Paula K. Berry
	
 
	 	 
	Title:

	 	Vice President
	 

	 	 
	 
	 	 

2EX-10.2

STOCK OPTION AGREEMENT AMENDMENT

AND

BONUS AGREEMENT

THIS STOCK OPTION AGREEMENT AMENDMENT AND BONUS AGREEMENT (the “Agreement”) is made this 24th
day of December, 2006 between Cyberonics, Inc. (the “Company”) and Michael Cheney (the “Optionee”).

WHEREAS, the Company previously granted to the Optionee the options identified on attached
Schedule A (the “Options”) to purchase shares of the Company’s common stock under the Company’s
Stock Incentive Plan(s), as amended and restated, and as identified as such on Schedule A (the
“Plan(s)”).

WHEREAS, the Company and the Optionee entered into a formal Stock Option Agreement (the
“Option Agreement”) evidencing each such Option.

WHEREAS, in order to avoid adverse tax consequences under section 409A of the Internal Revenue
Code, the Optionee desires to amend each of the Options to increase the exercise price per share to
be in effect for the unexercised portion of that Option which is subject to section 409A and
identified as such on Schedule A (the “Covered Portion”) to the higher exercise price per share
indicated for that portion of such Option on Schedule A.

WHEREAS, in order to compensate the Optionee for the increased exercise prices to be in effect
for the Covered Portions of the Options, the Company is willing to pay the Optionee a special cash
bonus in a dollar amount equal to the aggregate increase to the exercise prices for the Covered
Portions of the Options listed on Schedule A, with the actual dollar of that bonus indicated as the
Total Bonus on Schedule A and payable as provided herein.

NOW THEREFORE, the parties hereby agree as follows:

1. Increased Exercise Price. The exercise price per share set forth in the Option
Agreement for each of the Options listed on Schedule A is hereby increased, with respect to the
shares subject to the Covered Portion of that Option, to the higher exercise price per share set
forth for that Option on Schedule A.

2. Bonus. The Optionee shall become entitled to receive a cash bonus from the Company
in the gross dollar amount indicated as his or her Total Bonus on attached Schedule A (the “Bonus”)
as follows:

(i) the bonus payable with respect to shares that vest prior to January 1, 2008
will be paid on or about January 15, 2008, and

(ii) the bonus payable with respect to shares that vest on or after January 1,
2008 will be payable only if such shares vest and will be paid quarterly for the
 shares that vested during the preceding fiscal quarter. Such payment will be made
within 14 days following the close of each fiscal quarter.

Payment of the Bonus shall be subject to the Company’s collection of all applicable federal,
state and local income and employment withholding taxes, and the Optionee shall be paid only the
net amount of such bonus remaining after such taxes have been collected.

3. Entire Agreement. This Agreement, together with the Option Agreements (to the
extent not expressly amended in a separate amendment or amended hereby) and the Plan(s), represents
the entire agreement of the parties with respect to the Options, the Covered Portions thereof and
the Bonus and supersedes any and all previous contracts, arrangements or understandings between the
parties with respect to such Options and the Bonus. This Agreement may be amended at any time only
by means of a writing signed by the Optionee and an authorized officer of the Company.

4. Continuation of Option Agreements. Except for the foregoing increases to the
exercise prices per share for the Covered Portions of the Options, no other terms or provisions of
the Option Agreements for such Options or the applicable Plan(s) have been modified as a result of
this Agreement, and those terms and provisions shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year indicated
above.

CYBERONICS, INC.

	 	 	 
	By:

	 	/s/ David S. Wise
	 

	 	 
	 
	 	 
	TITLE: Vice President & General Counsel

	 
	 	 
	 

	 
	 	 
	OPTIONEE

	 	

	 
	 	 
	By:

	 	/s/ Michael Cheney
	
 
	 	 

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SCHEDULE A

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Number of	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Unexercised	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Exercise	 	Option Shares	 	Applicable	 	Increased	 	Aggregate	 	Potential
	 	 	 	 	 	 	Price Per	 	Which Vest After	 	Measurement	 	Exercise Price	 	Increase in	 	Retention
	Name	 	Plan	 	Grant Date	 	Share	 	12/31/2004	 	Date	 	Per Share	 	Exercise Price	 	Bonus
	Cheney, Michael

	 	1997 Plan
	 	01/24/2002
	 	$	12.45	 	 	 	10,417	 	 	02/12/2002
	 	$	2.06	 	 	$	21,459.02	 	 	$	21,459.02	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

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