SC TO-I

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE TO

(Rule 13e-4)

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934

CYBERONICS, INC.

(Name of Subject Company (Issuer) and Filing Person (Offeror))

Options to Purchase Shares of common stock, Par Value $0.01 Per Share
(Title of Class of Securities)

23251P102
(CUSIP Number of Class of Securities)
(Underlying Common Stock)

David S. Wise
Vice President, General Counsel and Secretary
Cyberonics, Inc.
100 Cyberonics Boulevard
Houston, Texas 77058
(281) 228-7200
(Name, address and telephone number of person authorized to receive notices and communications on behalf of filing person)
Copy to:
Zaitun Poonja, Esq.
Jill Mather Bartow, Esq.
Morgan, Lewis, & Bockius LLP
Two Palo Alto Square
Palo Alto, California 94306
(650) 843-4000

CALCULATION OF FILING FEE

Transaction valuation*	Amount of filing fee**
$6,213,247.34	$190.75

*	The “transaction valuation” set forth above is based on the Black-Scholes option valuation model and assumes that all outstanding options eligible for tender covering an aggregate of 369,928 shares of common stock of Cyberonics, Inc. will be amended pursuant to this offer, which may not occur.
**	The amount of the filing fee, calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, as modified by Fee Advisory No. 5 for fiscal year 2007, equals $30.70 per $1,000,000 of transaction valuation. The transaction valuation set forth above was calculated for the sole purpose of determining the filing fee, and should not be used or relied upon for any other purpose.
o	Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:	Not applicable.
Form or Registration No.:	Not applicable.
Filing party:	Not applicable.
Date filed:	Not applicable.

o	Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
	Check the appropriate boxes below to designate any transactions to which the statement relates:

o third party tender offer subject to Rule 14d-1.

þ issuer tender offer subject to Rule 13e-4.

o going-private transaction subject to Rule 13e-3.

o amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer. o

TABLE OF CONTENTS

	ITEM 1. SUMMARY TERM SHEET
	ITEM 2. SUBJECT COMPANY INFORMATION
	ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON
	ITEM 4. TERMS OF THE TRANSACTION
	ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND ARRANGEMENTS
	ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
	ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
	ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
	ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
	ITEM 10. FINANCIAL STATEMENTS
	ITEM 11. ADDITIONAL INFORMATION
	ITEM 12. EXHIBITS
	ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3
SIGNATURE
INDEX OF EXHIBITS
Offer to Amend or Replace
Email Announcement of Offer to Amend or Replace
Form of Letter of Transmittal
Frequently Asked Questions
Employee Presentation
Form of Stock Option Amendment and Cash Bonus Agreement
Withdrawal Form
Form of Acknowledgement of Receipt of Letter of Transmittal/Withdrawal Form
Form of Reminder of Expiration Date
Form of Notice of Expiration of Offer, Amendment or Replacement of Eligible Options and Commitment to Pay Cash Bonus
1996 Stock Option Plan, as amended
Form of Notice of Stock Option Grant and Stock Option Agreement
Form of Stock Option Agreement under the 2005 Stock Plan
1998 Stock Option Plan
Form of Stock Option Agreement under the 1998 Stock Option Plan

ITEM 1. SUMMARY TERM SHEET.

The information set forth under “Summary Term Sheet” in the Offer to Amend or Replace Eligible Options, dated June 7, 2007 (the “Offer to Amend or Replace”), attached hereto as Exhibit (a)(1), is incorporated herein by reference.

ITEM 2. SUBJECT COMPANY INFORMATION.

(a) The name of the issuer is Cyberonics, Inc., a Delaware corporation (the “Company”); the address of its principal executive offices is 100 Cyberonics Boulevard, Houston, Texas 77058; and its telephone number is (281) 228-7200. The information set forth in the Offer to Amend or Replace under Section 11 (“Information Concerning Cyberonics”) is incorporated herein by reference.

(b) This Tender Offer Statement on Schedule TO relates to an offer (the “Offer”) by the Company to amend outstanding “Eligible Options” (as defined in the Offer to Amend or Replace) held by current employees of the Company as of the Expiration Date (as defined below) who are subject to income taxation in the United States (“Eligible Optionees”) so that they may avoid potential adverse tax consequences under Internal Revenue Code Section 409A. Each eligible participant may elect to amend his or her Eligible Option to increase the exercise price per share of the Company’s common stock, par value $0.01 per share, purchasable thereunder and become eligible to receive a special Cash Bonus (as defined in the Offer to Amend or Replace) from the Company, all upon the terms and subject to the conditions set forth in the Offer to Amend or Replace and the related form of Letter of Transmittal attached hereto as Exhibit (a)(3). Certain tendered Eligible Options may, in lieu of such amendment, be cancelled and replaced with new options that will be exactly the same as the cancelled options, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date. The Offer is currently set to expire at 11:59 p.m. Central Time on July 6, 2007 but may be extended (the “Expiration Date”). As of June 6, 2007, Eligible Options to purchase 369,928 shares of the Company’s common stock were outstanding.

The information set forth in the Offer to Amend or Replace on the introductory pages and under “Summary Term Sheet,” Section 1 (“Eligible Optionees; Eligible Options; Amendment of Eligible Options and Cash Bonus; Cancellation of Eligible Options and Grant of New Options; Expiration Date; Additional Considerations”), Section 3 (“Status of Eligible Options Not Amended or Replaced”), Section 6 (“Acceptance of Eligible Options for Amendment or Replacement and Commitment to Pay Cash Bonus”) and Section 9 (“Source and Amount of Consideration; Terms of Amended Options or New Options”) is incorporated herein by reference.

(c) The information set forth in the Offer to Amend or Replace under Section 8 (“Price Range of Common Stock Underlying the Options”) is incorporated herein by reference.

ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.

(a) The Company is the filing person. The information set forth under Item 2(a) above is incorporated herein by reference. The information set forth in Schedule I to the Offer to Amend or Replace (“Information Concerning the Directors and Executive Officers of Cyberonics, Inc.”) is incorporated herein by reference.

ITEM 4. TERMS OF THE TRANSACTION.

(a) The information set forth in the Offer to Amend or Replace on the introductory pages and under “Summary Term Sheet,” Section 1 (“Eligible Optionees; Eligible Options; Amendment of Eligible Options and Cash Bonus; Cancellation of Eligible Options and Grant of New Options; Expiration Date; Additional Considerations”), Section 3 (“Status of Eligible Options Not Amended or Replaced”), Section 4 (“Procedures for Tendering Eligible Options”), Section 5 (“Withdrawal Rights”), Section 6 (“Acceptance of Eligible Options for Amendment or Replacement and Commitment to Pay Cash Bonus”), Section 7 (“Conditions of the Offer”), Section 9 (“Source and Amount of Consideration; Terms of Amended Options or New Options”), Section 10 (“Amended Options and New Options Will Not Differ from Eligible Options”), Section 13 (“Status of Options Accepted by Us in the Offer; Accounting Consequences of the Offer”), Section 14 (“Legal Matters; Regulatory Approvals”), Section 15 (“Material U.S. Federal Income Tax Consequences”), Section 16 (“Extension of the Offer; Termination; Amendment”) and Section 19 (“Forward-Looking Statements; Miscellaneous”), is incorporated herein by reference.

(b) The information set forth in the Offer to Amend or Replace under Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options; and Material Agreements with Directors and

Officers”) is incorporated herein by reference.

ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND ARRANGEMENTS.

(a) The information set forth in the Offer to Amend or Replace under Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options; and Material Agreements with Directors and Officers”) is incorporated herein by reference. The Cyberonics, Inc. 1996 Stock Option Plan and Cyberonics, Inc. 2005 Stock Plan, pursuant to which the Eligible Options have been granted are attached hereto as Exhibits (d)(1) and (d)(3), respectively, and contain information regarding the subject securities. The Cyberonics, Inc. 1998 Stock Option Plan, as amended, pursuant to which new options will be granted in cancellation and replacement of certain Eligible Options is attached hereto as Exhibit (d)(5) and contains information regarding the subject securities.

ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.

(a) The information set forth in the Offer to Amend or Replace under Section 2 (“Purpose of the Offer”) is incorporated herein by reference.

(b) The information set forth in the Offer to Amend or Replace under Section 6 (“Acceptance of Eligible Options for Amendment or Replacement and Commitment to Pay Cash Bonus”) and Section 13 (“Status of Options Accepted by Us in the Offer; Accounting Consequences of the Offer”) is incorporated herein by reference.

(c) The information set forth in the Offer to Amend or Replace under Section 1 (“Eligible Optionees; Eligible Options; Amendment of Eligible Options and Cash Bonus; Cancellation of Eligible Options and Grant of New Options; Expiration Date; Additional Considerations”) is incorporated herein by reference.

ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) The information set forth in the Offer to Amend or Replace under Section 9 (“Source and Amount of Consideration; Terms of Amended Options or New Options”) and Section 17 (“Fees and Expenses”) is incorporated herein by reference.

(b) The information set forth in the Offer to Amend or Replace under Section 7 (“Conditions of the Offer”) is incorporated herein by reference.

(d) Not applicable.

ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a) The information set forth in the Offer to Amend or Replace under Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options; and Material Agreements with Directors and Officers”) is incorporated herein by reference.

(b) The information set forth in the Offer to Amend or Replace under Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options; and Material Agreements with Directors and Officers”) is incorporated herein by reference.

ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.

(a) Not applicable.

ITEM 10. FINANCIAL STATEMENTS.

(a) The information set forth in the Offer to Amend or Replace under Section 11 (“Information Concerning Cyberonics”) and Section 18 (“Additional Information”) is incorporated herein by reference. Item 8 (“Financial Statements and Supplementary Data”) of the Company’s Annual Report on Form 10-K for its fiscal year ended April 28, 2006 and Item 1 of the Company’s Quarterly Report on Form 10-Q for its quarter ended January 26, 2007 are incorporated herein by reference.

(b) Not applicable.

(c) Summary Information. The information set forth in the Offer to Amend or Replace under Section 11 (“Information Concerning Cyberonics”) is incorporated herein by reference.

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ITEM 11. ADDITIONAL INFORMATION.

(a) The information set forth in the Offer to Amend or Replace under Section 12 (“Interests of Directors and Officers; Transactions and Arrangements Concerning the Options; and Material Agreements with Directors and Officers”) and Section 14 (“Legal Matters; Regulatory Approvals”) is incorporated herein by reference.

(b) Not applicable.

ITEM 12. EXHIBITS.

(a)(1)	Offer to Amend or Replace, dated June 7, 2007.
(a)(2)	Email Announcement of Offer to Amend or Replace, dated June 7, 2007.
(a)(3)	Form of Letter of Transmittal.
(a)(4)	Frequently Asked Questions.
(a)(5)	Employee Presentation.
(a)(6)	Form of Stock Option Amendment and Cash Bonus Agreement.
(a)(7)	Withdrawal Form.
(a)(8)	Form of Acknowledgement of Receipt of Letter of Transmittal/Withdrawal Form.
(a)(9)	Form of Reminder of Expiration Date.
(a)(10)	Form of Notice of Expiration of Offer, Amendment or Replacement of Eligible Options and Commitment to Pay Cash Bonus.
(a)(11)	Cyberonics, Inc. Annual Report on Form 10-K for the year ended April 28, 2006, filed with the Securities and Exchange Commission (the “SEC”) January 5, 2007, is incorporated herein by reference.
(a)(12)	Cyberonics, Inc. Quarterly Report on Form 10-Q for the quarter ended January 26, 2007 filed with the SEC March 7, 2007, is incorporated herein by reference.
(b)	Not applicable.
(d)(1)	Cyberonics, Inc. 1996 Stock Option Plan, as amended.
(d)(2)	Form of Notice of Stock Option Grant and Stock Option Agreement under the Cyberonics, Inc. 1996 Stock Option Plan.
(d)(3)	Cyberonics, Inc. 2005 Stock Plan is incorporated herein by reference from Annex A to the Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 14, 2005.
(d)(4)	Form of Stock Option Agreement under the Cyberonics, Inc. 2005 Stock Plan.
(d)(5)	Cyberonics, Inc. 1998 Stock Option Plan, as amended.
(d)(6)	Form of Notice of Stock Option Grant and Stock Option Agreement under the Cyberonics, Inc. 1998 Stock Option Plan.
(g)	Not applicable.
(h)	Not applicable.

ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.

(a) Not applicable.

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SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.

CYBERONICS, INC.
By:	/s/ David S. Wise
	David S. Wise
	Vice President, General Counsel and Secretary
Date:	June 7, 2007

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INDEX OF EXHIBITS

EXHIBIT
NUMBER	DESCRIPTION
(a)(1)	Offer to Amend or Replace, dated June 7, 2007.
(a)(2)	Email Announcement of Offer to Amend or Replace, dated June 7, 2007.
(a)(3)	Form of Letter of Transmittal.
(a)(4)	Frequently Asked Questions.
(a)(5)	Employee Presentation.
(a)(6)	Form of Stock Option Amendment and Cash Bonus Agreement.
(a)(7)	Withdrawal Form.
(a)(8)	Form of Acknowledgement of Receipt of Letter of Transmittal/Withdrawal Form.
(a)(9)	Form of Reminder of Expiration Date.
(a)(10)	Form of Notice of Expiration of Offer, Amendment or Replacement of Eligible Options and Commitment to Pay Cash Bonus.
(a)(11)	Cyberonics, Inc. Annual Report on Form 10-K for the year ended April 28, 2006, filed with the SEC January 5, 2007, is incorporated herein by reference.
(a)(12)	Cyberonics, Inc. Quarterly Report on Form 10-Q for the quarter ended January 26, 2007 filed with the SEC March 7, 2007, is incorporated herein by reference.
(b)	Not applicable.
(d)(1)	Cyberonics, Inc. 1996 Stock Option Plan, as amended.
(d)(2)	Form of Notice of Stock Option Grant and Stock Option Agreement under the Cyberonics, Inc. 1996 Stock Option Plan.
(d)(3)	Cyberonics, Inc. 2005 Stock Plan, is incorporated herein by reference from Annex A to the Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 14, 2005.
(d)(4)	Form of Stock Option Agreement under the Cyberonics, Inc. 2005 Stock Plan.
(d)(5)	Cyberonics, Inc. 1998 Stock Option Plan, as amended.
(d)(6)	Form of Notice of Stock Option Grant and Stock Option Agreement under the Cyberonics, Inc. 1998 Stock Option Plan.
(g)	Not applicable.
(h)	Not applicable.

EX-99.A1

EXHIBIT (a)(1)

CYBERONICS, INC.

OFFER TO AMEND OR REPLACE ELIGIBLE OPTIONS

JUNE 7, 2007

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 11:59 P.M., CENTRAL TIME, ON JULY 6, 2007,
UNLESS THE OFFER IS EXTENDED

Cyberonics, Inc. (“Cyberonics,” the “Company,” “us” or “we”) is making this offer (the “Offer”) to certain individuals to amend or replace certain outstanding stock options to purchase Cyberonics common stock previously granted to those individuals. A stock option will be subject to this offer only to the extent that option meets all of the following conditions:

(i) The option was granted under the 1996 Stock Option Plan or the 2005 Stock Plan (together with the 1996 Stock Option Plan, the “Plans”);

(ii) The option has a revised measurement date for financial accounting purposes as a result of the recently completed review of our option grant practices;

(iii) All or a portion of the option was unvested as of December 31, 2004;

(iv) The option is held by an individual who is, on the expiration of this Offer, a current employee of Cyberonics and subject to income taxation in the United States with respect to that option (an “Eligible Optionee”); and

(iv) The option is outstanding on the expiration date of this Offer.

However, executive officers of the Company and members of the Company’s Board of Directors are not eligible to participate in the Offer.

An option that satisfies all of the foregoing conditions is designated an “Eligible Option” for purposes of this Offer. If only a portion of a particular option grant meets the foregoing conditions (i.e.—only the portion that was unvested at December 31, 2004), then only that portion will be considered an Eligible Option, and the balance of that option will not be eligible for amendment or replacement pursuant to this Offer.

The Offer is being made to address certain potential adverse tax consequences that may apply to the Eligible Options under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Eligible Optionees may be able to avoid such adverse tax consequences if certain changes are made to the Eligible Options. Accordingly, Cyberonics is making this Offer so that each Eligible Optionee holding one or more Eligible Options will have the opportunity to amend or replace those options to the extent necessary to avoid such potential adverse taxation.

If an Eligible Option is tendered and accepted pursuant to the Offer, the amendment will adjust the exercise price per share currently in effect for the Eligible Option to the lower of (i) the Fair Market Value per share of Cyberonics common stock on the revised measurement date applied to that Eligible Option and (ii) the Fair Market Value per share of our common stock on the date on which the Eligible Option is amended. The new exercise price per share will be designated the “Adjusted Exercise Price” and will become effective on the first business day following the expiration of the Offer (the “Amendment Date”). The option as so amended for the Adjusted Exercise Price will be

designated an “Amended Option.” However, if the Adjusted Exercise Price as so determined would be the same or lower than the exercise price per share currently in effect for the Eligible Option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a new option that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date, and that replacement option will be designated a “New Option.” Such cancellation and regrant is necessary to evidence the remedial action required under Section 409A with respect to an Eligible Option whose current exercise price is not increased. Any New Option to be issued in cancellation of the Eligible Option that was granted under the 2005 Stock Plan will be granted under the 2005 Stock Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Stock Option Plan will be granted under the Cyberonics, Inc. 1998 Stock Option Plan. The “Fair Market Value” per share of our common stock on any date means the closing selling price per share of our common stock on the last market trading day prior to that date.

If only a portion of an outstanding option is an Eligible Option (i.e., the portion of the option that was unvested as of December 31, 2004), then only that portion may be amended or replaced pursuant to this Offer. The balance of that option will not be subject to this Offer and will not constitute an Eligible Option for purposes of this Offer. That balance (i.e., the portion that was vested as of December 31, 2004) will retain its current exercise price and will not be subject to adverse tax consequences under Section 409A of the Code.

Each Eligible Optionee whose Eligible Option is amended to increase the exercise price pursuant to this Offer will become entitled to a special cash bonus (the “Cash Bonus”) with respect to that option. The amount of the Cash Bonus payable with respect to each Eligible Option that is amended to increase the exercise price to the Adjusted Exercise Price will be determined by multiplying (i) the amount by which the Adjusted Exercise Price exceeds the exercise price per share currently in effect for that Eligible Option by (ii) the number of shares of Cyberonics common stock purchasable under that option at the Adjusted Exercise Price. The Cash Bonus will be paid on the Company’s first regular payroll date in January 2008. The delay in the payment of the Cash Bonus is required by applicable Internal Revenue Service (“IRS”) regulations. The payment, when made, will be subject to collection of all applicable withholding taxes required to be withheld by Cyberonics. The Cash Bonus will be paid whether or not you continue in the Company’s employ through the payment date.

If you are not in the employ of Cyberonics (or any Cyberonics subsidiary) on the expiration date of the Offer, then none of your tendered Eligible Options will be amended or replaced, and you will not become entitled to any Cash Bonus pursuant to this Offer. The tendered options will be returned to you and will remain exercisable in accordance with the terms in effect for them at the time of tender, including the current exercise price. If you take no other action to bring those options into compliance with Section 409A, then you may be subject to adverse taxation under Section 409A (and similar provisions under certain state tax laws).

The Offer set forth in this document and the related Letter of Transmittal will expire on the expiration date, currently set for July 6, 2007, unless extended (the “Expiration Date”).

If you are an Eligible Optionee, then we will send to you promptly after the commencement of the Offer a personalized Letter of Transmittal providing the following information with respect to each Eligible Option you hold:

• the grant date indicated for that option in the applicable option agreement or grant notice,

• the current exercise price per share in effect for that option,

• the revised measurement date for that option,

• the fair market value per share of Cyberonics common stock on the revised measurement date for that option,

• the number of shares subject to that option, and

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• the number of shares qualifying as an Eligible Option.

Subject to satisfaction of the conditions of the Offer, we currently intend to accept for amendment or replacement on the Expiration Date all Eligible Options tendered by Eligible Optionees who properly accept the Offer.

As of June 6, 2007, options to purchase approximately 3,253,554 shares of our common stock were issued and outstanding under the Plans, including Eligible Options to purchase up to approximately 369,928 shares of our common stock. We are making this Offer upon the terms and subject to the conditions set forth in this Offer, including the conditions described in Section 7. You are not required to accept the Offer. The Offer is not conditioned upon the acceptance of the Offer with respect to a minimum number of Eligible Options.

Although the Company’s Board of Directors has approved this Offer, neither we nor the Company’s Board of Directors will make any recommendation as to whether you should tender your Eligible Options for amendment or replacement. You must make your own decision whether to tender your Eligible Options, after taking into account your own personal circumstances and preferences. You should be aware that adverse tax consequences under Section 409A (and similar state tax laws) may apply to your Eligible Options if they are not amended or replaced pursuant to this Offer, and you will be solely responsible for any taxes, interest or penalties you may incur under Section 409A (and such state tax laws). For that reason, we recommend that you consult with your personal tax, financial and legal advisor to determine the consequences of accepting or declining the Offer.

Shares of our common stock are quoted on the Nasdaq Global Select Market under the symbol “CYBX.” On June 6, 2007, the last reported sale price of our common stock on the Nasdaq Global Select Market was $18.20 per share. Neither the exercise price currently in effect for each Eligible Option nor the Adjusted Exercise Price for each such option is meant to reflect our view of what the trading price of our common stock will be in the short-, medium- or long-term.

You should direct questions about the Offer or requests for assistance or for additional copies of this document, the related Tender Offer Statement on Schedule TO or the Letter of Transmittal to Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com.

We have not authorized anyone to give you any information or to make any representation in connection with this Offer other than the information and representations contained in this document, the related Tender Offer Statement on Schedule TO or in the related Letter of Transmittal. If anyone makes any representation or gives you any information that is different from the representations and information contained in this Offer, the related Tender Offer Statement on Schedule TO or the related Letter of Transmittal, you must not rely upon that representation or information as having been authorized by us. We have not authorized any person to make any recommendation on our behalf as to whether you should tender or refrain from tendering your Eligible Options pursuant to the Offer. If anyone makes any recommendation to you, you must not rely upon that recommendation as having been authorized by us. You should rely only on the representations and information contained in this Offer, the related Tender Offer Statement on Schedule TO and the related Letter of Transmittal to which we have referred you.

The Offer has not been approved or disapproved by the United States Securities and Exchange Commission (the “SEC”) or any state or foreign securities commission nor has the SEC or any state or foreign securities commission passed upon the accuracy or adequacy of the information contained in this Offer. Any representation to the contrary is a criminal offense. We recommend that you consult with your personal tax advisor to determine the tax consequences of electing to participate or not participate in the Offer.

IMPORTANT INFORMATION

If you wish to tender one or more of your Eligible Options for amendment or replacement, you must properly complete and sign the Letter of Transmittal in accordance with the applicable instructions for that form and submit

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that document and any other required documents to us by facsimile, overnight courier or email using the following contact information:

By Facsimile: Facsimile Number (281) 853-2503.
By Overnight Courier:	Cyberonics, Inc.
	100 Cyberonics Boulevard
	Houston, Texas 77058
	Attn: Tender Offer.
By Email: tenderoffer@cyberonics.com.

The key dates to remember in connection with the Offer are as follows:

The commencement date of the Offer is June 7, 2007.

The Offer will expire at 11:59 pm Central Time on July 6, 2007 (unless we extend the Offer).

The Eligible Options will be amended or replaced on July 9, 2007 (unless we extend the Offer).

The Cash Bonus for Amended Options will become payable on the Company’s first regular payroll date in January 2008.

We are not making the Offer to, nor will we accept any tender of Eligible Options on behalf of, option holders in any jurisdiction in which the Offer or the acceptance of any option tender would not be in compliance with the laws of such jurisdiction. However, we may, at our discretion, take any actions necessary for us to legally make the Offer to option holders in any such jurisdiction.

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TABLE OF CONTENTS

	PAGE
INDEX TO SUMMARY TERM SHEET		1
SUMMARY TERM SHEET		3
CERTAIN RISKS RELATED TO PARTICIPATING IN THE OFFER		13
THE OFFER		14
1. ELIGIBLE OPTIONEES; ELIGIBILE OPTIONS; AMENDMENT OF ELIGIBLE OPTIONS AND CASH BONUS; CANCELLATION OF ELIGIBLE OPTIONS AND GRANT OF NEW OPTIONS; EXPIRATION DATE; ADDITIONAL CONSIDERATIONS		14
2. PURPOSE OF THE OFFER		18
3. STATUS OF ELIGIBLE OPTIONS NOT AMENDED OR REPLACED		21
4. PROCEDURES FOR TENDERING ELIGIBLE OPTIONS		22
5. WITHDRAWAL RIGHTS		23
6. ACCEPTANCE OF ELIGIBLE OPTIONS FOR AMENDMENT OR REPLACEMENT AND COMMITMENT TO PAY CASH BONUS		24
7. CONDITIONS OF THE OFFER		24
8. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS		26
9. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF AMENDED OPTIONS OR NEW OPTIONS		27
10. AMENDED OPTIONS AND NEW OPTIONS WILL NOT DIFFER FROM ELIGIBLE OPTIONS		30
11. INFORMATION CONCERNING CYBERONICS		30
12. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS; AND MATERIAL AGREEMENTS WITH DIRECTORS AND OFFICERS		32
13. STATUS OF OPTIONS ACCEPTED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF THE OFFER		34
14. LEGAL MATTERS; REGULATORY APPROVALS		34
15. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES		35
16. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT		35
17. FEES AND EXPENSES		36
18. ADDITIONAL INFORMATION		36
19. FORWARD-LOOKING STATEMENTS; MISCELLANEOUS		37

SCHEDULE I	INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF CYBERONICS, INC.
SCHEDULE II	BENEFICIAL OWNERSHIP OF CYBERONICS SECURITIES BY CYBERONICS DIRECTORS AND EXECUTIVE OFFICERS

INDEX TO SUMMARY TERM SHEET

QUESTION		PAGE
1.	WHAT IS THE OFFER?		3
2.	WHY IS CYBERONICS MAKING THE OFFER?		4
3.	WHO IS ELIGIBLE TO PARTICIPATE IN THE OFFER?		4
4.	WHICH OPTIONS ARE ELIGIBLE FOR AMENDMENT OR REPLACEMENT PURSUANT TO THE OFFER?		4
5.	ARE CYBERONICS’ EXECUTIVE OFFICERS AND NON-EMPLOYEE BOARD MEMBERS ELIGIBLE TO PARTICIPATE IN THE OFFER?		5
6.	WHAT ARE THE COMPONENTS OF THE OFFER?		6
7.	WHAT HAPPENS IF I AM NOT AN EMPLOYEE ON THE EXPIRATION DATE?		6
8.	WHAT HAPPENS IF MY EMPLOYMENT TERMINATES ON OR AFTER THE EXPIRATION DATE BUT BEFORE THE AMENDMENT DATE?		6
9	WHAT ARE THE TAX CONSEQUENCES OF AN OPTION SUBJECT TO CODE SECTION 409A?		6
10.	WHAT ARE THE TAX CONSEQUENCES IF I ACCEPT THE OFFER?		8
11.	HOW WILL MY CASH BONUS BE TAXED?		8
12.	WHAT ARE THE TAX CONSEQUENCES IF I DO NOT ACCEPT THE OFFER?		8
13.	WHAT SECURITIES ARE SUBJECT TO THE OFFER?		8
14.	AM I REQUIRED TO PARTICIPATE IN THE OFFER?		9
15.	DO I HAVE TO ACCEPT THE OFFER WITH RESPECT TO ALL OF MY ELIGIBLE OPTIONS OR MAY I ACCEPT THE OFFER WITH RESPECT TO ONE OR MORE SELECTED OPTIONS?		9
16.	WILL THE TERMS AND CONDITIONS OF MY AMENDED OPTIONS OR NEW OPTIONS BE THE SAME AS THOSE CURRENTLY IN EFFECT FOR MY ELIGIBLE OPTIONS?		9
17.	WHEN WILL MY ELIGIBLE OPTION BE AMENDED OR REPLACED?		9
18.	WHAT HAPPENS IF THE FAIR MARKET VALUE OF THE CYBERONICS COMMON STOCK ON THE AMENDMENT DATE IS LESS THAN THE FAIR MARKET VALUE PER SHARE OF SUCH STOCK ON THE REVISED MEASUREMENT DATE OR GRANT DATE OF THE ELIGIBLE OPTION?		10
19.	WHEN CAN I EXERCISE MY AMENDED OPTIONS OR NEW OPTIONS?		10
20.	WHAT IF I EXERCISE MY ELIGIBLE OPTIONS AFTER I ACCEPT THE OFFER BUT BEFORE AMENDMENT OR REPLACEMENT?		10
21.	WILL MY AMENDED OPTIONS OR NEW OPTIONS BE INCENTIVE STOCK OPTIONS OR NON-STATUTORY OPTIONS?		10
22.	WHEN MAY I EXERCISE THE PORTION OF MY OPTIONS THAT WAS VESTED AS OF DECEMBER 31, 2004?		10
23.	WHAT ARE THE CONDITIONS OF THE OFFER?		11
24.	WHEN DOES THE OFFER EXPIRE? CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL I BE NOTIFIED IF IT IS EXTENDED?		11
25.	HOW AND WHEN DO I TENDER MY ELIGIBLE OPTIONS?		11

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QUESTION		PAGE
26.	DURING WHAT PERIOD OF TIME MAY I WITHDRAW MY PREVIOUSLY TENDERED OPTIONS?		11
27.	WHAT DOES CYBERONICS THINK OF THE OFFER?		12
28.	WHAT ARE SOME OF THE KEY DATES TO REMEMBER?		12
29.	WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?		12

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SUMMARY TERM SHEET

The following are answers to some of the questions that you may have about the Offer. We urge you to read carefully the remainder of this document and the accompanying Letter of Transmittal. The information in this summary and in the introductory pages preceding this summary is not complete and may not contain all of the information that is important to you. Additional important information is contained in the remainder of this document and the accompanying Letter of Transmittal. We have included page references to the relevant sections of the document where you can find a more complete description of the topics addressed in this summary term sheet.

1. WHAT IS THE OFFER?

The Offer is a voluntary opportunity for eligible optionees to elect to have certain outstanding options amended to increase their exercise price and receive a cash bonus with respect to such amendment or, in certain cases, to have their options cancelled for new options.

For purposes of this Offer, you should be familiar with the following terms.

     “Adjusted Exercise Price” is the new exercise price per share that will be in effect for any tendered Eligible Option that is amended pursuant to the Offer and will be equal to the lower of (i) the Fair Market Value per share of our common stock on the revised measurement date applicable to that option, and (ii) the Fair Market Value per share of our common stock on the date on which the option is amended. However, if the Adjusted Exercise Price as so determined would be the same or lower than the exercise price per share currently in effect for the Eligible Option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a new option that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date.

     Accordingly, the exercise price for a tendered Eligible Option that we amend or replace pursuant to the Offer will fall within one of the three following categories:

          (i) Full Increase: increased to the Fair Market Value per share of our common stock on the revised measurement date for that option;

          (ii) Partial Increase: increased to the Fair Market Value per share of our common stock on the date such option is amended; or

          (iii) No Increase: retained at the same exercise price per share for any New Option issued in replacement of that option.

     “Amended Option” will mean an Eligible Option that has been amended pursuant to the Offer to increase the exercise price per share for the common stock purchasable under that option to the Adjusted Exercise Price determined for such option.

     “Amendment Agreement” will mean the Stock Option Amendment and Cash Bonus Agreement that will document the Adjusted Exercise Price for each of your Amended Options and evidence our unconditional obligation to pay the Cash Bonus with respect to those Amended Options.

     “Amendment Date” will mean the date on which each Eligible Option is amended to increase the exercise price of that option to the Adjusted Exercise Price and will be July 9, 2007 or, if the Offer is extended, the first business day following the extended expiration date of the Offer.

     “Cash Bonus” is the special cash bonus to which each Eligible Optionee will become entitled if the current exercise price of one or more of his or her Eligible Options is increased pursuant to the Offer.

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     “Eligible Option” is an option that (i) was granted under the 1996 Stock Option Plan or the 2005 Stock Plan, (ii) has a revised measurement date for financial accounting purposes as a result of the recently completed review of our option grant practices, (iii) was unvested, in whole or in part, as of December 31, 2004, (iv) is held by an Eligible Optionee and (v) is outstanding on the expiration date of the Offer.

     “Eligible Optionee” is each person who is, on the expiration date of the Offer, a current employee of Cyberonics and subject to income taxation in the United States with respect to his or her Eligible Options.

     “Fair Market Value” per share of Cyberonics common stock on any relevant date will be deemed to be equal to the closing selling price per share of such stock on the last market trading day prior to that date on the Nasdaq Global Select Market.

     “Letter of Transmittal” is the form that the Eligible Optionee must use to notify Cyberonics as to the particular Eligible Options he or she has elected to tender for amendment or replacement pursuant to the terms of the Offer.

     “New Option” will mean the option granted under the 1998 Plan on the Amendment Date in replacement of a tendered Eligible Option with a current exercise price per share at or above the Adjusted Exercise Price determined for that option. The New Option will be exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but will have a new grant date. The New Option will be evidenced by a new option agreement that replaces the option documentation in effect for the cancelled option.

     “1998 Plan” will mean the Cyberonics, Inc. 1998 Stock Option Plan.

2. WHY IS CYBERONICS MAKING THE OFFER?

As a result of a recently completed review of our option grant practices, we concluded that we used incorrect measurement dates for financial accounting purposes for certain stock options granted between January 19, 2000 and September 25, 2006. These stock options are deemed, for accounting purposes, to have been granted at a discount. One or more of those affected options may also be deemed to have been granted at a discount for tax purposes and may be subject to adverse tax consequences under Section 409A of the Internal Revenue Code (the “Code”), to the extent that they remained unvested on December 31, 2004. Cyberonics decided to offer Eligible Optionees who hold options that may potentially be subject to Section 409A the opportunity to amend or replace each such option to avoid adverse taxation under Section 409A.

3. WHO IS ELIGIBLE TO PARTICIPATE IN THE OFFER?

You are an Eligible Optionee, and are, therefore, eligible to participate in the Offer if you are a current employee of Cyberonics (or a subsidiary of Cyberonics) on the expiration date of the Offer and are subject to income taxation in the United States with respect to your Eligible Options. However, executive officers of the Company and members of the Company’s Board of Directors are not eligible to participate in the Offer.

4. WHICH OPTIONS ARE ELIGIBLE FOR AMENDMENT OR REPLACEMENT PURSUANT TO THE OFFER?

An outstanding option to purchase shares of Cyberonics common stock will be eligible for amendment or replacement pursuant to the Offer if that option meets all of the following conditions:

(i) The option was granted under one of the following stock incentive plans (the “Plans”):

– the 1996 Stock Option Plan (the “1996 Plan”), or

– the 2005 Stock Plan (the “2005 Plan”);

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(ii) The option has a revised measurement date for financial accounting purposes as a result of our review;

(iii) All or a portion of the option was unvested as of December 31, 2004;

(iv) The option is held by an individual who is, on the expiration of this Offer, an Eligible Optionee; and

(iv) The option is outstanding on the expiration date of this Offer.

An option that meets all of the foregoing conditions will constitute an “Eligible Option” for purposes of the Offer. If only a portion of a particular option grant meets those conditions (i.e.— only the portion that was unvested at December 31, 2004), then only that portion will be considered an Eligible Option, and the balance of that option will not be eligible for amendment or replacement pursuant to this Offer. (Page 14)

The grant date indicated for each Eligible Option in the applicable option agreement or grant notice and the exercise price per share currently in effect for that option are set forth on page 15 of this document. Your individualized Letter of Transmittal that will be sent to you promptly after the commencement of the Offer will also set forth the revised measurement date for each Eligible Option you hold, the Fair Market Value per share of our common stock on that date, the number of shares of common stock subject to that option and the number of shares qualifying as an Eligible Option and subject to adjustment under this Offer.

5. ARE CYBERONICS’ EXECUTIVE OFFICERS AND NON-EMPLOYEE BOARD MEMBERS ELIGIBLE TO PARTICIPATE IN THE OFFER?

None of our executive officers or non-employee members of the Cyberonics Board of Directors are eligible to participate in the Offer.

However, the following officers and directors each hold stock options under the Plans that would have been Eligible Options but for the fact that the exercise prices for those options were amended on terms similar to the terms of this Offer on December 31, 2006: Richard L. Rudolph, M.D., Vice President, Clinical and Medical Affairs Chief Medical Officer, Randal L. Simpson, Vice President, Operations, Michael A. Cheney, Vice President, Marketing, Reese S. Terry, Jr., Director and Chief Executive Officer (interim), Michael J. Strauss, M.D., M.P.H., Director, and Alan J. Olsen, Director. Internal Revenue Service (“IRS”) regulations required those particular options held by our executive officers and directors to be so amended prior to January 1, 2007.

With respect to Messrs. Rudolph, Simpson and Cheney, the December 31, 2006 amendment increased the per share exercise prices previously in effect for the shares of Cyberonics common stock purchasable under the portions of the respective outstanding options held by such individuals that would have been Eligible Options pursuant to this Offer had they not been so amended. In each instance, the amended exercise price per share is equal to the Fair Market Value per share of the common stock on the Nasdaq Global Select Market on the revised measurement date determined for each such option in accordance with applicable financial accounting principles. These executive officers and directors are entitled to receive a cash bonus from us to compensate them for the increase to the exercise prices of their amended options. However, the bonus is subject to vesting and accordingly is payable with respect to option shares that have vested as of January 1, 2008 on January 15, 2008 and with respect to the remaining shares on the date of vesting of such shares.

With respect to Messrs. Terry, Strauss and Olsen, the December 31, 2006 amendment increased the per share exercise prices previously in effect for the shares of Cyberonics common stock purchasable under the respective outstanding options held by such individuals (including the portions of such options that would have been Eligible Options pursuant to this Offer had they not been amended). However, these individuals will not receive a bonus to compensate them for such increase.

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Two other former executive officers, Pamela B. Westbrook and Alan D. Totah, also had the exercise prices for certain of their options similarly increased. Ms. Westbrook will not receive cash bonuses to compensate her for the higher exercise prices; however, Mr. Totah is entitled to receive a cash bonus for the increased exercise prices upon terms similar to those described above for bonuses payable to other executive officers.

Richard L. Rudolph, M.D., and Randal Simpson, each hold one or more options that would be Eligible Options and that were not amended on December 31, 2006 but they are not eligible to participate in the Offer. (Page 33)

6. WHAT ARE THE COMPONENTS OF THE OFFER?

If an Eligible Option is amended pursuant to the Offer, then the exercise price of that option will be increased to the lower of (i) the Fair Market Value per share on the revised measurement date applicable to that option and (ii) the Fair Market Value per share of Cyberonics common stock on the Amendment Date. In addition, each Eligible Optionee whose Eligible Options are so amended will become entitled to a special cash bonus from Cyberonics (the “Cash Bonus”). The amount of the Cash Bonus payable with respect to each Amended Option will be determined by multiplying (i) the amount by which the Adjusted Exercise Price exceeds the exercise price per share currently in effect for that Eligible Option by (ii) the number of shares of our common stock purchasable under that option at the Adjusted Exercise Price. The Cash Bonus will be paid on the Company’s first regular payroll date in January 2008. The delayed payment is required by applicable IRS regulations. The payment when made will be subject to collection of all applicable withholding taxes. The Cash Bonus will be paid whether or not you continue in our employ through the payment date. (Page 16)

However, if the Adjusted Exercise Price determined for any tendered Eligible Option would be the same or lower than the exercise price per share currently in effect for that option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a New Option that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date. The cancellation and regrant is necessary to evidence the remedial action required under Section 409A with respect to an Eligible Option whose current exercise price is not increased. Any New Option to be issued in cancellation of the Eligible Option that was granted under the 2005 Plan will be granted under the 2005 Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Plan will be granted under the 1998 Plan. (Page 17)

7. WHAT HAPPENS IF I AM NOT AN EMPLOYEE ON THE EXPIRATION DATE?

If you are not an employee of Cyberonics (or any Cyberonics subsidiary) on the expiration date of the Offer, then you will not be eligible to participate in the Offer and none of your tendered Eligible Options will be amended or replaced, and you will not be entitled to any Cash Bonus with respect to those options. The tendered options will be returned to you and will remain exercisable in accordance with the terms in effect for them at the time of tender, including the current exercise price per share. If you take no other action to bring those options into compliance with Section 409A, then you may be subject to adverse taxation in the manner discussed below.

8. WHAT HAPPENS IF MY EMPLOYMENT TERMINATES ON OR AFTER THE EXPIRATION DATE BUT BEFORE THE AMENDMENT DATE?

If your employment with Cyberonics (or any Cyberonics subsidiary) terminates on or after the expiration date of the Offer but prior to the Amendment Date, none of your tendered Eligible Options will be amended or replaced, and you will not be entitled to any Cash Bonus with respect to those options. The tendered Eligible Options will be returned to you and will remain exercisable in accordance with the terms in effect for them at the time of tender, including the current exercise price per share. If you take no other action to bring those options into compliance with Section 409A, then you may be subject to adverse taxation in the manner discussed below.

9. WHAT ARE THE TAX CONSEQUENCES OF AN OPTION SUBJECT TO CODE SECTION 409A?

Section 409A was added to the Code by the American Jobs Creation Act of 2004. Section 409A and the U.S. Treasury regulations issued thereunder provide that a stock option granted with an exercise price per share below the

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fair market value of the underlying shares on the grant date will, to the extent that option was not vested as of December 31, 2004, be subject to the adverse tax consequences of Section 409A. Unless certain remedial action is taken prior to the earlier of (i) December 31, 2007 or (ii) the date the optionee exercises his or her Eligible Options, Section 409A will subject the optionee to the following adverse tax consequences beginning with the 2008 calendar year.

     Taxation in Calendar Year 2008. To the extent the optionee continues to hold in the 2008 calendar year unexercised Eligible Options that vested prior to that year or that vest during such year, the optionee will recognize taxable income for the 2008 calendar year in an amount equal to the fair market value of those shares on the applicable tax measurement date less the aggregate exercise price payable for those shares. The optionee will have to report that income in his or her tax return filed for the 2008 calendar year even though the Eligible Option is not yet exercised for those shares during that year. The IRS has not yet provided guidance as to the applicable tax measurement date for determining an optionee’s taxable income but it is possible that such date will be the earlier of (i) the date the optionee exercises the Eligible Option during the 2008 calendar year or (ii) December 31, 2008.

     Tax Penalty. In addition to normal income taxes payable on the income recognized under each of the optionee’s Eligible Options on the applicable tax measurement date for the 2008 calendar year, the optionee would also be subject to an additional tax penalty equal to 20% of such income.

     Interest Penalty Measured From Year of Vesting. To the extent the Eligible Option outstanding in the 2008 calendar year vested as to one or more shares during the 2005 calendar year, the optionee will incur an interest penalty payable with his or her tax return for the 2008 calendar year. The interest penalty will be based on the income taxes the optionee would have incurred for the 2005 calendar year had he or she been taxed on the spread which existed on those vested shares on December 31, 2005 (the amount by which the December 31, 2005 fair market value of the shares which vested under the Eligible Option during the 2005 calendar year exceeded the exercise price payable for those shares). For purposes of such calculation, the optionee’s tax rate will be deemed to be 35%, and that tax rate will be applied to the December 31, 2005 option spread on the shares which vested under the Eligible Option during the 2005 calendar year. The income tax amount resulting from such calculation is not actually payable for the 2005 calendar year, but will trigger an interest penalty under Section 409A for the period beginning April 15, 2006 and continuing until the date the optionee pays the accrued interest with his or her taxes for the 2008 calendar year. To the extent the Eligible Option vested as to one or more shares during the 2006 calendar year, the optionee would perform the same calculation based on the December 31, 2006 fair market value of the shares which vested during that year, and the interest penalty would accrue over the period beginning April 15, 2007 and continuing until the optionee pays the accrued interest with his or her taxes for the 2008 calendar year. The same calculation would also be applicable for any shares which vested under the Eligible Option during the 2007 calendar year based on the option spread which existed on those particular shares on December 31, 2007, and the interest penalty would accrue from April 15, 2008 until the optionee pays the accrued interest with his or her 2008 calendar year taxes. Finally, there would also be an additional interest penalty with respect to the shares which vested in the 2005, 2006 and 2007 calendar years but remain unexercised in the 2008 calendar year, to the extent their year-end fair market value in each calendar year subsequent to the calendar year of vesting is greater than their year-end fair market value in the immediately preceding calendar year. The interest penalty would accrue from April 15, 2007 until the date the optionee pays that accrued interest with his or her 2008 calendar year taxes.

     Vesting in Subsequent Calendar Years. To the extent an Eligible Option first vests in a calendar year after the 2008 calendar year, the optionee will be subject to income taxation and penalty taxes on the spread which exists between the fair market value of the shares which vest during that year and the exercise price payable for those shares. Such spread will be calculated on the applicable tax measurement date for such year.

     Continued Taxation of Vested Shares. The optionee will be subject to additional income taxation and penalty taxes on any subsequent increases to the fair market value of his or her vested option shares which occur in calendar years after the calendar year in which those shares are first taxed under Section 409A. Such taxation will continue until the optionee exercises the options or those options terminate.

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     Note: The IRS has not yet provided any guidance as to how the additional taxable income is to be measured over the period the options remain outstanding after the 2007 calendar year.

     State Taxes. Certain states, including California, have adopted provisions similar to Section 409A under their tax laws, and for optionees subject to income taxation in such states, the total penalty tax could be up to 40% (a 20% federal penalty tax and up to a 20% state penalty tax).

An example illustrating the applicable tax consequences may be found on Page 20 of this document.

10. WHAT ARE THE TAX CONSEQUENCES IF I ACCEPT THE OFFER?

If you tender your Eligible Options, you will not recognize any taxable income for U.S. federal income tax purposes at the time of the tender or at the time your Eligible Options are amended to adjust the exercise price or replaced with a New Option.

By amending the exercise prices of your Eligible Options to the applicable Adjusted Exercise Prices or replacing those options with New Options, you should avoid the adverse tax taxation of those options under Section 409A. Accordingly, you will not be subject to taxation under Section 409A on your vested Eligible Options in calendar year 2008 and as your Amended Options or New Options vest in one or more subsequent calendar years, you will not recognize taxable income with respect to the option shares that vest in those years, and you will not be subject to any 20% penalty tax or any interest penalty under Code Section 409A. You should only be taxed with respect to your Amended Options or New Options when you exercise those options. However, you will recognize taxable income when you receive the Cash Bonus paid with respect to your Amended Options. (Page 35)

All Eligible Optionees should consult with their own personal tax, financial and legal advisors as to the tax and other consequences of accepting or declining the Offer.

11. HOW WILL MY CASH BONUS BE TAXED?

You will be taxed upon receipt of the Cash Bonus. The payment will constitute wages for tax withholding purposes. Accordingly, Cyberonics must withhold all applicable U.S. federal, state and local income and employment withholding taxes required to be withheld with respect to such payment. You will receive only the portion of the payment remaining after all those taxes have been withheld. (Page 35)

If your Eligible Options are not amended pursuant to the Offer, you will not receive any Cash Bonus with respect to those options. No Cash Bonus will be paid with respect to a New Option because the exercise price for that option will be the same as the exercise price in effect for the tendered Eligible Option it replaces. (Page 17)

12. WHAT ARE THE TAX CONSEQUENCES IF I DO NOT ACCEPT THE OFFER?

If you choose not to tender your Eligible Options and take no other action to bring those options into compliance with Section 409A, then you may be subject to the adverse taxation under Section 409A (and similar state tax laws) in the manner discussed above. You will be solely responsible for any taxes, penalties or interest you may incur under Section 409A (and state tax laws). An example illustrating the applicable tax consequences may be found on Page 20 of this document.

13. WHAT SECURITIES ARE SUBJECT TO THE OFFER?

The Offer covers only Eligible Options. Promptly after the commencement of the Offer we will send to you (by mail or email) a personalized Letter of Transmittal summarizing the Eligible Options that you currently hold, including information relating to the grant date indicated for each Eligible Option, the current exercise price per share in effect for that option, the revised measurement date applicable to that option, the number of shares subject to that option and the number of shares qualifying as an Eligible Option. (Page 14)

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14. AM I REQUIRED TO PARTICIPATE IN THE OFFER?

No. Participation in the Offer is voluntary. You may choose either to tender your Eligible Options for amendment or replacement pursuant to the Offer or to retain the current exercise prices for those options and seek another alternative to bring those options into compliance with Section 409A. If you decide to accept the Offer, you must timely submit a properly completed Letter of Transmittal for your tendered Eligible Options. (Page 21)

If you choose not to tender your Eligible Options and take no other action to bring those options into compliance with Section 409A, then you may be subject to the adverse taxation under Section 409A (and similar state tax laws). You will be solely responsible for any taxes, penalties or interest payable under Section 409A (and state tax laws). (Page 21)

15. DO I HAVE TO ACCEPT THE OFFER WITH RESPECT TO ALL OF MY ELIGIBLE OPTIONS OR MAY I ACCEPT THE OFFER WITH RESPECT TO ONE OR MORE SELECTED OPTIONS?

If you hold more than one Eligible Option, then you may elect to tender one or more of those options and retain the balance. If you wish to accept this Offer with respect to a particular Eligible Option, you must tender all of that option for amendment or replacement. Please remember that not all of a particular outstanding option grant may be an Eligible Option. Only the portion of that grant that was not vested as of December 31, 2004 constitutes an Eligible Option. (Page 22)

16. WILL THE TERMS AND CONDITIONS OF MY AMENDED OPTIONS OR NEW OPTIONS BE THE SAME AS THOSE CURRENTLY IN EFFECT FOR MY ELIGIBLE OPTIONS?

Except for the adjustment to the exercise price per share, each Eligible Option that is amended pursuant to this Offer will continue to remain subject to the same terms and conditions as in effect for such option immediately prior to the amendment. Accordingly, each Amended Option will vest in accordance with the same vesting schedule measured from the same vesting commencement date and will have the same exercise period, option term and other conditions currently in effect for that option. (Page 30)

Each New Option granted pursuant to this Offer will be subject to the same terms and conditions as the tendered Eligible Option it replaces, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date. Any New Option to be issued in cancellation of the Eligible Option that was granted under the 2005 Plan will be granted under the 2005 Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Plan will be granted under the 1998 Plan. (Page 30)

17. WHEN WILL MY ELIGIBLE OPTION BE AMENDED OR REPLACED?

The exercise price for each Eligible Option tendered pursuant to this Offer will be amended to the applicable Adjusted Exercise Price on July 9, 2007, or if the Offer is extended, the first business day following the extended expiration date. The date the exercise price for an Eligible Option is increased to the applicable Adjusted Exercise Price will constitute the Amendment Date, and each Eligible Option that is so amended will be designated an Amended Option. However, each tendered Eligible Option with a current exercise price at or above the Adjusted Exercise Price determined for that option will, on the Amendment Date, be cancelled and immediately replaced with a new option that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date. That replacement option will be designated a New Option.

As soon as administratively practicable after the Amendment Date, we will deliver to you a final and complete Amendment Agreement that will reflect the adjustment to the exercise price of each of your Amended Options and our unconditional obligation to pay you on the date of the Company’s first regular payroll date in January, 2008 the Cash Bonus calculated for each Amended Option. If any of your tendered Eligible Options are cancelled and replaced with a New Option, then as soon as administratively practicable after the Amendment Date, you will receive a new option agreement for any such New Option granted in replacement of a tendered Eligible Option. (Page 23)

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18. WHAT HAPPENS IF THE FAIR MARKET VALUE OF THE CYBERONICS COMMON STOCK ON THE AMENDMENT DATE IS LESS THAN THE FAIR MARKET VALUE PER SHARE OF SUCH STOCK ON THE REVISED MEASUREMENT DATE OR GRANT DATE OF THE ELIGIBLE OPTION?

If the Fair Market Value per share of Cyberonics common stock on the Amendment Date is less than the Fair Market Value of such common stock on the revised measurement date applied to the Eligible Option, then the Adjusted Exercise Price for that option will be set at the Fair Market Value per share of Cyberonics common stock on the Amendment Date. However, if that Adjusted Exercise Price would be the same or lower than the exercise price per share currently in effect for the Eligible Option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a New Option with the same exercise price as the cancelled option. (Page 17)

19. WHEN CAN I EXERCISE MY AMENDED OPTIONS OR NEW OPTIONS?

You may exercise an Amended Option for vested option shares at any time following the Amendment Date and prior to its termination. You may exercise a New Option at any time after grant and prior to termination. However, an Amended Option or a New Option may not be exercised for more than the vested number of shares for which it is at the time exercisable. Any such exercise must be subject to our insider trading policies and any interim blackout periods during which cashless exercises and sales to cover are prohibited.

20. WHAT IF I EXERCISE MY ELIGIBLE OPTIONS AFTER I ACCEPT THE OFFER BUT BEFORE AMENDMENT OR REPLACEMENT?

If you choose to exercise your Eligible Options prior to the Amendment Date, assuming such exercise complies with the existing terms of your Eligible Options, our insider trading policy and any interim blackout periods during which cashless exercises and sales to cover are prohibited, then any election you have made to accept the Offer as to the exercised options will be null and void. Consequently, you may incur adverse tax consequences under Section 409A (and similar state tax laws) with respect to any Eligible Options you exercise prior to the Amendment Date. You will be solely responsible for any taxes, penalties or interest payable under Section 409A (and state tax laws).

21. WILL MY AMENDED OPTIONS OR NEW OPTIONS BE INCENTIVE STOCK OPTIONS OR NON-STATUTORY OPTIONS?

Because your Eligible Options may be deemed to be below-market options, they are considered non-statutory options under the U.S. federal income tax laws, and they will remain non-statutory options after the amendment to the Adjusted Exercise Price. Therefore, when you subsequently exercise your Amended Options, you will recognize immediate taxable income equal to the excess of (i) the fair market value of the purchased shares at the time of exercise over (ii) the Adjusted Exercise Price paid for those shares, and Cyberonics must collect the applicable withholding taxes with respect to such income. All New Options will also be taxable as non-statutory options. (Page 35)

22. WHEN MAY I EXERCISE THE PORTION OF MY OPTIONS THAT WAS VESTED AS OF DECEMBER 31, 2004?

You may exercise the portion of each of your options that was vested as of December 31, 2004 at any time prior to the termination or expiration of that option subject to our insider trading policies and any interim blackout periods during which cashless exercises and sales to cover are prohibited. Such portion is not subject to the Offer and will not be subject to adverse taxation under Section 409A.

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23. WHAT ARE THE CONDITIONS OF THE OFFER?

The Offer is subject to a number of conditions, including the conditions described in Section 7. The Offer is not conditioned upon the tender of a minimum number of Eligible Options for amendment. (Page 24)

24. WHEN DOES THE OFFER EXPIRE? CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL I BE NOTIFIED IF IT IS EXTENDED?

The Offer will expire on July 6, 2007, at 11:59 p.m. Central Time, unless we extend the Offer.

Although we do not currently intend to do so, we may, in our discretion, extend the Offer at any time. If the Offer is extended, we will send you an email or other communication informing you of the extension no later than 9:00 a.m. Eastern Time on the business day immediately following the previously scheduled expiration of the Offer period. (Page 17; Page 36)

25. HOW AND WHEN DO I TENDER MY ELIGIBLE OPTIONS?

To tender one or more of your Eligible Options for amendment or replacement pursuant to the Offer, you must properly complete and duly execute your Letter of Transmittal and timely deliver it to Cyberonics by facsimile, overnight courier or email using the following contact information:

By Facsimile: Facsimile Number (281) 853-2503.
By Overnight Courier:	Cyberonics, Inc.
	100 Cyberonics Boulevard
	Houston, Texas 77058
	Attn: Tender Offer.
By Email: tenderoffer@cyberonics.com.

We must receive your completed Letter of Transmittal before 11:59 p.m. Central Time on July 6, 2007. If we extend the Offer beyond that time, you must deliver your completed and executed Letter of Transmittal before the extended expiration date of the Offer. (Page 22)

We will not accept delivery of any Letter of Transmittal after expiration of the Offer. If we do not receive a properly completed and duly executed Letter of Transmittal from you prior to the expiration of the Offer, we will not accept your Eligible Options for amendment or replacement. Those options will not be amended or replaced pursuant to this Offer, and no Cash Bonus will be paid with respect to those options.

We reserve the right to reject any or all tenders of Eligible Options that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we intend to accept all properly and timely tendered Eligible Options that are not validly withdrawn. Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will accept all properly tendered Eligible Options upon the expiration of the Offer, and we will amend or replace those options on the next business day thereafter. (Page 23)

26. DURING WHAT PERIOD OF TIME MAY I WITHDRAW MY PREVIOUSLY TENDERED OPTIONS?

You may withdraw your tendered Eligible Options at any time before 11:59 p.m. Central Time on July 6, 2007. If we extend the Offer beyond that time, you may withdraw your tendered Eligible Options at any time until the extended expiration date of the Offer. To withdraw your tendered options, you must send to us by facsimile at facsimile number (281) 853-2503, by overnight courier to Cyberonics, Inc., 100 Cyberonics Boulevard, Houston, Texas 77058, Attn: Tender Offer or by email to tenderoffer@cyberonics.com, a properly completed and executed Withdrawal Form, with the required information while you still have the right to withdraw those options. We must receive your completed Withdrawal Form before 11:59 p.m. Central Time on July 6, 2007 (or until any extended

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expiration of the Offer). If you have withdrawn your Eligible Options and decide again that you want to participate in the Offer, you must re-tender those options pursuant to this Offer by following the tender procedures, as described in this document and the Letter of Transmittal, prior to the expiration of the Offer. (Page 23)

27. WHAT DOES CYBERONICS THINK OF THE OFFER?

Although the Cyberonics Board of Directors has approved the Offer, neither the Company nor the Cyberonics Board of Directors makes any recommendation as to whether you should tender or refrain from tendering your Eligible Options for amendment or replacement. You must make your own decision whether to tender your Eligible Options, after taking into account your own personal circumstances and preferences. Cyberonics recommends that you consult with your personal tax, financial and legal advisors when deciding whether or not you should tender your Eligible Options. (Page 21)

28. WHAT ARE SOME OF THE KEY DATES TO REMEMBER?

The commencement date of the Offer is June 7, 2007.

The Offer will expire at 11:59 pm Central Time on July 6, 2007 (unless we extend the Offer).

The Eligible Options will be amended or replaced on July 9, 2007 (unless we extend the Offer).

Payment of the Cash Bonus: The Cash Bonus for Amended Options will become payable on the Company’s first regular payroll date in January 2008.

29. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?

For additional information or assistance, you should contact Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com.

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CERTAIN RISKS RELATED TO PARTICIPATING IN THE OFFER

Participating in the Offer involves risks discussed in this Offer and described below. In addition, information concerning risk factors included in our Annual Report on Form 10-K for the fiscal year ended April 28, 2006 and subsequent quarterly reports on Form 10-Q are incorporated by reference herein and may be inspected at, and copies may be obtained from, the places and in the manner described in Section 18 “Additional Information.” You should carefully consider these risks and are encouraged to consult your investment, tax and legal advisors before deciding to participate in the Offer.

Tax-Related Risks.

The discussion in Section 2 and Section 15 of the Offer describes the material U.S. federal income tax consequences if you participate in the Offer or if you elect not to participate. State and local laws may provide different tax treatment. In addition, certain states, including California, have adopted provisions similar to Section 409A. If you are subject to income taxation in those states, you may incur additional taxes, interest and penalties under such provisions if you do not bring your Eligible Options into compliance.

All option holders should consult with their own personal tax, financial and legal advisors as to the tax and other consequences of their participation in the Offer.

Procedural Risks.

You are responsible for making sure that your Letter of Transmittal and any subsequent Withdrawal Form are received by the designated recipient at Cyberonics prior to the expiration time. We intend to confirm the receipt of your Letter of Transmittal or any subsequent Withdrawal Form within two business days after receipt. If you have not received a confirmation within this time period, you should confirm that we have received your submissions by contacting Tabetha L. Yllander at (281) 727-2448 or tenderoffer@cyberonics.com. If we do not have a record of receipt of your submissions, we may request that you show us evidence of those submissions. We recommend that you keep a copy of your submissions and proof of delivery or other transmittal in case we ask you for evidence of timely submission.

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THE OFFER

1. ELIGIBLE OPTIONEES; ELIGIBILE OPTIONS; AMENDMENT OF ELIGIBLE OPTIONS AND CASH BONUS; CANCELLATION OF ELIGIBLE OPTIONS AND GRANT OF NEW OPTIONS; EXPIRATION DATE; ADDITIONAL CONSIDERATIONS.

As a result of a recently completed review of our option grant practices, we concluded that we used incorrect measurement dates for financial accounting purposes for certain stock options granted between January 19, 2000 and September 25, 2006. These stock options are deemed, for accounting purposes, to have been granted at a discount. One or more of those affected options may also be deemed to have been granted at a discount for tax purposes and may be subject to adverse tax consequences under Section 409A of the Internal Revenue Code (the “Code”), to the extent that they remained unvested on December 31, 2004. Cyberonics decided to offer Eligible Optionees (as defined below) who hold options that may potentially be subject to Section 409A the opportunity to amend or replace each such option to avoid adverse taxation under Section 409A.

Eligible Optionees

Individuals to whom Eligible Options have been granted by Cyberonics will be Eligible Optionees for purposes of the Offer if they are, on the expiration date of the Offer, a current employee of Cyberonics (or any Cyberonics subsidiary) and subject to income taxation in the United States with respect to those options.

None of the non-employee members of the Cyberonics Board of Directors or executive officers are eligible to participate in the Offer.

Eligible Options

An outstanding option to purchase shares of Cyberonics common stock will be eligible for amendment or replacement pursuant to the Offer if that option meets all of the following conditions:

(i) The option was granted under one of the following Cyberonics stock incentive plans (the “Plans”):

• the 1996 Stock Option Plan (the “1996 Plan”), or

• the 2005 Stock Plan (the “2005 Plan”);

(ii) The option has a revised measurement date for financial accounting purposes as a result of the recent review of our option grant practices;

(iii) All or a portion of the option was unvested as of December 31, 2004;

(iv) The option is held by an individual who is, on the expiration of this offer, an Eligible Optionee; and

(v) The option is outstanding on the expiration date of the Offer.

An option that meets all of the foregoing conditions will constitute an “Eligible Option” for purposes of the Offer. If only a portion of a particular option grant meets those conditions (i.e.- only the portion that was unvested at December 31, 2004), then only that portion will be considered an Eligible Option, and the balance of that option will not be eligible for amendment pursuant to the Offer.

The following chart provides information concerning the grant date indicated in the option agreement or grant notice for each Eligible Option subject to the Offer and the exercise price per share currently in effect for that option. Your individualized Letter of Transmittal that will be sent to you promptly after the commencement of the Offer also sets

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forth the revised measurement date for each of your Eligible Options, the fair market value per share of our common stock on that date, the number of shares of common stock subject to each such option and the number of shares qualifying as an Eligible Option.

Indicated Grant	Current Exercise Price
Date	Per Share
01/19/2000		19.6875
02/01/2000		23.00
03/23/2000		17.125
06/21/2000		13.50
07/12/2000		15.25
08/16/2000		12.25
10/11/2000		17.4375
10/31/2000		22.50
12/04/2000		22.125
12/20/2000		20.00
01/22/2001		20.00
02/13/2001		20.9375
03/26/2001		14.0625
04/12/2001		13.15
04/30/2001		11.47
05/15/2001		11.19
06/25/2001		12.80
07/06/2001		15.10
07/24/2001		15.79
08/01/2001		16.75
08/23/2001		15.56
09/24/2001		14.00
10/26/2001		14.88
11/12/2001		16.03
11/26/2001		21.98
12/11/2001		23.85
12/24/2001		25.13
01/24/2002		12.45
01/28/2002		12.55
02/26/2002		14.15
03/11/2002		14.32
03/26/2002		15.24
07/16/2002		9.31
07/24/2002		9.96
08/06/2002		12.95
12/20/2002		17.70
07/01/2003		21.56
07/22/2003		20.77
09/17/2003		28.45
09/29/2003		30.21
06/15/2004		19.58
06/06/2005		37.43
09/26/2005		31.71
02/13/2006		29.65
09/25/2006		17.04

Amendment of Eligible Options and Cash Bonus

Subject to the terms and conditions of the Offer, we will amend or replace each Eligible Option that is properly tendered by an Eligible Optionee in accordance with Section 4, and not validly withdrawn in accordance with Section 5, before the Expiration Date (as defined below). The exercise price of each Eligible Option that is amended pursuant to the Offer will be increased to the lower of (i) the Fair Market Value per share of Cyberonics common stock on the revised measurement date applied to that option or (ii) the Fair Market Value per share of our common stock on the date on which the option is amended. The new exercise price per share will be designated the “Adjusted Exercise Price” and will become effective on the first business day following the expiration of the Offer (the “Amendment Date”). The option as so amended for the Adjusted Exercise Price will be designated an “Amended Option.” The “Fair Market Value” per share of our common stock on any date will be equal to the closing selling price per share on the last market trading day prior to that date.

To the extent an Eligible Option was vested as of December 31, 2004, that portion of the option would not be subject to taxation under Section 409A and will not be an Eligible Option for purposes of the Offer. Accordingly, the Adjusted Exercise Price would not be in effect for the portion of an affected option that was vested as of December 31, 2004. The Adjusted Exercise Price will apply only to the portion of an affected option that was not vested as of December 31, 2004.

Each Amended Option will continue to vest in accordance with the same vesting schedule measured from the same vesting commencement date currently in effect for that option. No change to the vesting schedule will occur by reason of the amendment. In addition, except for the Adjusted Exercise Price, the other terms and provisions of

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each Amended Option will be identical to the terms and provisions in effect for each such Eligible Option immediately prior to the amendment incorporating the Adjusted Exercise Price.

Each Eligible Optionee whose Eligible Options are amended pursuant to the Offer will become entitled to a special cash bonus (the “Cash Bonus”) from Cyberonics. The amount of the Cash Bonus payable with respect to each Amended Option will be determined by multiplying (i) the amount by which the Adjusted Exercise Price exceeds the exercise price per share currently in effect for that Eligible Option by (ii) the number of shares of our common stock purchasable under that option at the Adjusted Exercise Price. The Cash Bonus will be paid on the Company’s first regular payroll date in January 2008. The delay in the payment of the Cash Bonus is required by applicable Internal Revenue Service (“IRS”) regulations. The payment, when made, will be subject to Cyberonics’ collection of all taxes and payments required to be withheld by us. The Cash Bonus will be paid whether or not the Eligible Optionee continues in our employ through the payment date.

EXAMPLE 1: Assume that you were granted an option to purchase 10,000 shares that had a grant date of June 25, 2001 and an exercise price per share of $12.80. That option vests in four successive equal annual installments over the four-year period measured from June 25, 2001. As of December 31, 2004, the option was accordingly unvested as to 2,500 of those shares and has not been exercised. Further assume that the Fair Market Value of our common stock was $16.45 per share on the revised measurement date for that option and that the Fair Market Value of our common stock on the Amendment Date is $20.00 per share. The portion of your June 25, 2001 grant that was unvested as of December 31, 2004 constitutes an Eligible Option for purposes of this Offer. No other portion of that option may be tendered pursuant to the Offer.

If you tender the portion constituting your Eligible Option, then that Eligible Option will be amended to increase the exercise price to $16.45 per share for the 2,500 shares subject to the tendered grant. No other change will be made to your June 25, 2001 option. In addition, you will receive a Cash Bonus in the amount of $9,125.00 determined by multiplying (i) $3.65 (the amount by which the $16.45 Adjusted Exercise Price for that option exceeds the $12.80 per share exercise price previously in effect for that option) by (ii) the 2,500 shares purchasable under the June 25, 2001 option at the $16.45 per share Adjusted Exercise Price.

Your Cash Bonus will become payable on the first regular payroll date in January 2008, subject to collection of all applicable withholding taxes.

EXAMPLE 2: Assume that you were granted an option to purchase 10,000 shares that had a grant date of November 12, 2001 and an exercise price per share of $16.03. That option vests in four successive equal annual installments over the four-year period measured from November 12, 2001. As of December 31, 2004, that option was accordingly unvested as to 2,500 of those shares and has not been exercised. Further assume that the Fair Market Value per share of our common stock was $21.05 on the revised measurement date for that option and that the Fair Market Value of our common stock on the Amendment Date is $20.00 per share. The portion of your November 12, 2001 grant that was unvested as of December 31, 2004 constitutes an Eligible Option for purposes of the Offer.

If you tender the portion constituting your Eligible Option, then that Eligible Option will be amended to increase the exercise price to $20.00 per share for the 2,500 shares subject to the tendered grant. No other change will be made to your option. In addition, you will receive a Cash Bonus in the amount of $9,925 determined by multiplying (i) $3.97 (the amount by which the $20.00 Adjusted Exercise Price for that option exceeds the $16.03 per share exercise price previously in effect for that option) by (ii) the 2,500 shares purchasable under the option at the $20.00 per share Adjusted Exercise Price.

Your Cash Bonus will become payable on the first regular payroll date in January 2008, subject to collection of all applicable withholding taxes.

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Cancellation of Eligible Options and Grant of New Options.

If the Adjusted Exercise Price determined for any tendered Eligible Option would be the same or lower than the exercise price per share currently in effect for that option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a New Option that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date and that replacement option will be designated a “New Option.” Such cancellation and regrant is necessary to evidence the remedial action required under Section 409A with respect to an Eligible Option whose current exercise price is not increased. No Cash Bonus will be paid with respect to a New Option, because there will be no change to the exercise price. Any New Option to be issued in cancellation of the Eligible Option that was granted under the 2005 Plan will be granted under the 2005 Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Plan will be granted under the 1998 Plan.

EXAMPLE: Assume that you were granted an option to purchase 10,000 shares that had a grant date of July 22, 2003 and an exercise price per share of $20.77. That option vests in four successive equal annual installments over the four-year period measured from July 22, 2003. As of December 31, 2004, that option was unvested as to 7,500 shares and has not been exercised. Further assume that the fair market value per share of our common stock was $27.48 on the measurement date for that option. The portion of your July 22, 2003 grant that was unvested as of December 31, 2004 constitutes an Eligible Option for purposes of this Offer. No other portion of that option may be tendered pursuant to this Offer.

Further assume that you tender your Eligible Option but that the Fair Market Value per share of our common stock on the Amendment Date is $20.00 per share. In that event, your tendered Eligible Option will be cancelled on the Amendment Date, and you will be immediately issued a New Option with an exercise price of $20.77 per share for the 7,500 shares purchasable under the tendered grant. Except for the new grant date, the New Option will be the same as the cancelled Eligible Option it replaces, with the same exercise price per share, vesting schedule and expiration date. Since the exercise price under the New Option will be the same as under the cancelled option, no Cash Bonus will be payable to you with respect to your New Option.

Former Employees

If you are not in the employ of Cyberonics (or any Cyberonics subsidiary) on the Expiration Date, then none of your tendered Eligible Options will be amended or replaced, and you will not be entitled to any Cash Bonus with respect to those options. The tendered options will be returned to you and will remain exercisable in accordance with the terms in effect for them at the time of tender, including the current exercise price per share. If you take no other action to bring those options into compliance with Section 409A, then you may be subject to adverse taxation in the manner discussed in Section 2 below.

Expiration Date

The term “Expiration Date” means 11:59 p.m. Central Time on July 6, 2007, unless we decide to extend the period of time during which the Offer will remain open, in which event the term “Expiration Date” will refer to the latest time and date at which the Offer, as so extended, expires. See Section 16 for a description of our rights to extend, delay, terminate and amend the Offer, and Section 7 for a description of conditions to the Offer.

Additional Considerations

In deciding whether to tender one or more Eligible Options pursuant to the Offer, you should know that Cyberonics continually evaluates and explores strategic opportunities as they arise, including business combination transactions, strategic partnerships, capital infusions, and the purchase or sale of assets. At any given time, we may be engaged in discussions or negotiations with respect to various corporate transactions. We also grant options, restricted stock units and other equity awards in the ordinary course of business to our current and new employees, including our

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executive officers. Our employees, including our executive officers, from time to time acquire or dispose of our securities. Subject to the foregoing, and except as otherwise disclosed in the Offer or in our filings with the Securities and Exchange Commission (“SEC”), we presently have no plans or proposals that relate to or would result in:

     (a) any extraordinary corporate transaction, such as a material merger, reorganization or liquidation, involving us or any of our subsidiaries;

     (b) any purchase, sale or transfer of a material amount of our assets or the assets of any of our subsidiaries;

     (c) any material change in our present dividend policy or our indebtedness or capitalization;

     (d) any change in our present Board of Directors or executive management team, including any plans to change the number or term of our directors or to fill any existing board vacancies or to change the material terms of any executive officer’s employment, except that we expect to appoint a new Chief Financial Officer to fill the current vacancy;

     (e) any other material change in our corporate structure or business;

     (f) our common stock not being authorized for quotation in an automated quotation system operated by a national securities association;

     (g) our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the “1934 Act”);

     (h) the suspension of our obligation to file reports pursuant to Section 15(d) of the 1934 Act;

     (i) the acquisition by any person of any of our securities or the disposition of any of our securities, other than in the ordinary course or pursuant to existing options or other rights; or

     (j) any change in our articles of incorporation or bylaws, or any actions that may impede the acquisition of control of us by any person.

2. PURPOSE OF THE OFFER.

We are making this Offer to amend or replace the Eligible Options because of potential adverse tax consequences that may apply under Section 409A of the Code. Section 409A provides that a stock option granted with a below-market exercise price, to the extent it was not vested as of December 31, 2004, will be subject to adverse income taxation (as described below), unless that option is brought into compliance with Section 409A prior to exercise. Based upon the results of our recently completed review of our option grant practices we concluded that the financial accounting measurement dates for certain stock option grants awarded between January 19, 2000 and September 25, 2006 differed from the measurement dates previously used for such awards. As a result, revised measurement dates were applied to the affected option grants. These revised measurement dates may be deemed to be the grant dates of those options for purposes of Section 409A. If they are, one or more of those affected options may also be deemed to be below-market options under Section 409A, to the extent that they remained unvested on December 31, 2004. Cyberonics has decided to offer Eligible Optionees who hold Eligible Options the opportunity to amend or replace each such option and thereby avoid potential taxation of that option under Section 409A.

Unless certain remedial action is taken before the earlier of (i) December 31, 2007 or (ii) the date the optionee exercises his or her Eligible Options, the optionee will be subject to the following adverse tax consequences under Section 409A, beginning with the 2008 calendar year.

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     Taxation in Calendar Year 2008. To the extent the optionee continues to hold in the 2008 calendar year unexercised Eligible Options that vested prior to that year or vest during that year, the optionee will recognize taxable income for the 2008 calendar year in an amount equal to the fair market value of those shares on the applicable tax measurement date less the exercise price payable for those shares. The optionee will have to report that income in his or her tax return filed for the 2008 calendar year, even though the Eligible Option has not been exercised for those shares during that year. The IRS has not yet provided guidance as to the applicable tax measurement date for determining an optionee’s taxable income, but it is possible that such date will be the earlier of (i) the date the optionee exercises the Eligible Option during the 2008 calendar year or (ii) December 31, 2008.

     Tax Penalty. In addition to normal income taxes payable on the income recognized under the affected options on the applicable tax measurement date for the 2008 calendar year, the optionee would also be subject to an additional tax penalty equal to 20% of the income recognized on such date.

     Interest Penalty Measured From Year of Vesting. To the extent the Eligible Option outstanding in the 2008 calendar year vested as to one or more shares during the 2005 calendar year, the optionee will incur an interest penalty payable with his or her tax return for the 2008 calendar year. The interest penalty will be based on the income taxes the optionee would have incurred for the 2005 calendar year had he or she been taxed on the spread which existed on those vested shares on December 31, 2005 (the amount by which the December 31, 2005 fair market value of the shares which vested under the Eligible Option during the 2005 calendar year exceeded the exercise price payable for those shares). For purposes of such calculation, the optionee’s tax rate will be deemed to be 35%, and that tax rate will be applied to the December 31, 2005 option spread on the shares which vested under the Eligible Option during the 2005 calendar year. The tax amount resulting from such calculation is not actually payable for the 2005 calendar year, but will trigger an interest penalty under Section 409A for the period beginning April 15, 2006 and continuing until the date the optionee pays the accrued interest with his or her taxes for the 2008 calendar year. To the extent the Eligible Option vested as to one or more shares during the 2006 calendar year, the optionee would perform the same calculation based on the December 31, 2006 fair market value of the shares which vested during that year, and the interest penalty would accrue over the period beginning April 15, 2007 and continuing until the optionee pays the accrued interest with his or her taxes for the 2008 calendar year. The same calculation would also be applicable for any shares which vested under the Eligible Option during the 2007 calendar year based on the option spread which existed on those particular shares on December 31, 2007, and the interest penalty would accrue from April 15, 2008 until the optionee pays the accrued interest with his or her 2008 calendar year taxes. Finally, there would also be an additional interest penalty with respect to the shares which vested during the 2005, 2006 and 2007 calendar years but remained unexercised in the 2008 calendar year, to the extent their year-end fair market value in each calendar year subsequent to the calendar year of vesting is greater than their year-end fair market value in the immediately preceding calendar year. The interest penalty would accrue from April 15, 2007 until the date the optionee pays that interest penalty with his or her 2008 calendar year taxes.

     Vesting in Subsequent Calendar Years. To the extent an Eligible Option first vests in a calendar year after the 2008 calendar year, the optionee will be subject to income taxation and penalty taxes on the spread which exists between the fair market value of the shares which vest during that year and the exercise price payable for those shares. Such spread will be calculated on the applicable tax measurement date for such year.

     Continued Taxation of Vested Shares. The optionee will be subject to additional income taxation and penalty taxes on any subsequent increases to the fair market value of his or her vested option shares which occur in calendar years after the calendar year in which those shares are first taxed under Section 409A. Such taxation will continue until the optionee exercises the options.

     Note: The IRS has not yet provided any guidance as to how the additional taxable income is to be measured over the period the options remain outstanding after the 2007 calendar year.

     State Taxes. Certain states, including California, have adopted provisions similar to Section 409A under their tax laws, and for optionees subject to income taxation in such states, the total penalty tax could be up to 40% (a 20% federal penalty tax and up to a 20% state penalty tax).

The following is an example of the adverse U.S. federal income taxes that may occur under Section 409A if remedial action is not taken to bring the below-market options into compliance with Section 409A:

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EXAMPLE. Optionee was granted an option for 10,000 shares with a grant date of July 24, 2002 and an exercise price of $9.96 per share. The Fair Market Value per share of our common stock on the revised measurement date for that option was $16.55. Assume the option was scheduled to vest in four equal annual installments, beginning July 24, 2003. Unless remedial action under Section 409A is taken before December 31, 2007 (or any earlier exercise of the option for the post-2004 installments), the 5,000 shares as to which the option vested during 2005 and 2006 would be taxed as follows under Section 409A:

     Taxation in Calendar Year 2008: On the applicable tax measurement date in the 2008 calendar year, the optionee would recognize taxable income equal to the amount by which the fair market value of the 5,000 shares exceeded the exercise price payable for those shares. If we assume that the option is exercised for those 5,000 shares on September 5, 2008, when the fair market value is $30.00 per share, and that such date is the applicable tax measurement date for Section 409A purposes, then the optionee will recognize $100,200.00 of taxable wages (5,000 x ($30.00 - $9.96)) in 2008. In addition, the optionee would incur a 20% penalty tax in the amount of $20,040.00. There would also be an interest penalty assessed with respect to the 2,500 shares which vested in 2005. That interest penalty would be based on the taxes that would have been due on April 15, 2006 had the optionee been taxed at the rate of 35% on the spread which existed on those 2,500 shares on December 31, 2005 (the amount by which the market price of those 2,500 shares on December 31, 2005 exceeded the $9.96 exercise price payable for those shares). The interest penalty on those particular shares would accrue until the optionee pays that interest penalty with his or her 2008 calendar year taxes. In addition, there would be an interest penalty assessed with respect to the 2,500 shares which vested in 2006. That interest penalty would be based on the taxes that would have been due on April 15, 2007 had the optionee been taxed at the rate of 35% on the spread which existed on those 2,500 shares on December 31, 2006 (the amount by which the market price of those 2,500 shares on December 31, 2006 exceeded the $9.96 exercise price payable for those shares). There would also be an additional interest penalty with respect to the shares which vested during the 2005 and 2006 calendar years, to the extent their year-end fair market value in each calendar year subsequent to the calendar year of vesting exceeded their year-end fair market value in the immediately preceding year. That interest penalty would accrue until the optionee pays that interest penalty with his or her 2008 calendar year taxes. There will also be the possibility of adverse taxation under the tax laws of the state in which the optionee resides.

     Continued Taxation: If the option is not exercised in the 2008 calendar year, the optionee will still recognize taxable income in that year. It is likely that the amount of taxable income and the 20% penalty tax will be based on the option spread which exists on the 5,000 shares as of December 31, 2008; however, there is at present no actual IRS guidance on the appropriate tax measurement date. In addition, the optionee would continue to be subject to income taxation and the 20% penalty tax in each subsequent calendar year the option remains outstanding after the 2008 calendar year, and the amount of such taxation would be based on any subsequent appreciation in the value of the shares since the last tax measurement date for those shares under Section 409A.

     Exercise in 2007 Calendar Year: If you exercise an Eligible Option in 2007 without first bringing that option into compliance with Section 409A, then the 20% penalty tax under Section 409A with respect to that exercised option will be based solely on the amount by which the fair market value of the purchased shares at the time of exercise exceeds the current exercise price, and the interest penalties will be based on the spread (the excess of the fair market value per share over the exercise price) on the vested option shares at the close of the 2005 and 2006 calendar years on the option shares initially vesting in those years and any additional increase to the 2005 option spread which existed at the end of the 2006 calendar year.

If you elect not to tender your Eligible Options for amendment or replacement pursuant to the Offer and do not otherwise take remedial action to bring your Eligible Options into compliance with Section 409A, then you will be solely responsible for any taxes, penalties or interest payable under Section 409A and comparable state tax laws.

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Section 409A only applies to below-market options that were not vested as of December 31, 2004. The portion of any below-market option granted prior to October 4, 2004 that was vested as of December 31, 2004 is grandfathered and is therefore not subject to Section 409A.

Pursuant to the U.S. Treasury regulations provided under Section 409A, if you exercised the portion of your stock options that vested in 2005 before the end of that year, you would have avoided any adverse tax consequences under Section 409A with respect to that portion. To avoid any adverse tax consequences under Section 409A with respect to the portion of your currently outstanding stock options that vested after December 31, 2004 (but were not exercised in 2005), you must take remedial action to bring that portion of your options into compliance with the requirements of Section 409A. Basically, two courses of remedial action are available as described below. Cyberonics is now offering you the opportunity to bring your Eligible Options into compliance with Section 409A only through the amendment alternative described in paragraph (ii) below.

     (i) You could designate a specific schedule for the exercise of your Eligible Option. Accordingly, you would have to designate the particular calendar year or years in which that Eligible Option is to be exercised and the number of shares to be exercised in each such year. As part of your designated exercise schedule, you could provide for immediate exercise of the vested shares subject to the Eligible Option upon the earlier of your termination of employment with Cyberonics or a change in control or ownership of Cyberonics. However, this alternative will not be available if you exercised your Eligible Option during 2006; or

     (ii) Your Eligible Option could be amended to adjust the exercise price to the Adjusted Exercise Price determined for that option. Such an amendment to the exercise price should bring the Eligible Option into compliance with Section 409A, and, after such amendment, you could exercise that option as you choose, subject only to the existing exercise provisions and option term in effect for such option. A New Option granted in replacement of an Eligible Option should also avoid taxation under Section 409A.

Accordingly, pursuant to the Offer, you may tender each of your Eligible Options to Cyberonics for amendment or replacement. The exercise price per share for each Amended Option will be increased to the Adjusted Exercise Price determined for that option, and that Amended Option should not be subject to the adverse tax consequences under Section 409A described above. Each New Option granted in replacement of a tendered Eligible Option should also avoid taxation under Section 409A.

Neither we nor the Company’s Board of Directors will make any recommendation as to whether you should tender your Eligible Options for amendment or replacement, nor have we authorized any person to make any such recommendation. You must make your own decision whether to tender your Eligible Options, after taking into account your own personal circumstances and preferences. You should be aware that adverse tax consequences under Section 409A may apply to your Eligible Options if they are not amended or replaced pursuant to the Offer and you will be solely responsible for any taxes, interest or penalties you may incur under Section 409A (and state tax laws). You are urged to evaluate carefully all of the information in the Offer, and we recommend that you consult your personal tax, financial and legal advisors.

3. STATUS OF ELIGIBLE OPTIONS NOT AMENDED OR REPLACED.

If you choose not to tender your Eligible Options for amendment or replacement, those options will continue to remain outstanding in accordance with their existing terms, and may potentially be subject to adverse tax consequences under Section 409A. Accordingly, if you take no other action to bring those options into compliance with Section 409A, you may be subject to the adverse U.S. federal tax consequences described in Section 2 above. You will be solely responsible for any taxes, penalties or interest payable under Section 409A (and state tax laws).

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4. PROCEDURES FOR TENDERING ELIGIBLE OPTIONS.

Proper Tender of Options. Cyberonics will send you a personalized Letter of Transmittal to use if you wish to tender your Eligible Options. The Letter of Transmittal will contain a personal summary of the Eligible Options that you currently hold, including information relating to the number of shares that are potentially subject to Section 409A, the grant date indicated for that option on the applicable grant notice, the current exercise price per share in effect for such option, the date that has now been determined to be the revised measurement date for each Eligible Option you hold and the Fair Market Value per share of our common stock on that date.

To validly tender your Eligible Options, you must, in accordance with the terms of your Letter of Transmittal, properly complete, duly execute and timely deliver that Letter of Transmittal to us by facsimile, overnight courier or email using the following contact information:

By Facsimile: Facsimile Number (281) 853-2503.
By Overnight Courier:	Cyberonics, Inc.
	100 Cyberonics Boulevard
	Houston, Texas 77058
	Attn: Tender Offer.
By Email: tenderoffer@cyberonics.com.

Responses submitted by any other means, including regular mail, inter-office mail or hand delivery, are not permitted.

We must receive your Letter of Transmittal before the Expiration Date. If we extend the Offer beyond that time, we must receive your completed and executed Letter of Transmittal before the extended Expiration Date of the Offer.

We will not accept delivery of any Letter of Transmittal after expiration of the Offer. If we do not receive your properly completed and duly executed Letter of Transmittal prior to the expiration of the Offer, your Eligible Options will not be amended or replaced pursuant to the Offer, and you will not be eligible for any Cash Bonus.

The method of delivery of all documents, including the Letter of Transmittal and any other required documents, is at the election and risk of the tendering Eligible Optionee. We recommend that you keep a copy of your Letter of Transmittal and record of delivery. In all cases, you should allow sufficient time to ensure timely delivery.

You cannot tender only a portion of an Eligible Option, and we will not accept such a partial tender for amendment or replacement. If you hold more than one Eligible Option, then you may elect to tender one or more of those options and retain the remaining the options. Please remember that not all of a particular option grant may be an Eligible Option. Only the portion of that grant that was not vested as of December 31, 2004 may constitute an Eligible Option.

If your Letter of Transmittal includes any option that is not an Eligible Option or includes only a portion of your outstanding Eligible Option, then we will not accept the tendered option or portion for amendment or replacement, but we do intend to accept for amendment or replacement each properly tendered Eligible Option set forth in the Letter of Transmittal.

Determination of Validity; Rejection of Option Shares; Waiver of Defects; No Obligation to Give Notice of Defects. We will determine, in our discretion, all questions as to form of documents and the validity, form, eligibility (including time of receipt), and acceptance of any option tender, and we will decide, in our sole discretion, all questions as to (i) the portion of each outstanding option that constitutes an Eligible Option for purposes of the Offer; (ii) the Adjusted Exercise Price to be in effect under each Amended Option, (iii) the number of shares of our common stock purchasable under the Amended Option at the Adjusted Exercise Price, (iv) the amount of the Cash Bonus payable with respect to each Amended Option and (v) the cancellation of tendered Eligible Options with

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exercise prices at or above the Adjusted Exercise Price determined for that option and the replacement of those cancelled options with New Options. Our determination as to those matters will be final and binding on all parties. We reserve the right to reject any or all option tenders that we determine do not comply with the conditions of the Offer, that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we intend to accept for amendment or replacement each properly and timely tendered Eligible Option that is not validly withdrawn. We also reserve the right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular Eligible Option or any particular Eligible Optionee. No tender of an Eligible Option will be deemed to have been properly made until all defects or irregularities have been cured by the tendering Eligible Optionee or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in tenders, nor will anyone incur any liability for failure to give any such notice.

Our Acceptance Constitutes an Agreement. Your tender of an Eligible Option pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the Offer. Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will, promptly upon the expiration of the Offer, accept for amendment all properly and timely tendered Eligible Options that have not been validly withdrawn, and on the next business day we will increase the exercise price per share to the Adjusted Exercise Price determined for that option. However, if the Adjusted Exercise Price determined for any tendered Eligible Option would be the same or lower than the exercise price per share currently in effect for that option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a New Option granted under the 1998 Plan that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date.

Our acceptance of your tendered Eligible Options for amendment or replacement pursuant to the Offer will constitute a binding agreement between us and you subject to the terms and conditions of the Offer. Accordingly, as soon as administratively practicable after the Amendment Date, we will deliver to you a final and complete Amendment Agreement. Schedule I to that Amendment Agreement will indicate the Adjusted Exercise Price in effect for each of your Amended Options and our unconditional obligation to pay you on the Company’s first regular payroll date in January 2008 the Cash Bonus calculated for each Amended Option. If any of your tendered Eligible Options are cancelled and replaced with a New Option, then as soon as administratively practicable after the Amendment Date, you will receive a new option agreement and grant notice for each such New Option granted in replacement of a tendered Eligible Option.

5. WITHDRAWAL RIGHTS.

You may only withdraw your tendered Eligible Options in accordance with the provisions of this Section 5.

     (i) You may withdraw your tendered Eligible Options at any time before 11:59 p.m., Central Time, on the Expiration Date of the Offer by following the procedure outlined in Section 5(ii) below. In addition, unless we accept and amend or replace your Eligible Options before 12:00 midnight, Central Time, on August 3, 2007 (the 40th business day after the June 7, 2007 commencement date of the Offer), you may withdraw your tendered options at any time thereafter.

     (ii) To validly withdraw your tendered Eligible Options, you must deliver to us a properly completed and duly executed Withdrawal Form by facsimile, overnight courier or email using the following contact information:

By Facsimile: Facsimile Number (281) 853-2503.
By Overnight Courier:	Cyberonics, Inc.
	100 Cyberonics Boulevard
	Houston, Texas 77058
	Attn: Tender Offer.
By Email: tenderoffer@cyberonics.com.

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To obtain a copy of the Withdrawal Form please contact Tabetha L. Yllander at (281) 727-2648 or email your request to tenderoffer@Cyberonics.com.

YOU MAY NOT WITHDRAW ONLY A PORTION OF A TENDERED ELIGIBLE OPTION. IF YOU CHOOSE TO WITHDRAW A TENDERED ELIGIBLE OPTION, YOU MUST WITHDRAW THE ENTIRE ELIGIBLE OPTION.

The Withdrawal Form must be executed by the Eligible Optionee who tendered the Eligible Option to be withdrawn.

You may not rescind any withdrawal, and any tendered Eligible Option you subsequently withdraw will no longer be deemed tendered for amendment or replacement pursuant to the Offer, unless you properly re-tender that option before the Expiration Date by following the procedures described in Section 4. The new tender must be properly completed, signed and dated after both the date of your original Letter of Transmittal and the date of any subsequent Withdrawal Form.

Neither Cyberonics nor any other person is obligated to give notice of any defects or irregularities in any Withdrawal Form submitted to us, nor will anyone incur any liability for failure to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal. Our determination of these matters will be final and binding.

6. ACCEPTANCE OF ELIGIBLE OPTIONS FOR AMENDMENT OR REPLACEMENT AND COMMITMENT TO PAY CASH BONUS.

Subject to the terms and conditions of the Offer, we will, upon the Expiration Date, accept for amendment or replacement all Eligible Options that have been properly tendered and not validly withdrawn prior to the Expiration Date. For each Amended Option, we will increase the exercise price per share to the applicable Adjusted Exercise Price on the next business day, currently scheduled to be July 9, 2007. For each tendered Eligible Option that is cancelled pursuant to the Offer, we will grant a New Option in replacement on the next business day, currently scheduled to be July 9, 2007. If we extend the Expiration Date, then the accepted Eligible Option will be amended or replaced on the first business day following the extended Expiration Date.

We will provide written or electronic notice of our acceptance to each Eligible Optionee whose tendered Eligible Options we have accepted for amendment or replacement. Such notice may be by email, press release or other means. In addition, we will, as soon as administratively practicable after the Amendment Date, deliver a final and complete Amendment Agreement to each Eligible Optionee whose Eligible Options have been amended pursuant to the Offer. Schedule I to that Amendment Agreement will reflect the increases to the exercise prices of the Amended Options and our unconditional obligation to pay such Eligible Optionee the applicable Cash Bonus for each of his or her Amended Options on the Company’s first regular payroll date in January 2008. Such Cash Bonus will be paid whether or not the Eligible Optionee continues in our employ through the payment date. For each New Option to which a tendering Eligible Optionee becomes entitled, we will deliver a new option agreement to that person as soon as administratively practicable after the grant date.

However, if you are not in the employ of Cyberonics (or any Cyberonics subsidiary) on the Expiration Date or on the Amendment Date, then none of your tendered Eligible Options will be amended or replaced, and you will not be entitled to any Cash Bonus with respect to those options. The tendered options will be returned to you and will remain exercisable in accordance with the terms in effect for them at the time of tender, including the current exercise price per share. If you take no other action to bring those options into compliance with Section 409A, then you may be subject to adverse taxation in the manner discussed below. You will be solely responsible for any taxes, penalties or interest you may incur under Section 409A (and state tax laws).

7. CONDITIONS OF THE OFFER.

We will not accept any Eligible Options tendered to us for amendment or replacement, and we may terminate or amend the Offer or postpone our acceptance of any Eligible Options tendered to us for amendment or replacement,

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in each case, subject to Rule 13e-4(f)(5) under the Securities Exchange Act of 1934, as amended (the “1934 Act”), if at any time on or after June 7, 2007, and prior to the Expiration Date, any of the following events has occurred, or has been reasonably determined by us to have occurred and, in our reasonable judgment in any such case and regardless of the circumstances giving rise thereto (including any action or omission by us), the occurrence of such event or events makes it inadvisable for us to proceed with the Offer or with our acceptance of the Eligible Options tendered to us for amendment or replacement:

     (a) there shall have been threatened or instituted or be pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or by any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly challenges the making of the Offer, the amendment of the existing exercise price in effect for some or all of the tendered Eligible Options pursuant to the Offer, the payment of the applicable Cash Bonuses, the cancellation of tendered options and the grant of New Options in replacement thereof or otherwise relates in any manner to the Offer or that, in our reasonable judgment, could materially and adversely affect our business, financial or other condition, operating results, operations or prospects, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or materially impair the contemplated benefits of the Offer to us;

     (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or us or any of our subsidiaries, by any court or any authority, agency or tribunal that, in our reasonable judgment, would or might directly or indirectly:

• make the amendment of the tendered Eligible Options or payment of the Cash Bonuses or the cancellation of tendered options and the grant of New Options in replacement thereof illegal or otherwise restrict or prohibit consummation of the Offer or otherwise relates in any manner to the Offer;

• delay or restrict our ability, or render us unable, to accept for amendment or replacement some or all of the tendered Eligible Options;

• materially impair the benefits that we hope to convey as a result of the Offer, which we believe would occur as a result of further changes to Section 409A of the Code, the regulations thereunder or other tax laws that would affect the Offer or the Eligible Options; or

• materially and adversely affect our business, financial or other condition, operating results, operations or prospects or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries;

     (c) there shall have occurred:

• any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market;

• any general suspension of our ability to issue equity under the Plans or pursuant to the registration statement on Form S-8 registering shares of our common stock for issuance under the Plans;

• any significant change in the market price of the shares of our common stock or any change in the general political, market, economic or financial conditions in the United States or abroad that could, in our reasonable judgment, have a material adverse effect on our business, financial or other condition, operating results, operations or prospects or on the trading in our common stock, or that, in our reasonable judgment, makes it inadvisable to proceed with the Offer;

• in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or

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• any decline in either the Dow Jones Industrial Average, the Nasdaq Global Select Market or the Standard and Poor’s Index of 500 Companies by an amount in excess of 10% measured during any time period after the close of business on June 7, 2007;

     (d) there shall have occurred any change in generally accepted accounting principles or the application or interpretation thereof that could or would require us for financial reporting purposes to record compensation expenses against our operating results in connection with the Offer that would be in excess of any compensation expenses that we would be required to record under generally accepted accounting principles in effect at the time we commence the Offer;

     (e) a tender or exchange offer with respect to some or all of our outstanding common stock, or a merger or acquisition proposal for us, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed, or we shall have learned that:

• any person, entity or “group,” within the meaning of Section 13(d)(3) of the 1934 Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC before June 7, 2007;

• any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC before June 7, 2007 shall have acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our common stock; or

• any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or made a public announcement reflecting an intent to acquire us or any of our subsidiaries or any of the assets or securities of us or any of our subsidiaries;

     (f) any change or changes shall have occurred in our business, financial or other condition, assets, operating results, operations, prospects or stock ownership or that of our subsidiaries as a result of unforeseen, extraordinary events beyond our control that, in our reasonable judgment, is or may be material to us or our subsidiaries or otherwise makes it inadvisable for us to proceed with the Offer; or

     (g) any rules, regulations or actions by any governmental authority, the Nasdaq Global Select Market, or other regulatory or administrative authority of any national securities exchange have been enacted, enforced or deemed applicable to Cyberonics that makes it inadvisable for us to proceed with the Offer.

The conditions to the Offer are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them prior to the Expiration Date. We may waive them, in whole or in part, at any time and from time to time prior to the Expiration Date, in our discretion, whether or not we waive any other condition to the Offer. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Our failure at any time to exercise any of these rights may be deemed a waiver of such rights and any waiver of a material condition would require that at least five business days remain in the Offer following the date we announce the waiver. Any determination we make concerning the events described in this Section 7 may be challenged by an Eligible Optionee only in a court of competent jurisdiction. A non-appealable determination with respect to such matter by a court of competent jurisdiction will be final and binding upon all persons.

8. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS.

There is no established trading market for the Eligible Options or any other options granted under our Plans.

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Our common stock is quoted on the Nasdaq Global Select Market under the symbol “CYBX.” The following table shows, for the periods indicated, the high and low sales prices per share of our common stock on the Nasdaq Global Select Market.

QUARTER	HIGH		LOW
Fiscal Year Ended April 27, 2007
First Quarter	$	27.16	$	19.74
Second Quarter		21.64		14.70
Third Quarter		27.55		17.30
Fourth Quarter		23.02		17.62
Fiscal Year Ended April 28, 2006
First Quarter	$	47.77	$	32.70
Second Quarter		40.69		26.63
Third Quarter		35.30		26.88
Fourth Quarter		30.96		22.61

On June 6, 2007 the last reported sale price of our common stock on the Nasdaq Global Select Market was $18.20 per share.

The price of our common stock has been, and in the future may be, volatile and could decline. The trading price of our common stock has fluctuated in the past and is expected to continue to do so in the future, as a result of a number of factors, many of which are outside our control. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market prices of many companies, and that have often been unrelated or disproportionate to the operating performance of these companies.

9. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF AMENDED OPTIONS OR NEW OPTIONS.

Consideration. If we accept the tender of your Eligible Options for amendment, the exercise price per share will be increased to the Adjusted Exercise Price determined for each such option. Except for such Adjusted Exercise Price, all the terms and provisions in effect for the Eligible Option at the time of tender will continue in effect after the amendment. Accordingly, each Amended Option will continue to vest in accordance with the same vesting schedule measured from the same vesting commencement date currently in effect for each such option, and the exercise period and expiration date for each option will also remain unchanged. However, if the Adjusted Exercise Price as so determined would be the same or lower than the exercise price per share currently in effect for the Eligible Option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a New Option that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date. Any New Option to be issued in cancellation of the Eligible Option that was granted under the 2005 Plan will be granted under the 2005 Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Plan will be granted under the 1998 Plan.

Should you accept this Offer, then with respect to each of your Eligible Options that is amended to increase the exercise price per share to the Adjusted Exercise Price determined for that option, you will be eligible to receive the special Cash Bonus. The Cash Bonus will be paid from our general assets on the Company’s first regular payroll date in January 2008, and you will be a general creditor of Cyberonics with respect to the Cash Bonus. No Cash Bonuses will be paid with respect to any New Option granted in replacement of a tendered Eligible Option, because the exercise price will be the same as in effect for the cancelled option it replaces.

If all Eligible Options tendered pursuant to the Offer are amended, then the resulting Amended Options and New Options will cover approximately 369,928 shares of our common stock, which represents approximately 1.4% of the total number of shares of our common stock outstanding as of June 6, 2007, and the Cash Bonuses payable pursuant to this Offer will be in the total maximum dollar amount of approximately $643,000, assuming the exercise price of each tendered Eligible Option is increased to the Fair Market Value per share on the revised measurement date for that option.

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Terms of Amended Options or New Options. The amendment or replacement of the tendered Eligible Options pursuant to the Offer will not create any contractual or other right of the tendering Eligible Optionees to receive any future grants of stock options, restricted stock units or other stock-based compensation. This Offer does not change the “at-will” nature of an Eligible Optionee’s employment with us, and an Eligible Optionee’s employment may be terminated by us or by the Eligible Optionee at any time, for any reason, with or without cause.

The Eligible Options have all been granted pursuant to the Plans. Each Amended Option will continue to remain outstanding under the Plan under which it was originally granted. Any New Option to be issued in cancellation of the Eligible Option that was granted under the 2005 Plan will be granted under the 2005 Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Plan will be granted under the 1998 Plan.

The following is a description of the principal features of the Amended and Restated 1996 Stock Option Plan under which substantially all the Eligible Options are outstanding. The principal features of the 2005 Stock Plan under which the remainder of the Eligible Options are outstanding and the 1998 Stock Option Plan under which certain New Options will be granted are substantially the same to the extent they apply to option grants, except as otherwise noted in the description below. The description of each plan is subject to, and qualified in its entirety by reference to, all the provisions of the applicable plan and the form of notice of stock option grant and stock option agreement in effect for the Eligible Options granted under that plan. The complete documents for the Amended and Restated 1996 Stock Option Plan and the 1998 Stock Option Plan, as amended, have been filed as exhibits to the Schedule TO filed with the U. S. Securities and Exchange Commission (the “SEC”), and the 2005 Stock Plan has been filed as Annex A to our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 15, 2005. Copies of each Plan and the form of notice of stock option grant and stock option agreement for each Plan are available on the Cybernet under “Tender Offer”. Please contact us at 100 Cyberonics Boulevard, Houston, Texas 77058, Attn: Tender Offer to receive a copy of each plan document and the form of notice of stock option grant and stock option agreement for each plan. We will promptly furnish you copies of those documents at our expense. The Amendment Agreement to be used to evidence the adjustment to the exercise price of each Eligible Option amended pursuant to the Offer and the notice of stock option agreement and/or stock option agreement to be used to evidence each New Option granted in replacement of an Eligible Option cancelled pursuant to the Offer have been filed with the SEC as exhibits to the Schedule TO.

     Administration. The Compensation Committee of our Board of Directors has the exclusive authority to grant stock options under and administer each of the plans.

     Share Reserve. As of June 6, 2007, options to purchase 2,775,569 shares of common stock were outstanding under the 1996 Plan. As of June 6, 2007, options to purchase 397,727 shares of common stock were outstanding under the 2005 Plan and an additional 437,553 shares remained available for issuance. As of June 6, 2007, options to purchase 0 shares of common stock were outstanding under the 1998 Plan and an additional 263,375 shares remained available for issuance. The shares of common stock issuable under each of the plans may be drawn from shares of our authorized but unissued common stock or from shares of our common stock that we reacquire, or a combination thereof.

     Eligibility. Officers, employees and consultants in our service or in the service of our subsidiaries are eligible to receive option grants under each of the plans. Officers participating in the 1996 Plan and 1998 Plan may not be granted options for more than 10% of the shares of common stock reserved for issuance under the 1996 Plan and 1998 Plan, respectively. No participant may receive option grants under the 2005 Plan for more than 300,000 shares of common stock.

     Option Terms. Each granted option has an option term and exercise price per share determined by the plan administrator, but that price may not be less than one hundred percent (100%) of the fair market value of the option shares on the grant date. The shares subject to each option will generally vest in one or more installments over a specified period of service measured from the grant date. Upon cessation of service, the optionee will have a limited period of time in which to exercise his or her outstanding options to the extent exercisable for vested shares. In general, that limited period will expire ninety (90) days following the optionee’s cessation of service, unless such cessation of service occurs by reason of the optionee’s death or permanent disability. In that event, the limited

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exercise period will expire twelve (12) months after such cessation of service. In no event, however, may any option be exercised after the expiration of the term in effect for that option.

     Change of Control. In the event Cyberonics should undergo a change of control, each option outstanding under the 1996 Plan and the 2005 Plan will vest and become exercisable on an accelerated basis for all the option shares. The plan administrator may provide that all options not exercised immediately prior to the change of control will terminate on such change of control, be assumed by the successor (or parent thereof) or be surrendered in exchange for equivalent substitution options or awards from the successor (or parent thereof). A change of control will mean (i) an acquisition of Cyberonics by merger, consolidation or other form of corporate transaction which results in the then current stockholders of the Company owning not more than 50% of the combined voting power entitled to vote in the election of directors of the surviving company in substantially the same proportions as their ownership immediately prior to such event, (ii) sale of all or substantially all of the Company’s assets, (iii) the acquisition by any person of securities possessing 50% or more of the combined voting power of the Company’s then outstanding securities entitled to vote in the election of directors, (iv) a change in the majority of our Board members as a result of any proposed or actual proxy contest or a plan or agreement to replace a majority of the incumbent directors or (v) complete or substantially complete liquidation or dissolution of the Company. The option agreement evidencing each New Option granted under the 1998 Plan will provide for the same provisions in the event of a change of control.

     Shareholder Rights and Option Transferability. No optionee will have any shareholder rights with respect to the option shares until such optionee has exercised the option and paid the exercise price for the purchased shares. Options are not assignable or transferable other than by will or the laws of descent and distribution following optionee’s death, and during the optionee’s lifetime, the option may only be exercised by the optionee.

     Changes in Capitalization. In the event of an increase or decrease in the number of issued shares of our common stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the common stock or any other increase or decrease in the number of issued shares of common stock effected without our receipt of consideration, proportional adjustments will be made to (i) the maximum number of shares issuable under each of the plans, and (ii) the number of shares and the exercise price per share in effect under each outstanding option. All such adjustments will be made in such manner as the plan administrator deems appropriate and such adjustments shall be final, binding and conclusive.

     Amendment and Termination. Our Board of Directors may amend or modify any outstanding options under each of the plans, but any amendment or modification that would impair the rights of the option holder will require the consent of that person. The 1996 Plan terminated on October 31, 2006.

Taxation of Non-statutory Stock Options. An optionee will not recognize taxable income for U.S. federal income tax purposes upon the grant of a non-statutory option under the 1996 Plan, the 1998 Plan or the 2005 Plan. In general, an optionee will recognize ordinary income, in the year in which the option is exercised, equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares, and the optionee will be required to satisfy the tax withholding requirements applicable to such income.

We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the optionee with respect to the exercised non-statutory option. The deduction will in general be allowed for our taxable year in which ends the calendar year in which such ordinary income is recognized by the optionee.

Accounting Treatment of the 1996 Plan, the 1998 Plan and the 2005 Plan.

In accordance with the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 123R (revised 2004) (“FAS 123R”), effective April 29, 2006, the stock options that we grant to our employees under the 1998 Plan and the 2005 Plan must be valued, under an appropriate valuation formula, at their fair value as of the grant date, and that fair value must then be charged as a direct compensation expense against our reported earnings over the designated vesting period of the award. Similar option expensing will be required for any unvested options outstanding under the 1996 Plan and the 2005 Plan on the April 29, 2006 effective date of FAS 123R, with the grant date fair value of those unvested options to be expensed against our earnings over the remaining vesting period.

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Please see Section 13 for a discussion of the accounting treatment of the Offer.

10. AMENDED OPTIONS AND NEW OPTIONS WILL NOT DIFFER FROM ELIGIBLE OPTIONS.

Except for the Adjusted Exercise Price, all the terms and provisions in effect for the Eligible Option at the time of tender will continue in effect if that option is amended pursuant to the Offer. Accordingly, each Amended Option will continue to vest in accordance with the vesting schedule currently in effect for that option at the time of the amendment, and the exercise period and option term for that Amended Option will also remain unchanged.

Each New Option will be exactly the same as the cancelled Eligible Option it replaces, with the same exercise price, vesting schedule and expiration date, but will have a new grant date.

11. INFORMATION CONCERNING CYBERONICS.

Cyberonics, Inc. is a neuromodulation company founded to design, develop and bring to market medical devices that provide a unique vagus nerve stimulation (“VNS”) therapy, VNS Therapy™, for the treatment of epilepsy, treatment-resistant depression (“TRD”) and other debilitating neurological or psychiatric diseases and other disorders. VNS Therapy consists of the electrical stimulation of the vagus nerve with an implantable device.

The Company’s mission is to improve the lives of people touched by epilepsy, depression and other chronic disorders that may prove to be treatable with our VNS Therapy System. To achieve this mission, our plan is to become the market leader in neuromodulation by:

     •    satisfying the urgent unmet medical need in TRD and developing and expanding our intellectual property, regulatory and market franchise in the global TRD market;

     •    repositioning VNS Therapy in a unique, defensible market position in epilepsy to rejuvenate growth and accelerate penetration of the global epilepsy market; and

     •    focusing our financial resources to develop and expand future revenue growth.

The United States Food and Drug Administration (“FDA”) approved the VNS Therapy System in July 1997 for use as an adjunctive therapy in patients over 12 years of age in reducing the frequency of partial onset seizures that are refractory or resistant to antiepileptic drugs. Regulatory bodies in Canada, Europe, South America, Africa, India, Australia and certain countries in Eastern Asia have approved VNS Therapy for the treatment of epilepsy without age restrictions or seizure-type limitations. In July 2005, FDA also approved the VNS Therapy System for the adjunctive long-term treatment of chronic or recurrent depression for patients 18 years of age or older who are experiencing a major depressive episode and have not had an adequate response to four or more adequate anti-depressant treatments. Regulatory bodies in the European Union countries and Canada approved the VNS Therapy System for the treatment of chronic or recurrent depression in patients who are in a treatment-resistant or in a treatment-intolerant depressive episode without age restrictions.

We are incorporated in Delaware. Our principal executive offices are located at 100 Cyberonics Boulevard, Houston, Texas 77058, and our telephone number is (281) 228-7200.

Financial Information. The following table sets forth selected consolidated financial operating data for Cyberonics. The selected historical statement of operations data for the fiscal years ended April 28, 2006 and April 29, 2005 and the selected historical balance sheet data as of April 28, 2006 and April 29, 2005 have been derived from the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 28, 2006 (the “2006 Form 10-K”) that have been audited by KPMG LLP, our independent registered public accounting firm and our Quarterly Report on Form 10-Q for the period ended January 26, 2007.

The information presented below should be read together with the complete financial statements and notes related thereto as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of

30

Operations” included in the 2006 Form 10-K and our Quarterly Report on Form 10-Q for the period ended January 26, 2007 filed with the SEC on March 7, 2007. We have presented the following data in thousands, except per share data.

	Fiscal Year Ended						Quarter Ended
	April 28, 2006			April 29, 2005			January 26, 2007			January 27, 2006
				(As Restated)						(As Restated)
	(In thousands, except per share data)
Consolidated Statements of Operations Data
Net sales		123,441.6			103,442.6			31,664.3			31,304.2
Gross profit		107,619.5			87,768.5			26,736.9			27,421.4
Earnings (loss) from operations		(59,232.4	)		(19,296.3	)		(18,660.8	)		(14,823.3	)
Net income (loss)		(59,069.2	)		(18,609.5	)		(19,385.3	)		(14,831.7	)
Net income (loss) per share (basic)		(2.37	)		(0.77	)		(0.76	)		(0.60	)
Net income (loss) per share (diluted)		(2.37	)		(0.77	)		(0.76	)		(0.60	)
Shares used in computing basic earnings (loss) per share		24,916.9			24,036.7			25,478.5			24,872.2
Shares used in computing diluted earnings (loss) per share		24,916.9			24,036.7			25,478.5			24,872.2
	April 28, 2006			April 29, 2005			January 26, 2007			April 28, 2006
				(As Restated)			(Unaudited)
Consolidated Balance Sheet Data
Cash, cash equivalents and marketable securities		92,355.1			61,475.9			84,152.9			92,355.1
Current assets		137,275.9			89,853.1			126,134.1			137,275.9
Noncurrent assets		15,024.4			9,002.3			12,880.2			15,024.9
Current liabilities		146,522.0			23,049.7			155,208.6			146,522.0
Noncurrent liabilities		1,148.4			209.9			309.5			1,148.4
Total shareholders’ equity		4,629.9			75,595.8			(16,503.8	)		4,629.9
Book value per common share		0.18			3.05			(0.64	)		0.18

The following table shows our historical ratio of earnings to fixed charges for the two most recent fiscal years and for the 39 weeks ended January 26, 2007.

39 Weeks Ended	52 Weeks Ended	52 Weeks Ended
January 26, 2007	April 28, 2006	April 29, 2005
0.0%(1)	0.0%(2)	0.0%(3)

(1)	Earnings are inadequate to cover fixed charges by $40.3 million.
(2)	Earnings are inadequate to cover fixed charges by $59.0 million.
(3)	Earnings are inadequate to cover fixed charges by $18.6 million.

For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before income tax plus fixed charges and minority interest. Fixed charges consist of interest expense (whether expensed or capitalized), amortization of debt expenses, discount and premium, preferred dividends and a portion of rental expense estimated to be attributable to interest.

See Section 18 for instructions on how you can obtain copies of our SEC reports that contain the audited financial statements we have summarized above.

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12. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS; AND MATERIAL AGREEMENTS WITH DIRECTORS AND OFFICERS.

A list of the current members of our Board of Directors and executive officers is attached as Schedule I to this document. As of June 6, 2007 our executive officers and directors as a group beneficially owned outstanding options under our various option plans to purchase a total of 1,171,300 shares of our common stock and restricted stock units under those plans covering an additional 86,000 shares of our common stock. That number represented approximately 23.6% of the aggregate number of shares of our common stock subject to all options and restricted stock units outstanding under our various stock plans as of that date.

No Cyberonics executive officer or non-employee member of the Board of Directors is eligible to participate in the Offer. The following executive officers and directors each hold stock options under the Plans that would have been Eligible Options but for the fact that the exercise prices for those options were amended on terms similar to the terms of this Offer on December 31,2006: Richard L. Rudolph, M.D., Vice President, Clinical and Medical Affairs Chief Medical Officer, Randal L. Simpson, Vice President, Operations, Michael A. Cheney, Vice President, Marketing, Reese S. Terry, Jr., Director and Chief Executive Officer (interim), Michael J. Strauss, M.D., M.P.H., Director and Alan J. Olsen, Director. IRS regulations required those particular options to be so amended prior to January 1, 2007 because they were granted to individuals who were executive officers or directors at the time of grant and the remedial period for those options ended on December 31, 2006.

With respect to Messrs. Rudolph, Simpson and Cheney, the December 31, 2006 amendment increased the per share exercise prices previously in effect for the shares of Cyberonics common stock purchasable under the portions of the respective outstanding options held by such individuals that would have been Eligible Options pursuant to this Offer had they not been so amended. In each instance, the amended exercise price per share is equal to the closing price per share of the common stock on the Nasdaq Global Select Market on the revised measurement date determined for each such option in accordance with applicable financial accounting principles. These executive officers and directors are entitled to receive a cash bonus from us to compensate them for the increase to the exercise prices of their amended options. However, the bonus is subject to vesting and accordingly is payable with respect to option shares that have vested as of January 1, 2008 on January 15, 2008 and with respect to the remaining shares on the date of vesting of such shares.

With respect to Messrs. Terry, Strauss and Olsen, the December 31, 2006 amendment increased the per share exercise prices previously in effect for the shares of Cyberonics common stock purchasable under the respective outstanding options held by such individuals (including the portions of such options that would have been Eligible Options pursuant to this Offer had they not been amended). However, these individuals will not receive a bonus to compensate them for such increase.

Two other former executive officers, Pamela B. Westbrook and Alan D. Totah also had the exercise prices for certain of their options similarly increased. Ms. Westbrook will not receive cash bonuses to compensate her for the higher exercise prices; however, Mr. Totah is entitled to receive a cash bonus for the increased exercise prices upon terms similar to those described above for bonuses payable to other executive officers.

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			Number of		Original		New, Amended
			Affected		Exercise Price		Exercise Price
Name	Grant Date		Option Shares		(per share)		(per share)
Richard L. Rudolph		01/24/02		10,417	$	12.45	$	14.51
		06/15/04		9,000	$	19.58	$	34.81
Randal L. Simpson		10/27/03		49,057	$	26.49	$	27.35
Michael A. Cheney		07/06/01		45,000	$	15.10	$	16.95
		01/24/02		10,417	$	12.45	$	14.51
Reese S. Terry		05/02/01		3,684	$	11.39	$	11.47
Michael J. Strauss		05/02/01		3,684	$	11.39	$	11.47
Alan Olsen		05/02/01		3,684	$	11.39	$	11.47

Messrs. Rudolph and Simpson hold options for 60,083 shares that would qualify as Eligible Options under the Offer; however, they are not eligible to participate in the Offer.

Schedule II attached to this document sets forth a table indicating the beneficial ownership of our common stock by our executive officers and non-employee members of our Board of Directors as of June 6, 2007.

During the 60-day period ended June 6, 2007:

• we have not granted any options to purchase shares of our common stock;

• individuals exercised options to acquire 91,266 shares of our common stock with exercise prices per share ranging from $12.45 to $19.75 all of which were acquired by our Board members or executive officers;

• we have not cancelled any options to purchase shares of our common stock;

• 14,500 shares of restricted stock vested, all of which were held by our Board members or executive officers;

• we have not granted any restricted stock units under our various stock plans; and

• our Board members and executive officers sold an aggregate of 118,516 shares of our common stock.

The following non-employee Board members and executive officers were parties to the foregoing transactions involving Cyberonics common stock conducted during the 60-day period ended June 6, 2007:

• On April 13, 2007, Reese S. Terry sold 750 shares of our common stock at an average price of $19.9567 per share.

• On April 23, 2007, Kevin S. Moore sold 4,266 shares of our common stock at an average price of $20.22 per share.

• On April 23, 2007, Kevin S. Moore exercised options to purchase 4,266 shares of our common stock at an exercise price of $19.75 per share.

• On April 26, 2007, Michael A. Cheney exercised options to purchase 45,300 shares of our common stock at an exercise price of $15.10 per share.

• On April 26, 2007, Michael A. Cheney exercised options to purchase 17,700 shares of our common stock at

33

	an exercise price of $16.95 per share.
•	On April 26, 2007, Michael A. Cheney exercised options to purchase 6,583 shares of our common stock at an exercise price of $12.45 per share.
•	On April 26, 2007, Michael A. Cheney exercised options to purchase 10,417 shares of our common stock at an exercise price of $14.51 per share.
•	On April 26, 2007, Michael A. Cheney exercised options to purchase 7,000 shares of our common stock at an exercise price of $14.74 per share.
•	On April 26, 2007, Michael A. Cheney sold 87,000 shares of our common stock at an average price of $22.04 per share.
•	On May 2, 2007, Tony Coelho sold 22,000 shares of our common stock at an average price of $21.7888 per share.
•	On June 1, 2007, Richard L. Rudolph, M.D., sold 2,500 shares of our common stock at an average price of $18.71 per share.
•	On June 1, 2007, Randal L. Simpson, sold 2,000 shares of our common stock at an average price of $18.71 per share.

There are no other persons controlling Cyberonics.

Except as otherwise described above and other than stock option grants, restricted stock unit awards and other stock-based awards made in the ordinary course to employees who are not executive officers, there have been no transactions in any outstanding options to purchase our common stock or in our common stock that were effected during the 60-day period ended June 6, 2007 by Cyberonics or by any current executive officer, Board member, affiliate or subsidiary of Cyberonics.

13. STATUS OF OPTIONS ACCEPTED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF THE OFFER.

The terms and provisions of each Amended Option will not differ from the terms and provisions in effect for that option at the time of tender, except that the Amended Option will have an exercise price equal to the Adjusted Exercise Price determined for that option. Accordingly, each Amended Option will continue to remain an outstanding option under the particular Plan under which it was originally granted. Each New Option will be exactly the same as the cancelled Eligible Option it replaces, with the same exercise price, vesting schedule and expiration date as the cancelled option, but with a new grant date. Any New Option to be issued in cancellation of an Eligible Option that was granted under the 2005 Plan will be granted under the 2005 Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Plan will be granted under the 1998 Plan.

Pursuant to the accounting standards in effect under SFAS 123R, we will recognize additional compensation expense for financial reporting purposes with respect to the amendment of the Eligible Options to increase the current exercise prices in effect for those options to the applicable Adjusted Exercise Prices based on the incremental fair value of those options as so modified. Both the change in exercise price and the offsetting Cash Bonus are included in the determination of the incremental fair value of those options. We will not recognize any additional compensation expense for financial reporting purposes with respect to the cancellation of tendered Eligible Options and the grant of New Options in replacement thereof because there is no incremental fair value since there was no change in the grant price or any other assumptions affecting the fair value.

14. LEGAL MATTERS; REGULATORY APPROVALS.

We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our increasing the exercise prices of the Eligible Options to the applicable Adjusted Exercise

34

Prices, paying the Cash Bonuses or canceling tendered options and granting New Options in replacement thereof, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for such amendment to those options, the payment of the Cash Bonuses or the cancellation of tendered options and grant of New Options as contemplated herein. Should any such approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We are unable to predict whether we may determine that we are required to delay the acceptance of the tendered Eligible Options for amendment or replacement or the payment of the applicable Cash Bonuses pending the outcome of any such matter. We cannot assure you that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to our business. Our obligation to amend or replace Eligible Options is subject to certain conditions, including the conditions described in Section 7.

15. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.

The following is a general summary of the material U.S. federal income tax consequences applicable to the amendment of the Eligible Options and the payment of the Cash Bonuses or the cancellation of tendered options and the grant of New Options in replacement thereof. Foreign, state and local tax consequences are not addressed.

Acceptance of Offer. If you tender your Eligible Options, you will not recognize any taxable income for U.S. federal income tax purposes at the time of your tender.

Amendment of Option. The amendment of your Eligible Option to increase the exercise price per share to the Adjusted Exercise Price determined for that option is not a taxable event for U.S. federal income tax purposes.

Cancellation and Grant of New Options. The cancellation of a tendered Eligible Option and the grant of a New Option in replacement will not be a taxable event for U.S. federal income tax purposes.

Exercise of Amended Option or New Option. Your Amended Option or New Option will be taxable as a non-statutory stock option for U.S. federal income tax purposes. Accordingly, upon each exercise of such option, you will recognize immediate taxable income equal to the excess of (i) the fair market value of the purchased shares at the time of exercise over (ii) the exercise price paid for those shares, and Cyberonics must collect the applicable federal, state and local income and employment withholding taxes with respect to such income.

Sale of Acquired Shares. The subsequent sale of the shares acquired upon the exercise of your Amended Option or New Option will give rise to a capital gain to the extent the amount realized upon that sale exceeds the sum of the (i) exercise price paid for the shares plus (ii) the taxable income recognized in connection with the exercise of your such option for those shares. A capital loss will result to the extent the amount realized upon such sale is less than such sum. The gain or loss will be long-term if the shares are sold more than one (1) year after the date the Amended Option or New Option is exercised for those shares.

Cash Bonus. You will be immediately taxed upon receipt of the Cash Bonus. The payment will constitute wages for tax withholding purposes. Accordingly, Cyberonics must withhold all applicable federal, state and local income and employment withholding taxes, and you will receive only the portion of the payment remaining after those taxes have been withheld.

WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX, FINANCIAL AND LEGAL ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL TAX AND OTHER CONSEQUENCES OF PARTICIPATING IN THE OFFER.

16. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT.

We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event set forth in Section 7 has occurred or is deemed by us to have occurred, to extend the period of time during which the Offer is open and thereby delay the acceptance of any Eligible Options for amendment or

35

replacement by giving notice of such extension to the tendering Eligible Optionees and making a public announcement thereof.

We also expressly reserve the right, in our judgment, at any time prior to the Expiration Date, to terminate or amend the Offer and to postpone our acceptance of any tendered Eligible Options for amendment or replacement upon the occurrence of any of the conditions specified in Section 7, by giving written or electronic notice of such termination or postponement to the tendering Eligible Optionees and making a public announcement thereof. Our reservation of the right to delay our acceptance of the tendered Eligible Options and amendment or replacement is limited by Rule 13e-4(f)(5) promulgated under the 1934 Act, which requires that we must pay the consideration offered or return the tendered Eligible Options promptly after termination or withdrawal of the Offer.

Amendments to the Offer may be made at any time and from time to time by public announcement of the amendment. In the case of an extension, the amendment will be issued no later than 9:00 a.m. Eastern Time on the next business day after the last previously scheduled or announced Expiration Date. Any public announcement made pursuant to the Offer will be disseminated promptly to Eligible Optionees in a manner reasonably designated to inform option holders of such change.

If we materially change the terms of the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the 1934 Act. Those rules require that the minimum period during which an Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of such terms or information. If we decide to take any of the following actions, we will give notice of such action and keep the Offer open for at least ten business days after the date of such notification:

          (i) we increase or decrease the amount of consideration offered for the Eligible Options, or

          (ii) we decrease the number of Eligible Options eligible to be tendered in the Offer.

17. FEES AND EXPENSES.

We will not pay any fees or commissions to any broker, dealer or other person for soliciting submissions of Eligible Options for amendment or replacement pursuant to this Offer.

18. ADDITIONAL INFORMATION.

We have filed with the SEC a Tender Offer Statement on Schedule TO, of which this document is a part, with respect to the Offer. This document does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, and the following materials which we have filed with the SEC before making a decision on whether to tender your Eligible Options for amendment or replacement:

     a. our Annual Report on Form 10-K for our fiscal year ended April 28, 2006, filed with the SEC January 5, 2007;

     b. our Quarterly Report on Form 10-Q for our fiscal quarter ended January 26, 2007, filed with the SEC on March 7, 2007;

     c. our Current Report on Form 8-K filed with the SEC on January 5, 2007; our Current Report on Form 8-K filed with the SEC on February 1, 2007; our Current Report on Form 8-K filed with the SEC on February 6, 2007; our Current Report on Form 8-K filed with the SEC on March 1, 2007; our Current Report on Form 8-K filed with the SEC on March 5, 2007; our Current Report on Form 8-K filed with the SEC on April 30, 2007; our Current Report on Form 8-K filed with the SEC on May 1, 2007; our

36

Current Report on Form 8-K filed with the SEC on May 10, 2007; our Current Report on Form 8-K filed with the SEC on May 18, 2007; and

     d. the description of our common stock included in our registration statement on Form 8-A, which was filed with the SEC on February 10, 1993, including any amendments or reports we file for the purpose of updating that description.

The SEC file number for these filings is 000-19806. These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings are available to the public on the SEC’s website at www.sec.gov. These filings may also be examined, and copies may be obtained, at the following SEC public reference room:

100 F Street, N.E.
Washington, D.C. 20549

You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.

We will also provide without charge to each person to whom a copy of this document is delivered, upon the written or oral request of any such person, a copy of any or all of the documents to which we have referred you, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to:

Cyberonics, Inc.
100 Cyberonics Boulevard, Houston, Texas 77058
Attn: Investor Relations

or by contacting Tabetha L. Yllander at (281) 727-2648 or tenderoffer@Cyberonics.com.

As you read the foregoing documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this document, you should rely on the statements made in the most recent document.

The information relating to Cyberonics in this document should be read together with the information contained in the documents to which we have referred you.

19. FORWARD-LOOKING STATEMENTS; MISCELLANEOUS.

All statements included or incorporated by reference in this document or our SEC reports referred to above, other than statements or characterizations of historical fact, are “forward-looking statements”. These forward-looking statements are based on our current expectations, estimates, approximations and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors.

Important factors that may cause such a difference for Cyberonics in connection with the Offer include, but are not limited to, the accounting treatment of the amendment to the Eligible Options; changes in the trading price of Cyberonics common stock during the Offer; potential claims and proceedings or other developments related to our review of our option grant practices and procedures, such as shareholder litigation and any action by the SEC, U.S. Attorney’s Office or other governmental agency that could result in civil or criminal sanctions against the company and/or certain of our current or former officers, directors or employees and negative tax or other implications

37

thereof. Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, recent Current Reports on Form 8-K and other SEC filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. These forward-looking statements speak only as of the date of this Offer. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

We are not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, we intend to make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law or we determine that further efforts to comply are not advisable, the Offer will not be made to, nor will tenders be accepted from or on behalf of, the holders of Eligible Options residing in such jurisdiction.

We have not authorized anyone to give you any information or to make any representations in connection with the Offer other than the information and representations contained in this document, the related Tender Offer Statement on Schedule TO or in the related Letter of Transmittal and Amendment Agreement. If anyone makes any representation to you or gives you any information different from the representations and information contained in this document, the related Tender Offer Statement on Schedule TO or in the related Letter of Transmittal and Amendment Agreement, you must not rely upon that representation or information as having been authorized by us. We have not authorized any person to make any recommendation on our behalf as to whether you should tender or refrain from tendering your Eligible Options pursuant to the Offer. You should rely only on the representations and information contained in this document, the related Tender Offer Statement on Schedule TO or in the related Letter of Transmittal and Amendment Agreement or to which we have referred you.

CYBERONICS, INC. June 7, 2007

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SCHEDULE I

INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF CYBERONICS, INC.

     The members of the Cyberonics board of directors and the Cyberonics executive officers and their respective positions and offices as of June 7, 2007, are set forth in the following table:

NAME	POSITION AND OFFICES HELD
Directors
Guy C. Jackson	Director
Daniel J. Moore	Director
Hugh M. Morrison	Chairman of the Board
Alfred J. Novak	Director
Alan J. Olsen	Director
Arthur L. Rosenthal, Ph.D.	Director
Jeffrey E. Schwarz	Director
Michael J. Strauss, M.D.	Director
Reese S. Terry, Jr.	Director
Executive Officers
Daniel J. Moore	President & CEO
Michael A. Cheney	Vice President, Marketing
Shawn P. Lunney	Vice President, Market Development
George E. Parker, III	Chief Operating Officer (Interim)
Richard L. Rudolph, M.D.	Vice President, Clinical & Medical Affairs, Chief Medical Officer
Randal L. Simpson	Vice President, Operations
David S. Wise	Vice President, General Counsel & Secretary

     The address of each board member and executive officer is c/o Cyberonics, Inc., 100 Cyberonics Boulevard, Houston, Texas 77058.

SCHEDULE II

BENEFICIAL OWNERSHIP OF CYBERONICS SECURITIES BY CYBERONICS DIRECTORS AND EXECUTIVE OFFICERS

The following table shows the holdings of Cyberonics common stock as of April 16, 2007 by each director and each executive officer of Cyberonics:

	Amount and Nature of
Name of Beneficial Owner	Beneficial Ownership (1)		Percent (2)
John A. Riccardi (3)		6,333		*
Michael A. Cheney (4)		198,951		*
W. Steven Jennings (5)		9,250		*
Shawn P. Lunney (6)		109,225		*
George E. Parker (7)		128,827		*
Richard Rudolph, M.D. (8)		177,166		*
Randal L. Simpson (9)		129,233		*
David S. Wise (10)		135,727		*
Guy C. Jackson (11)		36,717		*
Hugh M. Morrison (12)		10,000		*
Alfred Novak (13)		10,000		*
Alan J. Olsen (14)		45,807		*
Arthur J. Rosenthal (15)		10,000		*
Jeffrey Schwarz (16)		12,500		*
Michael J. Strauss, M.D., M.P.H. (17)		80,200		*
Reese S. Terry, Jr. (18)		523,030		*

* Does not exceed 1% of the outstanding shares.

(1)	Beneficial ownership is determined in accordance with the SEC’s rules and generally includes voting or investment power with respect to securities. Shares of our common stock subject to options and warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of shares beneficially owned by the person holding such options, but are not deemed outstanding for computing the percentage of any other person. Restricted stock not yet vested is included in the total shares outstanding but excluded from both the total shares held by the beneficial holder and the total shares deemed outstanding for computing the percentage of the person holding such restricted stock. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
(2)	Based on total shares outstanding of 25,710,000 at April 16, 2007.
(3)	Includes 6,333 shares subject to options exercisable on or before June 15, 2007. Mr. Riccardi was appointed Interim Chief Financial Officer in November 2006.
(4)	Includes 194,801 shares subject to options exercisable on or before June 15, 2007.
(5)	Includes 5,250 shares subject to options exercisable on or before June 15, 2007.
(6)	Includes 109,225 shares subject to options exercisable on or before June 15, 2007.
(7)	Includes 127,727 shares subject to options exercisable on or before June 15, 2007. Mr. Parker was appointed Interim Chief Operating Officer in November 2006.
(8)	Includes 167,166 shares subject to options exercisable on or before June 15, 2007.
(9)	Includes 120,425 shares subject to options exercisable on or before June 15, 2007.
(10)	Includes 135,727 shares subject to options exercisable on or before June 15, 2007.
(11)	Includes 33,217 shares subject to options exercisable on or before June 15, 2007.
(12)	Mr. Morrison joined our Board in November 2006.
(13)	Mr. Novak joined our Board in February 2007.
(14)	Includes 45,200 shares subject to options exercisable on or before June 15, 2007.
(15)	Mr. Rosenthal joined our Board in February 2007.
(16)	Mr. Schwarz joined our Board in February 2007.
(17)	Includes 80,200 shares subject to options exercisable on or before June 15, 2007.
(18)	Includes 97,400 shares held in trust for the benefit of Mr. Terry’s children of which Mr. Terry serves as trustee. Also includes 50,200 shares subject to options exercisable on or before June 15, 2007. Mr. Terry was appointed Interim Chief Executive Officer in November 2006.

EX-99.A2

Exhibit (a)(2)

[Cyberonics Employees]:

As you may be aware, we recently completed a voluntary review of our option grant practices. As a result of that review, revised measurement dates were applied to certain stock option grants awarded between January 19, 2000 and September 25, 2006. One or more of those options may also be deemed to have been granted at a discount for tax purposes and may be subject to adverse tax consequences under Section 409A of the Internal Revenue Code (and similar provisions under certain state tax laws).

I am pleased to announce that today Cyberonics is launching a program that offers eligible employees who hold options that may potentially be subject to Section 409A of the Internal Revenue Code the opportunity to amend or replace their options to avoid any adverse tax consequences under Section 409A. You are receiving this email because you hold one or more affected options. The program is described in complete detail in the formal Offer to Amend or Replace Eligible Options (the “Offer to Amend or Replace”) that is attached to this email. Also attached is a personalized Letter of Transmittal containing information about the options you hold that are eligible for this program, instructions for completing and returning the Letter of Transmittal and a set of Frequently Asked Questions.

Brief Description of the Program

As discussed in greater detail in the Offer to Amend or Replace, if you tender an affected option that is amended pursuant to the program, the current exercise price in effect for that option will be adjusted to the lower of (i) the fair market value per share of Cyberonics common stock on the revised measurement date applied to that option as a result of the review and (ii) the fair market value per share of Cyberonics common stock on the date on which the option is amended. The new exercise price per share will be designated the “Adjusted Exercise Price” and will become effective on the first business day following the expiration of the offer (the “Amendment Date”). No other changes will be made to your affected option. Accordingly, each amended option will otherwise continue to be subject to the same vesting schedule, exercise period, option term and other terms and conditions as in effect for that option immediately prior to the amendment. Each participant whose affected options are so amended will become entitled to a special cash payment with respect to those options. The amount of the cash payment payable with respect to each option that is amended will be determined by multiplying (i) the number of shares of common stock subject to each amended option and (ii) the amount by which the adjusted exercise price for that option exceeds the current exercise price in effect for that option. The cash payment will be made on the Company’s first regular payroll date in January 2008, and will be subject to both income and employment tax withholding.

However, if the Adjusted Exercise Price so determined would be the same or lower than the exercise price per share currently in effect for an affected option, then that option will, on the Amendment Date, be cancelled and immediately replaced with a new option that is exactly the same as the cancelled option, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date. The cancellation and regrant is necessary to evidence the remedial action required under Section 409A with respect to an affected option whose current exercise price is not increased. No cash payment will be made with respect to a replaced option because the exercise price for that option will be the same as the exercise price in effect for the tendered option.

We urge you to read the entire Offer to Amend or Replace and your personalized Letter of Transmittal very carefully.

Information Sessions

We will be holding information sessions in [LOCATION] at 10:00 a.m. on June 8, 2007 and on June 11, 2007 at 10:00 a.m. and telephonically at 2:00 p.m. on June 8, 2007 [NUMBER / PIN] in order to:

• Explain the adverse tax consequences of Section 409A

• Explain the offer by Cyberonics to address the discounted options; and

• Answer any questions you may have on the terms of the offer.

Please plan to attend at least one of these sessions.

Action Items Required by You

Participation in the program is completely voluntary and you are not required to tender any of your affected options for amendment or replacement. However, if you elect not to tender your affected options, you will be solely responsible for any adverse tax consequences that may arise under Section 409A (and state tax laws) without any expectation of reimbursement by Cyberonics. We strongly recommend that you consult with your personal tax, financial and legal advisors to determine the tax and other consequences of electing or declining to participate in the offer.

Whether or not you choose to tender your options under the program, you must complete, sign and date your Letter of Transmittal and return it to us by 11:59 p.m. Central Time on Friday, July 6, 2007. You may submit your Letter of Transmittal by facsimile, overnight courier or email using the following contact information:

Cyberonics, Inc.
Attn: Tender Offer
100 Cyberonics Boulevard
Houston, Texas 77058
Facsimile: (281) 853-2403
Email: tenderoffer@cyberonics.com

Questions

If you have any questions regarding this program, you may call Tabetha L. Yllander at (281) 727-2648 or send an email to tenderoffer@cyberonics.com.

We are pleased to be able to take these steps so that our valued employees may avoid potential adverse tax consequences under Section 409A.

EX-99.A3

Exhibit (a)(3)

FORM OF LETTER OF TRANSMITTAL

CYBERONICS, INC.
LETTER OF TRANSMITTAL
RE: TENDER OF ELIGIBLE OPTION(S) PURSUANT TO THE OFFER TO AMEND OR REPLACE
DATED JUNE 7, 2007

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 11:59 P.M., CENTRAL TIME, ON JULY 6, 2007,
UNLESS THE OFFER IS EXTENDED.

Name

Important: Read the remainder of this Letter of Transmittal before completing and signing this page.

The chart on the attached Schedule A provides information regarding the grant date indicated for each Eligible Option in the applicable grant notice or option agreement, the exercise price per share currently in effect for that option, the revised measurement date determined for that option for financial accounting purposes, the fair market value per share of Cyberonics common stock on that date, the number of shares currently outstanding under the option and the portion of the option that qualifies as an Eligible Option.

Indicate your decision to tender your Eligible Option(s) identified on the attached Schedule A by checking the “Amend This Eligible Option” box on that schedule. Only the portion of your option that is subject to Section 409A of the Internal Revenue Code will be amended. If you do not want to tender one or more of your Eligible Options for amendment, check the “Do Not Amend This Eligible Option” box for each option you choose not to tender. If you do not clearly mark the “Amend This Eligible Option” box with respect to an Eligible Option, your election with respect to that option will default to “Do Not Amend This Eligible Option”. In that event, such Eligible Option will not be amended, and you will not become entitled to the special Cash Bonus payable with respect to that Eligible Option. In addition, you will be solely responsible for any taxes, penalties or interest you may incur under Section 409A (or state tax laws).

Signature:

Date:

IMPORTANT: YOU MUST ALSO SIGN ON PAGE 4.

Schedule A

				Fair Market	Total	Number of
				Value Per	Number of	Shares		Do Not
		Current		Share on	Shares	Qualifying	Amend	Amend
	Indicated	Exercise	Revised	Revised	Subject to	as an	This	This
Employee	Grant	Price Per	Measurement	Measurement	Outstanding	Eligible	Eligible	Eligible
Name	Date	Share	Date	Date	Option	Option (1)	Option	Option
		$		$			o	o

(1) Reflects the portion of the option potentially subject to taxation under IRC Section 409A.

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To: Cyberonics, Inc.

By checking the ”Amend This Eligible Option” box in the table on Schedule A attached to the cover page of this Letter of Transmittal, I understand and agree to all of the following:

     1. I hereby tender my Eligible Option(s) identified on Schedule A attached to the cover page of this Letter of Transmittal (the “Letter”) to Cyberonics, Inc., a Delaware corporation (“Cyberonics”), for amendment or replacement in accordance with the terms set forth set forth in (1) the Offer to Amend or Replace dated June 7, 2007 (the “Offer to Amend or Replace”), of which I hereby acknowledge receipt, and (2) this Letter of Transmittal. Each tendered Eligible Option will be amended or replaced effective on July 9, 2007, or, if the Offer is extended, the first business day following the extended expiration date. The date on which the tendered Eligible Options are amended or replaced will constitute the “Amendment Date.” All other capitalized terms used in this Letter of Transmittal but not defined herein have the meaning assigned to them in the Offer to Amend or Replace.

     2. The Offer is currently set to expire at 11:59 p.m. Central Time on July 6, 2007 (the “Expiration Date”), unless Cyberonics, in its discretion, extends the period of time during which the Offer will remain open. In such event, the term “Expiration Date” will mean the latest time and date at which the Offer, as so extended, expires.

     3. Except as otherwise provided in Paragraph 5 below, the exercise price of each of my tendered Eligible Option(s) will be amended on the Amendment Date to an exercise price per share equal to the lower of (i) the Fair Market Value per share of Cyberonics common stock on the revised measurement date determined for that option for financial accounting purposes and (ii) the Fair Market Value per share of Cyberonics common stock on the Amendment Date. The new exercise price will constitute the “Adjusted Exercise Price,” and each of my tendered Eligible Options with such Adjusted Exercise Price will be designated an “Amended Option.” Except for the Adjusted Exercise Price, the terms and provisions of each Amended Option will be the same as in effect for the corresponding Eligible Option immediately before the amendment. The “Fair Market Value” per share of Cyberonics common stock on any date means the closing selling price per share of Cyberonics common stock on the last market trading day prior to that date.

     4. I will become entitled to receive a cash bonus (the “Cash Bonus”) in an amount determined by multiplying (i) the number of shares of common stock subject to each Amended Option by (ii) the amount by which the Adjusted Exercise Price exceeds the current exercise price per share in effect for that Eligible Option. The Cash Bonus will be paid on the first regular payroll date in January 2008, whether or not I continue in the employ of Cyberonics (or any subsidiary) through such date, but the payment will be subject to Cyberonics’ collection of all applicable withholding taxes.

     5. Should an Eligible Option I tender for amendment have an exercise price per share at or above the Fair Market Value per share of the common stock on the Amendment Date, then that option will be cancelled on such date and immediately replaced with a New Option that is exactly the same as the cancelled option, including the same exercise price per share, vesting schedule and expiration date, but with a new grant date. A stock option agreement for the New Option will be delivered to me as soon as administratively practicable following the Amendment Date.

     6. If I cease to be employed by Cyberonics or its subsidiaries after I tender my Eligible Option(s) but before Cyberonics amends or replaces such option(s), my Eligible Options will not be amended or replaced, and I will not be entitled to receive the Cash Bonus.

     7. Until the Expiration Date, I will have the right to withdraw my tendered Eligible Option(s). However, after that date I will have no withdrawal rights, unless Cyberonics does not accept my tendered Eligible Option(s) before August 3, 2007, the 40th business day after commencement of the Offer. I may then withdraw my tendered Eligible Option(s) at any time prior to Cyberonics’ acceptance of such options for amendment or replacement pursuant to the Offer.

     8. The tender of my Eligible Option(s) pursuant to the procedure described in Section 4 of the Offer and the instructions to this Letter of Transmittal will constitute my acceptance of all of the terms and conditions of the Offer. Acceptance by Cyberonics of my tendered Eligible Option(s) for amendment or replacement pursuant to the Offer will constitute a binding agreement between Cyberonics and me upon the terms and subject to the conditions of the Offer.

     9. I am the registered holder of the Eligible Option(s) tendered hereby, and my name and other information appearing on the cover page of this Letter of Transmittal are true and correct.

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     10. I am not required to tender my Eligible Option(s) pursuant to the Offer. However, if I do not tender such option(s), then I must take other action on my own with respect to such option(s) in order to bring such option(s) into compliance with Section 409A of the Internal Revenue Code (“Section 409A”) and thereby avoid the potentially adverse tax consequences of Section 409A. I will be solely responsible for any penalty taxes, interest payments or other liabilities I may incur under Section 409A (and comparable state tax laws) with respect to any Eligible Option that is not amended or replaced pursuant to the Offer.

     11. Cyberonics cannot give me legal, tax or investment advice with respect to the Offer and has advised me to consult with my own legal, tax and investment advisors as to the consequences of participating or not participating in the Offer.

     12. Under certain circumstances set forth in the Offer to Amend or Replace, Cyberonics may terminate or amend the Offer and postpone its acceptance and amendment or replacement of the tendered Eligible Options. Should the Eligible Option(s) tendered herewith not be accepted for amendment or replacement, such option(s) will be returned to me promptly following the expiration or termination of the Offer.

I understand that neither Cyberonics nor the Cyberonics Board is making any recommendation as to whether I should tender or refrain from tendering my Eligible Option(s) for amendment or replacement, and that I must make my own decision whether to tender my Eligible Option(s), taking into account my own personal circumstances and preferences. I understand that the Amended Option(s) or New Option(s) resulting from the amendment or replacement of my tendered Eligible Option(s) may decline in value and may be “out of the money” when I decide to exercise such option(s). I further understand that past and current market prices of Cyberonics common stock may provide little or no basis for predicting what the market price of Cyberonics common stock will be when Cyberonics amends my tendered option(s) or at any other time in the future.

SIGNATURE OF OPTIONEE

(Signature of Optionee or Authorized Signatory)
(Optionee’s Name, please print in full)
Date:                     , 2007
Address	Office Telephone: (___)

4

Please read the instructions on pages 6 and 7 of this Letter of Transmittal and then complete the table on Schedule A attached to the cover page, and sign and date the cover page and the signature block on page 4 and return the entire Letter of Transmittal (including the instructions) to us by facsimile, overnight courier or email using the following contact information:

For delivery by facsimile, you must use the following facsimile number: (281) 853-2503.

For delivery by overnight courier, the Letter of Transmittal should be addressed to Cyberonics, Inc., Attn: Tender Offer, 100 Cyberonics Boulevard, Houston, Texas 77058.

For delivery by email, you must use the following email address: tenderoffer@cyberonics.com.

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS
OTHER THAN THE ADDRESS ABOVE OR TRANSMISSION VIA FACSIMILE
TO A NUMBER OTHER THAN THE FACSIMILE NUMBER ABOVE OR SUBMISSION VIA EMAIL TO AN
ADDRESS OTHER THAN THE EMAIL ADDRESS ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.

WE MUST RECEIVE YOUR LETTER OF TRANSMITTAL
BY 11:59 P.M. CENTRAL TIME ON THE EXPIRATION DATE

5

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Delivery of Letter of Transmittal. A properly completed and duly executed original of pages 1-7 of the Letter of Transmittal (or a facsimile thereof) must be received by Cyberonics, at its address or at its facsimile number set forth on the signature page of the Letter of Transmittal, by 11:59 p.m. Central Time on the Expiration Date.

The method by which you deliver the Letter of Transmittal is at your election and risk, and the delivery will be deemed made only when actually received by Cyberonics. If you elect to deliver your Letter of Transmittal by facsimile, Cyberonics recommends that you retain the fax transmittal receipt. If you elect to deliver your Letter of Transmittal by overnight courier, Cyberonics recommends that you obtain and retain a receipt of delivery. If you elect to deliver your Letter of Transmittal by email, Cyberonics recommends that you print and retain the email delivery receipt that you receive upon submitting the Letter of Transmittal. You should in all events allow sufficient time to ensure timely delivery.

Tenders of Eligible Options made pursuant to the Offer may be withdrawn up to 11:59 p.m. Central Time on the Expiration Date. If the Offer is extended by Cyberonics beyond that time, you may withdraw your tendered Eligible Options at any time until the extended expiration of the Offer. In addition, if Cyberonics does not accept your tendered options by 11:59 p.m. Central Time on August 3, 2007, you may withdraw your tendered Eligible Options at any time thereafter until such options are accepted for amendment or replacement. To validly withdraw your tendered Eligible Options, you must deliver a written notice of withdrawal, or a facsimile thereof, with the required information to Cyberonics while you still have the right to withdraw such tendered options. Withdrawals may not be rescinded, and any Eligible Options withdrawn will thereafter be deemed not to have been properly tendered for purposes of the Offer, unless the withdrawn options are properly re-tendered prior to the Expiration Date by following the procedures described above.

Cyberonics will not accept any alternative, conditional or contingent tenders. All person tendering Eligible Options shall, by execution of this Letter of Transmittal (or a facsimile of it), waive any right to receive any notice of the acceptance of their tender, except as provided for in the Offer.

2. Tenders. If you intend to tender your Eligible Options pursuant to the Offer, you must complete the table on Schedule A attached to the cover page of the Letter of Transmittal and follow the procedures described in Instruction 1. If you decide to tender one or more Eligible Options, you must tender the entire portion of each such option that is subject to the Offer.

3. Signatures on This Letter of Transmittal. The optionee must sign the Letter of Transmittal.

4. Requests for Assistance or Additional Copies. Any questions or requests for assistance, as well as requests for additional copies of the Offer to Amend or Replace or the Letter of Transmittal, may be directed to Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com. Copies will be furnished promptly at Cyberonics’ expense.

5. Irregularities. Cyberonics will determine, in its discretion, all questions as to the form of documents and the validity, form, eligibility (including time of receipt), and acceptance of any tendered option. Cyberonics will also decide, in its discretion, all questions as to (i) the portion of each option grant that qualifies as an Eligible Option for purposes of the Offer; (ii) the Adjusted Exercise Price to be in effect under the Amended Option, (iii) the number of shares of common stock purchasable under the Amended Option at the Adjusted Exercise Price, (iv) the amount of the Cash Bonus payable with respect to each Amended Option and (v) the cancellation of tendered Eligible Options with exercise prices at or above the Adjusted Exercise Prices determined for those options and the replacement of those options with New Options. The determination of such matters by Cyberonics will be final and binding on all parties. Cyberonics reserves the right to reject any or all tenders it determines do not comply with the conditions of the Offer, are not in proper form or the acceptance of which would be unlawful. Cyberonics also reserves the right to waive any of the conditions of the Offer or any defect or irregularity in the tender with respect to any particular Eligible Option or any particular optionee, and Cyberonics’ interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of an Eligible Option will be deemed to be properly made until all defects and irregularities have been cured by the tendering optionee or waived by Cyberonics.

6

Unless waived, any defects or irregularities in connection with the tender of an Eligible Option must be cured within such time as Cyberonics shall determine. Neither Cyberonics nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for failure to give any such notice. If the table on the cover page of the Letter of Transmittal includes options that are not eligible for the Offer, Cyberonics will not accept those options for amendment or replacement, but Cyberonics does intend to accept for amendment or replacement any properly tendered Eligible Option set forth in that table.

6. Important Tax Information. You should refer to Sections 2 and 15 of the Offer and the “Risks of Participation in the Offer” section of the Offer, which contain important U.S. federal tax information concerning the Offer. You are strongly encouraged to consult with your own tax, financial and legal advisors as to the tax and other consequences of your participation in the Offer.

7. Copies. You should make a copy of the Letter of Transmittal, after you have completed and signed it, for your records.

IMPORTANT: THE LETTER OF TRANSMITTAL (OR A FACSIMILE COPY) MUST BE RECEIVED BY
CYBERONICS BY 11:59 P.M. CENTRAL TIME ON THE EXPIRATION DATE.

7

EX-99.A4

Exhibit (a)(4)

CYBERONICS, INC.
OFFER TO AMEND OR REPLACE ELIGIBLE OPTIONS

FREQUENTLY ASKED QUESTIONS

The following are answers to some of the questions that you may have about the Offer to Amend or Replace Eligible Options (the “Offer”) and the accompanying Letter of Transmittal (which, as they may each be amended or supplemented from time to time, constitute the “Offer Documents”). We urge you to read carefully the Offer Documents because the information in this summary is not complete and does not contain all of the information that is important to you.

1. WHEN DOES THE OFFER COMMENCE?

The commencement date of the Offer is June 7, 2007.

2. WHEN DOES THE OFFER EXPIRE?

The Offer will expire on July 6, 2007, at 11:59 p.m., Central Time, unless we extend the Offer. If the Offer is extended, we will make a public announcement of the extension no later than 9:00 a.m., Eastern Time, on the next business day following the previously scheduled expiration of the Offer.

3. HOW AND WHEN DO I TENDER MY ELIGIBLE OPTIONS?

To tender one or more of your Eligible Options for amendment or replacement pursuant to the Offer, you must properly complete and duly execute your Letter of Transmittal and deliver it via facsimile, overnight courier or email using the following contact information:

By Facsimile: Facsimile Number (281) 853-2503.
By Overnight Courier:	Cyberonics, Inc.
	100 Cyberonics Boulevard
	Houston, Texas 77058
	Attn: Tender Offer.
By Email: tenderoffer@cyberonics.com.

We must receive your completed Letter of Transmittal before 11:59 p.m. Central Time on July 6, 2007. If we extend the Offer beyond that time, you must deliver your completed and executed Letter of Transmittal before the extended expiration date of the Offer.

4. DURING WHAT PERIOD OF TIME MAY I CHANGE MY ELECTION WITH RESPECT TO MY ELIGIBLE OPTIONS?

You may withdraw your tendered Eligible Options at any time before 11:59 p.m., Central Time, on July 6, 2007. If we extend the Offer beyond that time, you may withdraw your tendered Eligible Options at any time until the extended expiration date of the Offer. To withdraw your tendered options, you must deliver a properly completed and signed Withdrawal Form via facsimile, overnight courier or email using the following contact information:

By Facsimile: Facsimile Number (281) 853-2503.
By Overnight Courier:	Cyberonics, Inc.
	100 Cyberonics Boulevard
	Houston, Texas 77058
	Attn: Tender Offer.
By Email: tenderoffer@cyberonics.com.

If you withdraw your Eligible Options, then it will be your responsibility to take appropriate action to avoid any potential adverse taxation of those options under Section 409A (or state tax laws). You will be responsible for any penalty taxes, interest payments or other liabilities you may incur with respect to the withdrawn options. However, you may re-tender any Eligible Options withdrawn from the Offer, provided you again follow the tender procedures, as described in this document and the Letter of Transmittal, prior to the expiration of the Offer.

5. WHERE CAN I OBTAIN A COPY OF THE LETTER OF TRANSMITTAL?

Your personalized Letter of Transmittal was sent to you with the Offer Document on June 7, 2007, the first day of the Offer. To receive additional copies of the Letter of Transmittal, please contact Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com

6. WHAT WILL HAPPEN TO MY TENDERED OPTIONS?

If Cyberonics accepts your tendered Eligible Options pursuant to the terms of the Offer, then each of those options will be amended to increase the exercise price per share to the lower of (i) the Fair Market Value per share of Cyberonics common stock on the revised measurement date determined for that option and (ii) the Fair Market Value per share of such common stock on the date on which the option is amended. The “Fair Market Value” per share of our common stock on any date means the closing selling price per share of our common stock on the last market trading day prior to that date.

However, if an Eligible Option you tender for amendment has an exercise price per share at or above the Fair Market Value per share of Cyberonics common stock on the amendment date, then that option will be cancelled on that date and immediately replaced with a new option that is exactly the same as the tendered Eligible Option it replaces, with the same exercise price per share, vesting schedule and expiration date, but with a new grant date. Such cancellation and regrant is necessary in order to avoid any potential adverse taxation of that option under IRC Section 409A with respect to an Eligible Option whose current exercise price is not increased. Any New Option to be issued in cancellation of an Eligible Option that was granted under the 2005 Plan will be granted under the 2005 Plan; any New Option to be issued in cancellation of an Eligible Option granted under the 1996 Plan will be granted under the 1998 Plan.

7. WHAT ARE SOME OF THE KEY DATES TO REMEMBER?

The commencement date of the Offer is June 7, 2007.

The Offer will expire at 11:59 p.m., Central Time, on July 6, 2007 (unless we extend it).

The Eligible Options will be amended or replaced on July 9, 2007 (unless we extend the Offer).

The cash bonus will be payable on the Company’s first regular payroll date in January 2008.

8. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?

For additional information or assistance, you should contact Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com.

2

EX-99.A5

Exhibit(a)(5)

Discounted Stock Options, Section 409A & Cyberonics' Tender Offer June 8 and 11, 2007 1-PA/3641683.v2

Meeting Objectives Explain the tax laws affecting certain options Describe what Cyberonics is doing to address the affected options Review your choices and participation requirements

Why are we here today? Cyberonics has determined that there are employees that hold certain stock options that may be negatively impacted by a recent tax law change The number of option shares affected: 369,928 Options issued under 1996 Plan and 2005 Plan: 3,173,296 Cyberonics has developed a solution to address the problem, but which requires your participation If you do not participate, you may have adverse income tax consequences

Option taxation prior to §409A Nonqualified stock options (discounted or not) were taxed as follows: No tax event at either grant or vesting Income tax at exercise Option grant price = $15 Stock price at vesting = $18 Employee exercises when stock price = $20 Income tax at exercise on the gain ($20-$15)

Tax Law Change: §409A §409A applies to items considered to be deferred compensation Certain stock options are now considered to be deferred compensation What are the consequences of §409A? Income taxation in 2008 for shares that vest in 2005 to 2008, not at exercise 20% additional federal tax Up to 20% additional state tax in certain states (CA) Interest penalty Continued taxation each year until exercise of option

Which options are impacted? Options with an exercise price below the stock's fair market value (FMV) on the actual grant date ("Discounted Options") Certain options granted between 1/19/00 and 9/25/06 may be considered Discounted Options because of new measurement dates applied to those options and the resulting change in FMV Only options that vest AFTER 12/31/04 are subject to §409A Portions of options granted prior to §409A's enactment could be impacted by §409A if they vested 1/1/05 and later Portions of options vesting prior to 1/1/05 are not subject to §409A

Example: Option granted on July 24, 2002 - 10,000 shares Option price = $9.96, but fair market value at new measurement date = $16.55 Vesting: 2,000 options vest on July 24, 2003 2,000 options vest on July 24, 2003 2,000 options vest on July 24, 2004 2,000 options vest on July 24, 2006 2,000 options vest on July 24, 2007 CONCLUSION: The 4,000 options that vested prior to 1/1/05 are NOT subject to §409A The 6,000 options that vest after 12/31/04 are subject to §409A because they were granted at a discount

What is the solution?

Cyberonics' Solution: Tender Offer for Unexercised Affected Options Amend option to increase exercise price, AND provide a cash payment OR Replace option with new option Amendment vs. Replacement depends on remeasurement pricing and pricing at the end of the Tender Offer

Cyberonics' Solution: Tender Offer Amend option to increase the exercise price Exercise price will be the lower of: Fair market value on the remeasurement date, or Fair market value on the amendment date FMV= Closing selling price on the last trading day before amendment date Option price will never be lower than current exercise price All other terms will remain the same (including the number of shares, vesting schedule and expiration date)

Cyberonics' Solution: Tender Offer Cash bonus payment Equal to the difference (if any) between the lower of remeasurement price or the FMV on the amendment date and original exercise price for the impacted options Will be made on the Company's first regular payroll date in January 2008 IRS regulations prevent any earlier payment date

Replace Option with New Option If adjusted exercise price is less than the current exercise price Adjusted exercise price = lesser of the remeasurement price or the FMV on the amendment date Cancel the option and replace with new option Original exercise price All other terms remain the same (including the number of shares, vesting schedule and expiration date)

Example 1 Option for 10,000 shares with recorded grant date of on 6/25/01 Exercise price = $12.80 FMV on revised measurement date= $16.45 FMV on the amendment date = $20.00 Vesting: 2,000 vest on 6/25/02 - not subject to §409A 2,000 vest on 6/25/03 - not subject to §409A 2,000 vest on 6/25/04 - not subject to §409A 2,000 vest on 6/25/05 - subject to §409A 2,000 vest on 6/25/06 - subject to §409A Option Amendment: 6,000 options vested on 12/31/04 - NO CHANGE 4,000 options vesting on 6/25/05,06 - amended exercise price = $16.45 No change to expiration date or vesting schedule Cash Payment: Employee receives cash payment of $14,600 = 4,000 options x ($16.45 - $12.80), (less tax withholdings), paid in January 2008

Example 2 Option for 10,000 shares with recorded grant date of on 12/11/01 Exercise price = $23.85 FMV on revised measurement date= $26.02 FMV on amendment date = $25.00 Vesting: 2,000 vest on 12/11/02 - not subject to §409A 2,000 vest on 12/11/03 - not subject to §409A 2,000 vest on 12/11/04 - not subject to §409A 2,000 vest on 12/11/05 - subject to §409A 2,000 vest on 12/11/06 - subject to §409A Option Amendment: 6,000 options vested on 12/31/04 - NO CHANGE 4,000 options vesting on 6/25/05, 06 - amended exercise price = $25.00 No change to expiration date or vesting schedule Cash Payment: Employee receives cash payment based on difference between $23.85 and $25.00 (less tax withholdings), paid in January 2008

Example 3 Option for 10,000 shares with recorded grant date of on 12/11/01 Exercise price = $23.85 FMV on revised measurement date= $26.02 FMV on amendment date = $19.00 Vesting: 2,000 vest on 12/11/02 - not subject to §409A 2,000 vest on 12/11/03 - not subject to §409A 2,000 vest on 12/11/04 - not subject to §409A 2,000 vest on 12/11/05 - subject to §409A 2,000 vest on 12/11/06 - subject to §409A New Option Grant: 6,000 options vested on 12/31/04 - NO CHANGE 4,000 options vesting on 6/25/05, 06 - new option grant with exercise price = $23.85 No change to expiration date or vesting schedule No cash bonus

Eligible Optionees Must be an employee as of the close of the Tender Offer (July 6, 2007, unless extended) Must hold unexercised options that were granted at a discount and vest after 12/31/04 Options subject to U.S. taxation

Eligible Options Only the discounted options impacted by §409A and vesting after 12/31/04 will be subject to the tender offer Only affected portions that are unexercised and outstanding at the close of the tender offer You can select which of your affected grants to tender (i.e., participate with), but the entire unexercised portion must be tendered

What if I do nothing?

What if I do nothing? If you choose NOT to participate: Your options will NOT be amended You will NOT become eligible to receive a cash payment Your affected options may remain subject to adverse tax consequences You will NOT be reimbursed for adverse tax consequences

What if I do nothing? Tax Impact: Federal income taxation in 2008 for shares that vest/vested from 2005 to 2008, even if you do not exercise 20% additional federal tax on spread at time of vesting Up to 20% additional state tax in certain states (CA) Interest penalty on income amount Will occur each year after vesting on future appreciation in FMV until exercise or expiration of the discounted options Tender offer is a one-time offer to prevent future adverse tax consequences

How do I participate?

Tender Offer Timeline Tender Offer Begins: June 7, 2007 Tender Offer Ends: July 6, 2007 All elections MUST be received by 11:59PM Central Time on the expiration date Late or incomplete submissions will not be accepted Option Amendment or Replacement: July 9, 2007 Confirming email will be sent to you, within 2 business days after receipt of your acceptance of the Offer

What Information Have You Received? Email that includes a copy of the Tender Offer document, your personalized Letter of Transmittal (election form) and FAQs This presentation and the Tender Offer materials Available on Cybernet under "Tender Offer"

How to Submit Your Letter of Transmittal Fax to (281) 853-2503 Overnight courier to: Cyberonics, Inc. 100 Cyberonics Boulevard Houston, Texas 77058 Attn: Tender Offer Email to tenderoffer@cyberonics.com

What if I still have questions? Any questions should be directed to Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com

Tax Advice This presentation is general and you should consult with your personal tax advisor for advice relevant to your specific situation Taxation of stock option transactions can be very complicated Cyberonics policy prohibits any employees from providing personal income tax advice to any other employee

Circular 230 Disclaimer Notice Any tax advice included in this presentation was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed by any governmental taxing authority or agency; This tax advice was written to support the promotion of the matter addressed by the presentation; and The taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor

EX-99.A6

Exhibit (a)(6)

STOCK OPTION AMENDMENT
AND
CASH BONUS AGREEMENT

     AGREEMENT made by Cyberonics, Inc. (the “Company”) which shall be effective on the date executed by a validly-authorized officer of the Company.

     WHEREAS, the Company previously granted to the optionee listed on the attached Schedule I (the “Optionee”) the options identified on Schedule I (the “Options”) to purchase shares of the Company’s common stock under one or more of the Company’s employee stock incentive plans (individually, a “Plan”).

     WHEREAS, the Company and Optionee entered into a Notice of Stock Option Grant and/or Stock Option Agreement (collectively, the “Option Agreement”) evidencing each such Option.

     WHEREAS, in order to avoid potential adverse tax consequences under section 409A of the Internal Revenue Code, 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 I (the “Covered Portion”) to the higher exercise price per share indicated for the Covered Portion of such Option on Schedule I.

     WHEREAS, in order to compensate Optionee for the increased exercise prices to be in effect for the Covered Portions of the Options, the Company is willing to pay Optionee a special cash bonus in a dollar amount equal to the aggregate increase in the exercise prices for the Covered Portion of the Options as indicated on Schedule I.

     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 I 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 I.

     2. Cash Bonus. Optionee shall become entitled to receive a cash bonus from the Company (the “Cash Bonus”) in the gross dollar amount indicated as his or her Total Cash Bonus on attached Schedule I. Payment shall be made on the Company’s first regular payroll date in January 2008. However, the Cash Bonus shall be subject to the Company’s collection of all applicable federal, state and local income and employment withholding taxes, and Optionee shall be paid only the net amount of such bonus remaining after such taxes have been collected. Optionee need not remain in the Company’s employ to receive the Cash Bonus.

     3. Entire Agreement. This Agreement, together with the Option Agreements (to the extent not expressly amended hereby) and the applicable Plan under which each Option is outstanding, represents the entire agreement of the parties with respect to the Options, the Covered Portions thereof and the Cash Bonus and supersedes any and all previous contracts, arrangements or understandings between the parties with respect to such Options and the Cash Bonus. This Agreement may be amended at any time only by means of a writing signed by 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 Plans have been modified as a result of this Agreement, and those terms and provisions shall continue in full force and effect.

IN WITNESS WHEREOF, this Agreement has been executed on behalf of Cyberonics, Inc. by a duly-authorized officer on the date indicated below.

CYBERONICS, INC.
By:	George E. Parker, III
TITLE:	VP, Human Resources
DATED:	, 2007

SCHEDULE I

AMENDED OPTIONS AND CASH BONUS (if applicable)

							Number of	Number of
							Outstanding	Outstanding
		Total Number			New Exercise		Option	Option
		of Shares	Exercise Price		Price Per		Shares	Shares Not	Cash Bonus
	Indicated	Subject to	Per Share		Share		Subject to	Subject to	Payable
Employee	Grant	Outstanding	Prior to		Following		Amended	Amended	(if
Name	Date	Option	Amendment		Amendment		Exercise Price	Exercise Price	applicable)*
				$		$				$

Total Cash Bonus: $                                        

* The Cash Bonus will be paid on the Company’s first regular payroll date in January 2008.

EX-99.A7

Exhibit (a)(7)

CYBERONICS, INC.
OFFER TO AMEND OR REPLACE ELIGIBLE OPTIONS

WITHDRAWAL FORM

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 11:59 P.M., CENTRAL TIME,
ON JULY 6, 2007 UNLESS THE OFFER IS EXTENDED

You previously received (1) an offer (the “Offer”) from Cyberonics to amend or replace your Eligible Options as described in the Offer to Amend or Replace Eligible Options dated June 7, 2007 (the “Offer to Amend or Replace”) and (2) a Letter of Transmittal for your Eligible Option(s). You signed and returned your Letter of Transmittal in which you tendered one or more Eligible Option(s) for amendment or replacement pursuant to the Offer. You should submit this Withdrawal Form only if you now wish to change your decision and withdraw one or more of your tendered Eligible Options. Capitalized terms not defined herein shall have the meaning assigned to such terms in the Offer to Amend or Replace.

The Offer is currently set to expire at 11:59 p.m. Central Time on July 6, 2007 (the “Expiration Date”), unless Cyberonics, in its discretion, extends the period of time during which the Offer will remain open. In such event, the term “Expiration Date” will mean the latest time and date at which the Offer, as so extended, expires.

To withdraw your tendered Eligible Option(s), you must complete, sign and date this Withdrawal Form and submit it to Cyberonics via (i) facsimile to facsimile number (281) 853-2503, (ii) overnight courier to Cyberonics, Inc., 100 Cyberonics Boulevard, Houston, Texas 77058, Attn: Tender Offer or (iii) email to tenderoffer@cyberonics.com.

For your withdrawal to be effective, this Withdrawal Form must be received by Cyberonics by 11:59 p.m. Central Time on the Expiration Date.

Each withdrawn Eligible Option will continue to be governed by the 1996 Stock Option Plan or the 2005 Stock Plan under which that withdrawn Eligible Option was granted and by the existing Notice of Stock Option Grant and/or Stock Option Agreement between you and Cyberonics evidencing that option.

You should note that if you withdraw your tendered Eligible Option(s), such option(s) will not be amended or replaced, and you will not receive the Cash Bonus. In addition, you will be solely responsible for bringing your Eligible Option(s) into compliance with IRC Section 409A in order to avoid adverse tax consequences with respect to such option(s). You will be solely be responsible for any penalty taxes, interest payments or other liabilities you may incur under IRC Section 409A (and similar provisions under certain state tax laws) with respect to the withdrawn Eligible Option(s).

If you wish to withdraw any tendered Eligible Option, please indicate your intent on the form attached to this notice as Schedule A by checking the box on such schedule labeled “Withdraw This Eligible Option” next to each particular Eligible Option you wish to withdraw.

If you withdraw any of your tendered Eligible Option(s), you may again elect to tender the withdrawn Eligible Option(s) for amendment or replacement pursuant to the Offer, by submitting a new Letter of Transmittal to Cyberonics via (i) facsimile to facsimile number (281) 853-2503, (ii) overnight courier to Cyberonics, Inc., 100 Cyberonics Boulevard, Houston, Texas 77058, Attn: Tender Offer or (iii) email to tenderoffer@cyberonics.com. For such tender to be effective, your new Letter of Transmittal must be received by Cyberonics by 11:59 p.m. Central Time on the Expiration Date.

Please read the instructions on pages 3 and 4 of this Withdrawal Form and then complete, sign and date this Withdrawal Form.

Signature:

Name (Please print):

Date:

Schedule A

					Fair Market Value		Total Number	Number of
		Current			Per Share on		of Shares	Shares	Withdraw
	Indicated	Exercise		Revised	Revised		Subject to	Qualifying as	This
Employee	Grant	Price Per		Measurement	Measurement		Outstanding	an Eligible	Eligible
Name	Date	Share		Date	Date		Option	Option	Option
			$			$			o

2

CYBERONICS, INC.

INSTRUCTIONS TO THE WITHDRAWAL FORM
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Delivery of Withdrawal Form. A properly completed and executed original of this Withdrawal Form, must be received by Cyberonics by 11:59 p.m., Central Time, on the Expiration Date. You may submit your Withdrawal Form via facsimile, overnight courier or email using the following contact information.

          For delivery by facsimile, you must use the following facsimile number: (281) 853-2503.

          For delivery by overnight courier, the Withdrawal Form should be addressed to Cyberonics, Inc., 100 Cyberonics Boulevard, Houston, Texas 77058, Attn: Tender Offer.

          For delivery by email, you must use the following email address: tenderoffer@cyberonics.com.

The delivery of all required documents, including the Withdrawal Form and any new Letter of Transmittal, is at your risk. Delivery will be deemed made only when actually received by Cyberonics. Cyberonics intends to confirm the receipt of your Withdrawal Form within two (2) U.S. business days. If you have not received such confirmation, it is your responsibility to ensure that your Withdrawal Form has been received by the Expiration Date.

By submitting the Withdrawal Form, you will have withdrawn one or more of your tendered Eligible Option(s) from the Offer, and the withdrawn option(s) will not be amended or replaced pursuant to the terms of the Offer. You should note that you may not rescind the withdrawal of your tendered Eligible Option(s). However, you may re-submit any withdrawn Eligible Option for amendment or replacement pursuant to the Offer, provided you do so before the Expiration Date. If Cyberonics extends the Offer beyond the Expiration Date, you may re-submit your withdrawn Eligible Option(s) at any time until the extended expiration of the Offer. You will not be deemed to have made a proper re-submission of your withdrawn Eligible Option(s) unless you deliver, prior to the Expiration Date, a new Letter of Transmittal following the procedures described in the instructions to the Letter of Transmittal. The new Letter of Transmittal must be signed and dated after your original Letter of Transmittal and any Withdrawal Form you have submitted. Upon the receipt of such a new, properly completed, signed and dated Letter of Transmittal, any previously submitted Letter of Transmittal or Withdrawal Form received by Cyberonics prior to the Expiration Date will be disregarded and will be considered replaced in full by the new Letter of Transmittal. You will be bound by the last properly submitted Letter of Transmittal or Withdrawal Form received by Cyberonics prior to the Expiration Date.

Although it is Cyberonics’ intent to send you confirmation of receipt of this Withdrawal Form, by signing this Withdrawal Form you waive any right to receive any notice of the withdrawal of your tendered Eligible Option(s) from the Offer.

2. Signatures on this Withdrawal Form. This Withdrawal Form must be signed by the optionee.

3. Other Information on this Withdrawal Form. In addition to signing this Withdrawal Form, you must print your name (exactly as it appears on the Letter of Transmittal you previously submitted) and indicate the date on which you signed the Withdrawal Form.

4. Requests for Assistance or Additional Copies. Any questions or requests for assistance, as well as requests for additional copies of the Offer to Amend or Replace, the Letter of Transmittal or this Withdrawal Form should be directed to Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com. Copies will be furnished promptly at Cyberonics’ expense.

5. Irregularities. Cyberonics will determine, in its discretion, all questions as to the form of documents and the validity, form, eligibility (including time of receipt) and acceptance of any Withdrawal Forms. Cyberonics’ determination of such matters will be final and binding on all parties. Cyberonics reserves the right to reject any Withdrawal Forms that it determines are not in appropriate form or that it determines are unlawful to accept. Cyberonics also reserves the right to waive any of the conditions of the Offer or any defect or irregularly in any Withdrawal Form, and Cyberonics’ interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No withdrawal of an Eligible Option will be

3

deemed to have been properly made until all defects or irregularities have been cured by the withdrawing optionee or waived by Cyberonics. Neither Cyberonics nor any other person is obligated to give notice of any defects or irregularities in the Withdrawal Form and no person will incur any liability for failure to give any such notice.

6. Additional Documents to Read. You should be sure to read the Offer to Amend or Replace and all documents referenced therein, before making any decisions regarding participation in, or withdrawal from, the Offer.

7. Important Tax Information. You should refer to Sections 2 and 15 of the Offer and the “Risks of Participation in the Offer” section of the Offer to Amend or Replace which contain important U.S. federal income tax information. We also recommend that you consult with your own tax, legal and financial advisors before deciding whether or not to participate in the Offer.

IMPORTANT: THE WITHDRAWAL FORM MUST BE RECEIVED BY CYBERONICS, VIA FACSIMILE, OVERNIGHT COURIER OR EMAIL BY 11:59 P.M. CENTRAL TIME ON THE EXPIRATION DATE.

4

EX-99.A8

Exhibit (a)(8)

FORMS OF ACKNOWLEDGEMENT OF RECEIPT OF LETTER OF
TRANSMITTAL/WITHDRAWAL FORM

ACKNOWLEDGEMENT OF LETTER OF TRANSMITTAL

     Cyberonics, Inc. (“Cyberonics”) has received your Letter of Transmittal dated                     , 2007, by which you elected to tender your Eligible Option(s) for amendment or replacement pursuant to the offer (the “Offer”) made by Cyberonics to amend or replace options as set forth in the Offer to Amend or Replace Eligible Options dated June 7, 2007.

     Should you change your mind, you may withdraw your tendered Eligible Option(s) by completing and signing a Withdrawal Form and sending it before 11:59 p.m., Central Time, on July 6, 2007 (or any extended expiration of the Offer) to Cyberonics, Inc. via (i) facsimile to facsimile number (281) 853-2503, (ii) overnight courier to Cyberonics, Inc., 100 Cyberonics Boulevard, Houston, Texas 77058, Attn: Tender Offer or (iii) email to tenderoffer@cyberonics.com. You may obtain a Withdrawal Form by contacting Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberoncis.com. Only Withdrawal Forms that are complete, signed and actually received via facsimile, overnight courier or email by the deadline will be accepted. If you have questions concerning the submission of your form, please direct them to Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com.

     Please note that Cyberonics’ receipt of your Letter of Transmittal is not by itself an acceptance of your Eligible Option(s) for amendment or replacement. For purposes of the Offer, Cyberonics will be deemed to have accepted all properly tendered and unwithdrawn Eligible Options as of the date when Cyberonics provides the tendering optionees with notice of its acceptance of those options. Such notice may be made by press release, email or other method of communication. Cyberonics’ formal acceptance is expected to take place shortly after the end of the Offer period.

ACKNOWLEDGEMENT OF WITHDRAWAL FORM

     Cyberonics, Inc. (“Cyberonics”) has received your Withdrawal Form dated               , 2007, by which you have withdrawn one or more Eligible Options you previously tendered for amendment or replacement pursuant to the offer (the “Offer”) set forth in the Offer to Amend or Replace Eligible Options dated June 7, 2007.

     You may re-submit any withdrawn Eligible Option for amendment or replacement pursuant to the Offer, provided you do so before the Expiration Date. If Cyberonics extends the Offer beyond the Expiration Date, you may re-submit your withdrawn Eligible Option(s) at any time until the extended expiration of the Offer. You will not be deemed to have made a proper re-submission of your withdrawn Eligible Option(s) unless you deliver, prior to the Expiration Date, a new Letter of Transmittal following the procedures described in the instructions to the Letter of Transmittal. The new Letter of Transmittal must be signed and dated after your original Letter of Transmittal and any Withdrawal Form you have submitted.

     The new Letter of Transmittal may be submitted to Cyberonics via (i) facsimile to facsimile number (281) 853-2503, (ii) overnight courier to Cyberonics, Inc., 100 Cyberonics Boulevard, Houston, Texas 77058, Attn: Tender Offer, or (iii) email at tenderoffer@cyberoncis.com. Such submission must be made before 11:59 p.m., Central Time, on July 6, 2007 (or any extended expiration of the Offer).

EX-99.A9

Exhibit (a)(9)

Form of Reminder of Expiration Date

REMINDER

DEADLINE: 11:59 P.M. Central Time, July 6, 2007

To all Employees Eligible to Participate in the Offer to Amend or Replace Eligible Options:

As a reminder, 11:59 p.m. Central Time on July 6, 2007 is presently the deadline for you to tender your Eligible Options for amendment or replacement pursuant to the offer (the “Offer”) made by Cyberonics, Inc. to amend or replace those options as set forth in the Offer to Amend or Replace Eligible Options dated June 7, 2007 (the “Offer to Amend or Replace”). The Offer to Amend or Replace is located on the Cybernet under “Tender Offer” and you may obtain a printed copy of that document by contacting Tabetha L. Yllander at (281) 727-2648 or tenderoffer@cyberonics.com.

If you decide to tender your Eligible Options for amendment or replacement, you must submit your Letter of Transmittal in accordance with the instructions attached to that document. The submission must be made by the deadline indicated above. We cannot accept late submissions, and we therefore urge you to respond early to avoid any last minute problems.

If you do not tender your Eligible Options, you will have to take other action on your own to bring your Eligible Options into compliance with Section 409A of the Internal Revenue Code, if you are to avoid any potential adverse tax consequences with respect to those options. Those adverse tax consequences are described in the Offer to Amend or Replace. You will be solely responsible for any tax penalties, interest payments or other liabilities you incur under Section 409A (or state tax laws) with respect to any Eligible Options you do not tender for amendment or replacement pursuant to the Offer.

This reminder is being distributed to all employees eligible to participate in the Offer. Accordingly you are receiving this notice even if you have previously submitted your Letter of Transmittal.

EX-99.A10

Exhibit (a)(10)

FORM OF NOTICE OF EXPIRATION OF OFFER TO AMEND OR REPLACE
ELIGIBLE OPTIONS

To Participant in the Offer to Amend or Replace Eligible Options identified on attached Schedule A and Schedule B, as applicable:

We are pleased to announce that we have completed our Offer to Amend or Replace Eligible Options. As a result of the Offer, we have amended outstanding Eligible Options covering                     shares of Cyberonics common stock to increase the exercise price of each such option to the lower of (i) the Fair Market Value per share of Cyberonics common stock on the revised measurement date determined for that option for financial accounting purposes or (ii) $                    , the Fair Market Value per share of such common stock on the amendment date. In addition, the participants whose Eligible Options have been so amended are now eligible for special cash bonuses in the approximate aggregate amount of $                     to compensate them for the higher exercise prices per share in effect for their amended options. The “Fair Market Value” per share of our common stock on any date means the closing selling price per share of our common stock on the last market trading day prior to that date.

In addition, we cancelled tendered Eligible Options covering                      shares of Cyberonics common stock because the adjusted exercise price for those options would have been the same or lower than the exercise price in effect for those options prior to the amendment. In replacement of each such cancelled option, we granted a new option that is exactly the same as the cancelled option, including the same exercise price per share, vesting schedule and expiration date, but with a new grant date of July 9, 2007. All New Options issued in cancellation of Eligible Options granted under the 2005 Stock Plan were issued under the 2005 Stock Plan; all New Options issued in cancellation of Eligible Options granted under the 1996 Stock Option Plan were issued under the Cyberonics, Inc. 1998 Stock Option Plan.

The chart attached to this notice as Schedule A lists each of your tendered Eligible Options that have been amended. The information in the chart confirms that the listed Eligible Options were validly submitted for amendment pursuant to the Offer and not otherwise withdrawn prior to the expiration date of the Offer. Accordingly, the adjusted exercise price per share now in effect for each of your amended Eligible Options is indicated on Schedule A. Each of your amended options will continue to vest in accordance with the same vesting schedule measured from the same vesting commencement date currently in effect for that option. The amendment has no effect on the exercise period, option term or any other provision of the option.

In exchange for your agreement to amend your outstanding Eligible Options to increase the exercise prices for those options, Cyberonics hereby irrevocably commits to pay you a special cash bonus in the amount set forth on Schedule A. Internal Revenue Service regulations require that the cash bonus not be paid in the same year in which the Eligible Options are amended. Therefore, the cash bonus will be paid on the Company’s first regular payroll date in January 2008. Cyberonics must withhold all applicable U.S. federal, state and local income and employment withholding taxes, and you will receive only the portion of the payment remaining after those taxes have been withheld. You will receive your cash bonus even if your employment with Cyberonics terminates prior to the date on which the cash bonus is paid.

This commitment to pay you the special cash bonus is governed by the terms and conditions of the Offer as set forth in the formal Offer to Amend or Replace Eligible Options dated June 7, 2007 and the Letter of Transmittal (collectively, the “Offer Documents”), all of which are incorporated herein by reference. Accordingly, this commitment and the Offer Documents reflect the entire agreement between you and Cyberonics with respect to the amendment of your tendered Eligible Options and the payment of the applicable cash bonus.

Each new option granted to you pursuant to the Offer is exactly the same as the tendered Eligible Option it replaced, including the same exercise price per share, vesting schedule and expiration date, but with a new grant date of July 9, 2007. The chart attached to this notice as Schedule B indicates which tendered Eligible Options were cancelled and replaced with a new option.

CYBERONICS, INC.

By:

Title:

Date:

Schedule A

				New		Number
		Total	Exercise	Exercise	Number	of Shares
		Number of	Price Per	Price Per	of Shares	Not	Cash Bonus
		Shares	Share Prior	Share	Subject to	Subject to	Payable in
	Indicated	Subject to	to	Following	Amended	Amended	2008 ($)
Employee	Grant	Outstanding	Amendment	Amendment	Exercise	Exercise	(if
Name	Date	Option	($)	($)	Price	Price	applicable)
							Total Cash Bonus
							Amount
							(if applicable):
							$

Schedule B

			Exercise Price	Same Exercise
		Total Number	Per Share	Price Per
	Grant Date of	of Shares	Prior to	Share under
Employee	Cancelled	Subject to	Cancellation	New Option
Name	Option	New Option	($)	($)

EX-99.D1

Exhibit (d)(1)

CYBERONICS, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN

     1. Purposes of the Plan. The purposes of this Amended Stock Option Plan are:

– to attract and retain the best available personnel for positions of substantial responsibility,

– to provide incentives to Employees and Consultants, and

– to promote the success of the Company’s business.

     Options granted under the Plan will be Nonstatutory Stock Options.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

          (b) “Applicable Laws” means the requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Code” means the Internal Revenue Code of 1986, as amended.

          (e) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.

          (f) “Common Stock” means the Common Stock of the Company.

          (g) “Company” means Cyberonics, Inc., a Delaware corporation.

          (h) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such
entity.

          (i) “Director” means a member of the Board.

          (j) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

          (k) “Employee” means any person, excluding Officers, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

          (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (m) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

               (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

               (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

               (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

          (n) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.

          (o) “Officer” means a person who is an executive officer of the Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.

          (p) “Option” means a nonstatutory stock option granted pursuant to the Plan, that is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

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          (q) “Option Agreement” means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

          (r) “Option Exchange Program” means a program whereby outstanding options are surrendered in exchange for options with a lower
exercise price.

          (s) “Optioned Stock” means the Common Stock subject to an Option.

          (t) “Optionee” means the holder of an outstanding Option granted under the Plan.

          (u) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

          (v) “Plan” means this Amended 1996 Stock Option Plan.

          (w) “Service Provider” means an Employee, Officer or Consultant, and specifically excludes Directors of the Company.

          (x) “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.

          (y) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 3,250,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).

     4. Administration of the Plan.

          (a) The Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

               (i) to determine the Fair Market Value of the Common Stock;

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               (ii) to select the Service Providers to whom Options may be granted hereunder;

               (iii) to determine whether and to what extent Options are granted hereunder;

               (iv) to determine the number of shares of Common Stock to be covered by each Option granted hereunder;

               (v) to approve forms of agreement for use under the Plan;

               (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

               (vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted;

               (viii) to institute an Option Exchange Program;

               (ix) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

               (x) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

               (xi) to modify or amend each Option (subject to Section 15(b) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;

               (xii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or
previously granted by the Administrator;

               (xiii) to determine the terms and restrictions applicable to Options;

               (xiv) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that

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the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; and

               (xv) to make all other determinations deemed necessary or advisable for administering the Plan.

          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

     5. Eligibility. Options may be granted to Service Providers; provided, however that the number of Shares subject to Options granted to Officers pursuant to this Plan subsequent to July 9, 1998 shall not exceed 10% of the total number of Shares reserved for issuance under this Plan. For purposes of determining compliance with the forgoing 10% limitation, the following provisions shall apply:

          (a) Options granted to a person at a time when such person was not an Officer shall not be counted toward the 10% limit upon promotion to officer status, and

          (b) If an Option granted to an Officer expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased shares which were subject thereto shall no longer be counted toward the 10% limit.

     6. Limitation. Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to terminate such relationship at any time, with or without cause.

     7. Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect until October 31, 2006, unless sooner terminated under Section 14 of the Plan.

     8. Term of Option. The term of each Option shall be stated in the Option Agreement.

     9. Option Exercise Price and Consideration.

          (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator.

          (b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised.

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          (c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. Such consideration may consist entirely of:

               (i) cash;

               (ii) check;

               (iii) promissory note;

               (iv) other shares which (A) in the case of shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares as to which said option shall be exercised;

               (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the
Plan;

               (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;

               (vii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or

               (viii) any combination of the foregoing methods of payment.

     10. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share.

               An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to

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be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan.

               Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

          (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option, but only within such period of time as is specified in the Option Agreement, and only to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised by the executor or administrator of the Optionee’s estate or, if none, by the person(s) entitled to exercise the Option under the Optionee’s will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

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          (e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

     11. Nontransferability of Options. Unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option transferable, such Option shall contain such additional terms and conditions as the Administrator deems appropriate.

     12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the Stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.

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          (c) Change of Control. In the event of a Change of Control (as defined below), Options under this Plan shall become fully vested and exercisable as to all Optioned Stock, including Shares as to which an Option would not otherwise be vested or exercisable, effective as of immediately prior to closing of the transaction constituting the Change of Control. For purposes of this Plan, “CHANGE OF CONTROL” shall mean a corporate reorganization of the Company which results in the then current Stockholders of the Company owning less than 50% of the equity securities of the surviving company, or the sale of all or substantially all of the assets of the Company.

     13. Date of Grant. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.

     14. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

          (b) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to options granted under the Plan prior to the date of such termination.

     15. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

          (b) Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

     16. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

FIRST AMENDMENT TO THE
CYBERONICS, INC. AMENDED AND RESTATED 1996 STOCK OPTION PLAN

     WHEREAS, there is reserved to the Board of Directors (“Board”) of Cyberonics, Inc. in Section 14 of the Cyberonics, Inc. Amended and Restated 1996 Stock Option Plan (the “Plan”) the right to amend the Plan, subject to certain restrictions set forth therein; and

     WHEREAS, the Board deems it advisable to amend the Plan in the manner hereafter set forth;

     NOW, THEREFORE, Section 12(c) of the Plan is hereby amended effective as of October 2, 2000, to read as follows:

     Notwithstanding anything in the Plan or any option agreement to the contrary, in the event of a Change of Control (as defined below), all Options shall automatically become fully vested and exercisable immediately prior to the Change of Control or for such earlier period as the Administrator may provide. A “Change of Control” means the happening of any of the following events:

(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 of Directors of the Company, 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 of Directors of the Company 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 of Directors or the stockholders of the Company of a complete or substantially complete liquidation or
dissolution of the Company.

     In addition to, or in lieu of, any other provision of the Plan, the Administrator, with the approval of a majority of the Incumbent Directors, may provide that all Options not exercised immediately prior to the Change of Control shall (x) terminate on such Change of Control, unless such Change of Control is described in clause (iv) above, (y) be assumed by the successor (a parent thereof) in any such merger or other corporate transaction, or (z) be surrendered in exchange for equivalent substitution options or awards from the successor (or a parent thereof).

     Except as amended and modified hereby, the Plan shall continue in full force and effect and the Plan and this amendment shall be read, take and construed as one and the same instrument.

SECOND AMENDMENT TO THE
CYBERONICS, INC. AMENDED AND RESTATED
1996 STOCK OPTION PLAN

     WHEREAS, there is reserved to the Board of Directors (“Board”) of Cyberonics, Inc. in Section 14 of the Cyberonics, Inc. Amended and Restated 1996 Stock Option Plan (the “Plan”) the right to amend the Plan, subject to certain restrictions set forth therein; and

     WHEREAS, the Board deems it advisable to amend the Plan in the manner hereafter set forth;

     NOW, THEREFORE, Section 9(a) of the Plan is hereby amended effective as of March 21, 2001, to read as follows:

Without stockholder approval, (i) no Option shall be granted with an exercise price per share that is less than 100% of the Fair Market Value of a Share on the date of grant and (ii) neither the Company, the Board nor the Committee shall institute the Option Exchange Program or reduce the exercise price of any outstanding Option; however, this provision shall not prevent adjustments pursuant to Section 12(a).

     Except as amended and modified hereby, the Plan shall continue in full force and effect and the Plan and this amendment shall be read, take and construed as one and the same instrument.

THIRD AMENDMENT TO THE
CYBERONICS, INC. AMENDED AND RESTATED 1996 STOCK OPTION PLAN

     WHEREAS, there is reserved to the Board of Directors (“Board”) of Cyberonics, Inc. in Section 14 of the Cyberonics, Inc. Amended and Restated 1996 Stock Option Plan (the “Plan”) the right to amend the Plan, subject to certain restrictions set forth therein; and

     WHEREAS, the Board deems it advisable to amend the Plan in the manner hereafter set forth;

     NOW, THEREFORE, Section 3 of the Plan is hereby amended effective as of July 27, 2001, to read as follows:

     Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 5,500,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).

     Except as amended and modified hereby, the Plan shall continue in full force and effect and the Plan and this amendment shall be read, take and construed as one and the same instrument.

FOURTH AMENDMENT TO THE
CYBERONICS, INC. AMENDED AND RESTATED 1996 STOCK OPTION PLAN

     WHEREAS, there is reserved to the Board of Directors (“Board”) of Cyberonics, Inc. in Section 14 of the Cyberonics, Inc. Amended and Restated 1996 Stock Option Plan (the “Plan”) the right to amend the Plan, subject to certain restrictions set forth therein; and

     WHEREAS, the Board deems it advisable to amend the Plan in the manner hereafter set forth;

     NOW, THEREFORE, Section 3 of the Plan is hereby amended effective as of January 2002, to read as follows:

     Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 6,500,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).

     Except as amended and modified hereby, the Plan shall continue in full force and effect and the Plan and this amendment shall be read, take and construed as one and the same instrument.

FIFTH AMENDMENT TO THE
CYBERONICS, INC. AMENDED AND RESTATED 1996 STOCK OPTION PLAN

     WHEREAS, there is reserved to the Board of Directors (“Board”) of Cyberonics, Inc. in Section 14 of the Cyberonics, Inc. Amended and Restated 1996 Stock Option Plan (the “Plan”) the right to amend the Plan, subject to certain restrictions set forth therein; and

     WHEREAS, the Board deems it advisable to amend the Plan in the manner hereafter set forth;

     NOW, THEREFORE, Section 3 of the Plan is hereby amended effective as of July 19, 2002, to read as follows:

     Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 7,500,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).

     Except as amended and modified hereby, the Plan shall continue in full force and effect and the Plan and this amendment shall be read, take and construed as one and the same instrument.

EX-99.D2

Exhibit (d)(2)

CYBERONICS, INC.

1996 STOCK OPTION PLAN

NOTICE OF STOCK OPTION GRANT

(Standard Vesting)

NAME:

     You have been granted an option (the “Option“) to purchase Common Stock of Cyberonics, Inc. (the “Company”) as follows:

Date of Grant:
Exercise Price:	$
Number of Shares Subject to Option:
Type of Option:	Nonstatutory Stock Option
Vesting Start Date:
Expiration Date:
Exercise Schedule:	The Option shall be exercisable at any time prior to the Expiration Date or earlier termination as to shares which are vested in accordance with the Vesting Schedule below.
Termination Period:	Option may be exercised for up to 90 days after termination of employment or consulting relationship except as set out in Sections 7 and 8 of the Stock Option Agreement (but in no event later than the Expiration Date).
Vesting Schedule:	1/60th of the Shares subject to the Option shall vest each month after the Vesting Commencement Date until the Option is fully vested, subject to the Optionee continuing to be a Service Provider on such dates.

     OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE

IN ANY WAY WITH OPTIONEE’S OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.

     By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Company’s 1996 Stock Option Plan and the Stock Option Agreement, all of which are attached and made a part of this document.

OPTIONEE:	CYBERONICS, INC.
	By:
		George E. Parker, III
	Title:	Vice President, Human Resources
Date:	Date:
Address:

Cyberonics, Inc.

STOCK OPTION AGREEMENT

     1. Grant of Option. Cyberonics, Inc., a Delaware corporation (the “Company”), hereby grants to the Optionee named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase a total number of shares of Common Stock (the “Shares”) set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”) subject to the terms, definitions and provisions of the Company’s 1996 Stock Option Plan (the “Plan”) which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option.

          This Option is a Nonstatutory Stock Option, and is not intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code.

     2. Adjustments for Stock Splits, Recapitalization.

          (a) The Exercise Price and number of Shares subject to this Option (as set forth on the Notice of Grant) shall be subject to adjustment as follows: If the Company at any time (i) subdivides (by any stock split, stock dividend or otherwise) the Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Shares issuable shall be proportionately increased, and (ii) if the Company at any time combines (by reverse stock split or otherwise) the Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Shares issuable shall be proportionately decreased.

          (b) If at any time while this Option is outstanding there shall be any reclassification or conversion of the Common Stock into another class of securities (other than a sub-division or combination or shares provided for in the preceding paragraph), the Optionee shall thereafter be entitled to receive, during the term hereof and upon payment of the Exercise Price, the number of shares of stock to which a holder of the Common Stock would have been entitled upon such reclassification or conversion had the Optionee exercised this Option immediately prior to such reclassification or conversion.

     3. Exercise of Option. This Option shall be exercisable during its term in accordance with the Exercise Schedule set out in the Notice of Grant and with the provisions of Section 10 of the Plan as follows:

          (a) Right to Exercise.

               (i) This Option may not be exercised for a fraction of a share.

               (ii) In the event of Optionee’s death, disability or other termination of employment, the exercisability of the Option is governed by Sections 6, 7 and 8 below.

               (iii) In no event may this Option be exercised after the Expiration Date of this Option as set forth in the Notice of Grant.

          (b) Method of Exercise. This Option shall be exercisable by execution and delivery of the Exercise Notice and Stock Purchase Agreement (the “Exercise Notice”) in the form attached as Exhibit A. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.

     4. Method of Payment. Payment of the Exercise Price shall be by:

               (i) cash; or

               (ii) check; or

               (iii) delivery of a properly executed Exercise Notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and immediate sale of the Shares through a broker which provides for delivery to the Company from the sale or loan proceeds of the Exercise Price; or

               (iv) any combination of the foregoing methods of payment.

     5. Restrictions on Exercise. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including the requirements of any stock exchange upon which the Shares may then be listed and including any rule under Part 207 of Title 12 of the Code of Federal Regulations (“Regulation G”) as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation.

     6. Termination of Relationship. In the event of termination of Optionee’s consulting relationship or Continuous Status as an Employee, Optionee may, to the extent otherwise so entitled at the date of such termination (the “Termination Date”), exercise this Option during the Termination Period set out in the Notice of Grant. To the extent that Optionee was not entitled to exercise this Option at the date of such termination, or if Optionee does not exercise this Option within the time specified herein, the Option shall terminate.

     7. Disability of Optionee. Notwithstanding the provisions of Section 6 above, in the event of termination of an Optionee’s consulting relationship or Continuous Status as an Employee as a result of total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of termination of employment (but in no event later than the Expiration Date of this Option as set forth in the Notice of Grant), exercise the Option to the extent otherwise so entitled at the date of such termination.: To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate.

     8. Death of Optionee___ In the event of the death of Optionee during the term of this Option and while an Employee or Consultant or within ninety (90) days following termination of Optionee’s employment/consultancy relationship with the Company, this Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the Expiration Date), by Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee could exercise the Option at the date of death.

     9. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

     10. Term of Option. This Option may be exercised only prior to the Expiration Date set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option..

     11. Tax Consequences. Set forth below is a brief summary as of the date of this Option of some of the federal tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE, OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES,

          (a) Exercise of Option. Upon exercise of this Option, the Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. If Optionee is an employee, the Company will be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.

          (b) Disposition of Shares. If Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes.

     12. Change of Control. In the event of a Change of Control (as defined in the Plan), this Option shall be governed by the terms of Section 12 of the Plan.

     OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY’S RIGHT TO TERMINATE

HIS OR HER EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

EXHIBIT A

EXERCISE NOTICE AND STOCK PURCHASE AGREEMENT

Cyberonics, Inc.
100 Cyberonics Boulevard
Houston, Texas 77058

Attention: Secretary

     1. Exercise of Option. Effective as of today,                     , 19___, the undersigned (“Optionee”) hereby elects to exercise Optionee’s option to purchase ___ shares of the Common Stock (the “Shares”) of Cyberonics, Inc. (the “Company”) under and pursuant to the Company’s 1996 Stock Option Plan, as amended (the “Plan”) and the Nonqualified Stock Option Agreement dated                      (the “Option Agreement”).

     2. Representations of Optionee.

          (a) Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions,

          (b) Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares, Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

     3. Rights as Stockholder. Subject to the terms and conditions of this Agreement, Optionee shall have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Optionee delivers full payment of the Exercise Price until such time as Optionee disposes of the Shares.

     4. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

     5. Arbitration. Any dispute or claim arising out of or in connection with this Agreement shall be settled by binding arbitration. Any such arbitration shall be conducted in accordance with the Rules of Conciliation and Arbitration of the American Arbitration Association and shall take place in Webster, Texas. The arbitration shall be conducted by one arbitrator; provided that if the parties cannot agree on a single arbitrator, then the arbitration shall be conducted by a panel of three arbitrators, one selected by each party and the third selected by the other two arbitrators. The determination of the arbitrator(s) shall be final and binding upon the parties.

     6. Governing Law; Severability. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE EXCLUDING THAT BODY OF LAW PERTAINING TO CONFLICTS OF LAW. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

     7. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.

     8. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

     9. Delivery of Payment. Optionee herewith delivers to the Company the full Exercise Price for the Shares.

     10. Entire Agreement. The Plan and Notice of Grant/Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Notice of Grant/Option Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.

Submitted by:	Accepted by:
OPTIONEE:	CYBERONICS, INC.
	By:
	Its:
Address:	Address:
	100 Cyberonics Blvd., Cyberonics Building
	Houston, TX 77058

EX-99.D4

Exhibit (d)(4)

CYBERONICS, INC.

2005 STOCK PLAN

STOCK OPTION AGREEMENT

     Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.

I. NOTICE OF GRANT

     You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

Date of Grant:
Exercise Price per Share:	$
Total Number of Shares Granted:
Type of Option:	Nonstatutory Stock Option
Expiration Date:	10th Anniversary of Date of Grant
Vesting Schedule:	1/60th of the Shares subject to the Option shall vest each month after the Date of Grant, subject to the Optionee continuing to be a Service Provider on such dates, until the Option is fully vested.
Termination Period:	To the extent vested, this Option may be exercised for 90 days after Optionee ceases to be a Service Provider and shall then terminate. Upon the death or Disability of the Optionee while a Service Provider, this Option may be exercised one year after Optionee ceases to be a Service Provider and shall then terminate. However, in no event may this Option be exercised after the Expiration Date as provided above.

II. AGREEMENT

     1. Grant of Option. The Plan’s Administrator hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the “Optionee”) an option (the “Option”) to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail.

     If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option (“NSO”).

     2. Exercise of Option.

          (a) Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement.

          (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be completed by the Optionee and delivered to the Director of Corporate Compliance or to the Secretary of the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price.

     No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares.

     3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

          (a) cash; or

          (b) check; or

          (c) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; or

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          (d) surrender of other Shares which (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares; or

     4. Nontransferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

     5. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.

     6. Tax Consequences. Some of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (a) Exercising the Option.

               (i) Nonstatutory Stock Option. The Optionee may incur federal and other tax liabilities upon exercise of a NSO. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

               (ii) Incentive Stock Option. If this Option qualifies as an ISO at the time of exercise, the Optionee will have no federal tax liabilities upon its exercise, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the Optionee ceases to be an Employee but remains a Service Provider, any Incentive Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option on the date three months and one day following such change of status.

          (b) Disposition of Shares.

               (i) NSO. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes.

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               (ii) ISO. If the Optionee holds ISO Shares for at least one year after exercise and two years after the grant date, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year after exercise or two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference between the sale price of such Shares and the aggregate Exercise Price. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held.

          (c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, the Optionee shall immediately notify the Company in writing of such disposition. The Optionee agrees that he or she may be subject to tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to the Optionee.

     7. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This Agreement is governed by the internal substantive laws, but not the choice of law rules, of Texas.

     8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

     By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

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OPTIONEE:	CYBERONICS, INC.
	By:
Social Security Number	George E. Parker, III
	Title: Vice President, Human Resources
Residence Address	Date:

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EXHIBIT A

2005 STOCK PLAN

EXERCISE NOTICE

Cyberonics, Inc.
16511 Space Center Blvd. #600
Houston, TX 77062

Attention: Chief Financial Officer

     1. Exercise of Option. Effective as of today,                      ___, ___, the undersigned (“Purchaser”) hereby elects to purchase                      shares (the “Shares”) of the Common Stock of Cyberonics, Inc. (the “Company”) under and pursuant to the 2005 Stock Plan (the “Plan”) and the Stock Option Agreement dated (the “Option Agreement”). The purchase price for the Shares shall be $ , as required by the Option Agreement.

     2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares.

     3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

     4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan.

     5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

     6. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing

A-1

signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of Texas.

Submitted by:	Accepted by:
PURCHASER:	CYBERONICS, INC.
	By:
	Its:
Social Security Number
Address:	Address:
	Cyberonics, Inc.
	100 Cyberonics Blvd.
	Houston, TX 77058
	Date Received:

A-2

EX-99.D5

Exhibit (d)5)

CYBERONICS, INC.
1998 STOCK OPTION PLAN

     1. Purposes of the Plan. The purposes of this Stock Option Plan are:

- to attract and retain the best available personnel for positions of substantial responsibility,

- to provide incentives to Employees and Consultants, and

- to promote the success of the Company’s business.

     Options granted under the Plan will be Nonstatutory Stock Options.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Acquisition Transaction” means any transaction or series of related transactions pursuant to which: (i) the Company is merged with or into another corporation (other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation); other than a transaction in which the holders of the voting stock of the Company immediately prior to the transaction continue to own not less than a majority of the voting stock of the surviving company solely as a result of their ownership interest in the Company prior to the transaction), (ii) all or substantially all of the assets of the Company are sold to a third party; or (iii) 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, including any trustee of such plan acting as trustee, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors.

          (b) “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

          (c) “Applicable Laws” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.

          (d) “Board” means the Board of Directors of the Company.

          (e) “Code” means the Internal Revenue Code of 1986, as amended.

          (f) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.

          (g) “Common Stock” means the Common Stock of the Company.

          (h) “Company” means Cyberonics, Inc., a Delaware corporation.

          (i) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity; provided, however, that a Director shall not be deemed a “Consultant” notwithstanding any consulting services that such Director may provide.

          (j) “Director” means a member of the Board.

          (k) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

          (l) “Employee” means any person, excluding Officers, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

          (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (n) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

               (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

               (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

               (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

          (o) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.

          (p) “Officer” means a person who is an executive officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

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          (q) “Option” means a nonstatutory stock option granted pursuant to the Plan, that is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

          (r) “Option Agreement” means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.

          (s) “Option Exchange Program” means a program whereby outstanding options are surrendered in exchange for options with a lower exercise price.

          (t) “Optioned Stock” means the Common Stock subject to an Option.

          (u) “Optionee” means the holder of an outstanding Option granted under the Plan.

          (v) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

          (w) “Plan” means this 1998 Stock Option Plan.

          (x) “Service Provider” means an Employee or Consultant, and specifically excludes Directors and Officers of the Company.

          (y) “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.

          (z) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 300,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).

     4. Administration of the Plan.

          (a) The Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

               (i) to determine the Fair Market Value of the Common Stock;

-3-

               (ii) to select the Service Providers to whom Options may be granted hereunder;

               (iii) to determine whether and to what extent Options are granted hereunder;

               (iv) to determine the number of shares of Common Stock to be covered by each Option granted hereunder;

               (v) to approve forms of agreement for use under the Plan;

               (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

               (vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted;

               (viii) to institute an Option Exchange Program;

               (ix) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

               (x) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

               (xi) to modify or amend each Option (subject to Section 15(b) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;

               (xii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or previously granted by the Administrator;

               (xiii) to determine the terms and restrictions applicable to Options;

               (xiv) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; and

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               (xv) to make all other determinations deemed necessary or advisable for administering the Plan.

          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

     5. Eligibility. Options may be granted to Service Providers and Officers; provided, however that the number of Shares subject to Options granted to Officers pursuant to this Plan shall not exceed 10% of the total number of Shares reserved for issuance under this Plan. For purposes of determining compliance with the foregoing 10% limitation, the following provisions shall apply:

          (a) Options granted to a person at a time when such person was not an Officer shall not be counted toward the 10% limit upon promotion to Officer status, and

          (b) If an Option granted to an Officer expires or becomes unexercisable with having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased shares which were subject thereto shall no longer be counted toward the 10% limit.

     6. Limitation. Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to terminate such relationship at any time, with or without cause.

     7. Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect until May 28, 2008, unless sooner
terminated under Section 14 of the Plan.

     8. Term of Option. The term of each Option shall be stated in the Option Agreement.

     9. Option Exercise Price and Consideration.

          (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator.

          (b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised.

          (c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. Such consideration may consist entirely of:

               (i) cash;

               (ii) check;

               (iii) promissory note;

               (iv) other shares which (A) in the case of shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares as to which said option shall be exercised;

               (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;

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               (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;

               (vii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or

               (viii) any combination of the foregoing methods of payment.

     10. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share.

               An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan.

               Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

          (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option, but only within such period of time as is specified in the Option Agreement, and only to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as

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is specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised by the executor or administrator of the Optionee’s estate or, if none, by the person(s) entitled to exercise the Option under the Optionee’s will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

     11. Non-Transferability of Options . Unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

     12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Change of Control.

          (a) Changes in Capitalization. Subject to any required action by the Stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by

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the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.

          (c) Acquisition Transaction. In the event of any Acquisition Transaction, each outstanding Option shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, then the Option shall be exercisable to the extent vested, and only to the extent vested, for a period of not less than fifteen days ending on the date on which the Acquisition Transaction is effected. Upon consummation of the Acquisition Transaction, any Option that has not been assumed or unexercised shall automatically expire and be of no further force or effect. For the purposes of this paragraph, an Option shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option immediately prior to the Acquisition Transaction, the consideration (whether stock, cash, or other securities or property) received in Acquisition Transaction by holders of Common Stock for each Share held on the effective date of the Acquisition Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

     13. Date of Grant. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.

     14. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

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          (b) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to options granted under the Plan prior to the date of such termination.

     15. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

          (b) Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

     16. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

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EX-99.D6

Exhibit (d)(6)

CYBERONICS, INC.

1998 STOCK OPTION PLAN

NOTICE OF STOCK OPTION GRANT

(Standard Vesting)

NAME:

     You have been granted an option (the “Option“) to purchase Common Stock of Cyberonics, Inc. (the “Company”) as follows:

Date of Grant:
Exercise Price:	$
Number of Shares Subject to Option:
Type of Option:	Nonstatutory Stock Option
Vesting Start Date:
Expiration Date:
Exercise Schedule:	The Option shall be exercisable at any time prior to the Expiration Date or earlier termination as to shares which are vested in accordance with the Vesting Schedule below.
Termination Period:	Option may be exercised for up to 90 days after termination of employment or consulting relationship except as set out in Sections 7 and 8 of the Stock Option Agreement (but in no event later than the Expiration Date).
Vesting Schedule:	1/60th of the Shares subject to the Option shall vest each month after the Vesting Commencement Date until the Option is fully vested, subject to the Optionee continuing to be a Service Provider on such dates.

     OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE

IN ANY WAY WITH OPTIONEE’S OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.

     By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Company’s 1998 Stock Option Plan and the Stock Option Agreement, all of which are attached and made a part of this document.

OPTIONEE:	CYBERONICS, INC.
	By:
		George E. Parker, III
	Title:	Vice President, Human Resources
Date:	Date:
Address:

Cyberonics, Inc.

STOCK OPTION AGREEMENT

     1. Grant of Option. Cyberonics, Inc., a Delaware corporation (the “Company”), hereby grants to the Optionee named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase a total number of shares of Common Stock (the “Shares”) set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”) subject to the terms, definitions and provisions of the Company’s 1998 Stock Option Plan (the “Plan”) which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option.

          This Option is a Nonstatutory Stock Option, and is not intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code.

     2. Adjustments for Stock Splits, Recapitalization.

          (a) The Exercise Price and number of Shares subject to this Option (as set forth on the Notice of Grant) shall be subject to adjustment as follows: If the Company at any time (i) subdivides (by any stock split, stock dividend or otherwise) the Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Shares issuable shall be proportionately increased, and (ii) if the Company at any time combines (by reverse stock split or otherwise) the Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Shares issuable shall be proportionately decreased.

          (b) If at any time while this Option is outstanding there shall be any reclassification or conversion of the Common Stock into another class of securities (other than a sub-division or combination or shares provided for in the preceding paragraph), the Optionee shall thereafter be entitled to receive, during the term hereof and upon payment of the Exercise Price, the number of shares of stock to which a holder of the Common Stock would have been entitled upon such reclassification or conversion had the Optionee exercised this Option immediately prior to such reclassification or conversion.

     3. Exercise of Option. This Option shall be exercisable during its term in accordance with the Exercise Schedule set out in the Notice of Grant and with the provisions of Section 10 of the Plan as follows:

          (a) Right to Exercise.

               (i) This Option may not be exercised for a fraction of a share.

               (ii) In the event of Optionee’s death, disability or other termination of employment, the exercisability of the Option is governed by Sections 6, 7 and 8 below.

               (iii) In no event may this Option be exercised after the Expiration Date of this Option as set forth in the Notice of Grant.

          (b) Method of Exercise. This Option shall be exercisable by execution and delivery of the Exercise Notice and Stock Purchase Agreement (the “Exercise Notice”) in the form attached as Exhibit A. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.

     4. Method of Payment. Payment of the Exercise Price shall be by:

               (i) cash; or

               (ii) check; or

               (iii) delivery of a properly executed Exercise Notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and immediate sale of the Shares through a broker which provides for delivery to the Company from the sale or loan proceeds of the Exercise Price; or

               (iv) any combination of the foregoing methods of payment.

     5. Restrictions on Exercise. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including the requirements of any stock exchange upon which the Shares may then be listed and including any rule under Part 207 of Title 12 of the Code of Federal Regulations (“Regulation G”) as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation.

     6. Termination of Relationship. In the event of termination of Optionee’s consulting relationship or Continuous Status as an Employee, Optionee may, to the extent otherwise so entitled at the date of such termination (the “Termination Date”), exercise this Option during the Termination Period set out in the Notice of Grant. To the extent that Optionee was not entitled to exercise this Option at the date of such termination, or if Optionee does not exercise this Option within the time specified herein, the Option shall terminate.

     7. Disability of Optionee. Notwithstanding the provisions of Section 6 above, in the event of termination of an Optionee’s consulting relationship or Continuous Status as an Employee as a result of total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of termination of employment (but in no event later than the Expiration Date of this Option as set forth in the Notice of Grant), exercise the Option to the extent otherwise so entitled at the date of such termination.: To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate.

     8. Death of Optionee___ In the event of the death of Optionee during the term of this Option and while an Employee or Consultant or within ninety (90) days following termination of Optionee’s employment/consultancy relationship with the Company, this Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the Expiration Date), by Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee could exercise the Option at the date of death.

     9. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

     10. Term of Option. This Option may be exercised only prior to the Expiration Date set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option..

     11. Tax Consequences. Set forth below is a brief summary as of the date of this Option of some of the federal tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE, OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES,

          (a) Exercise of Option. Upon exercise of this Option, the Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. If Optionee is an employee, the Company will be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.

          (b) Disposition of Shares. If Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes.

     12. Change of Control. Notwithstanding anything in the Plan to the contrary, in the event of a Change of Control (as defined below), this Option shall automatically become fully vested and exercisable immediately prior to the Change of Control or for such earlier period as the Administrator may provide. A “Change of Control” means the happening of any of the following events:

               (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 entitle 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 of Directors of the Company, 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 of Directors of the Company 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 of Directors or the stockholders of the Company of a complete or substantially complete liquidation or dissolution of the Company.

     In addition to, or in lieu of, any provision of the Plan, the Administration, with the approval of a majority of the Incumbent Directors, may provide that this Option, if not exercised immediately prior to the Change of Control, shall (x) terminate on such Change of Control, unless such Change of Control is described in clause (iv) above, (y) be assumed by the successor (a parent thereof) in any such merger or other corporate transaction, or (z) be surrendered in exchange for equivalent substitution options or awards from the successor (or a parent thereof).

     OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY’S RIGHT TO TERMINATE HIS OR HER EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

EXHIBIT A

EXERCISE NOTICE AND STOCK PURCHASE AGREEMENT

Cyberonics, Inc.
100 Cyberonics Boulevard
Houston, Texas 77058

Attention: Secretary

     1. Exercise of Option. Effective as of today,                     , 20___, the undersigned (“Optionee”) hereby elects to exercise Optionee’s option to purchase ___ shares of the Common Stock (the “Shares”) of Cyberonics, Inc. (the “Company”) under and pursuant to the Company’s 1998 Stock Option Plan, as amended (the “Plan”) and the Stock Option Agreement dated                      (the “Option Agreement”).

     2. Representations of Optionee.

          (a) Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions,

          (b) Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares, Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

     3. Rights as Stockholder. Subject to the terms and conditions of this Agreement, Optionee shall have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Optionee delivers full payment of the Exercise Price until such time as Optionee disposes of the Shares.

     4. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

     5. Arbitration. Any dispute or claim arising out of or in connection with this Agreement shall be settled by binding arbitration. Any such arbitration shall be conducted in accordance with the Rules of Conciliation and Arbitration of the American Arbitration Association and shall take place in Webster, Texas. The arbitration shall be conducted by one arbitrator; provided that if the parties cannot agree on a single arbitrator, then the arbitration shall be conducted by a panel of three arbitrators, one selected by each party and the third selected by the other two arbitrators. The determination of the arbitrator(s) shall be final and binding upon the parties.

     6. Governing Law; Severability. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE EXCLUDING THAT BODY OF LAW PERTAINING TO CONFLICTS OF LAW. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

     7. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.

     8. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

     9. Delivery of Payment. Optionee herewith delivers to the Company the full Exercise Price for the Shares.

     10. Entire Agreement. The Plan and Notice of Grant/Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Notice of Grant/Option Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.

Submitted by:	Accepted by:
OPTIONEE:	CYBERONICS, INC.
	By:
	Its:
Address:	Address:
	100 Cyberonics Blvd., Cyberonics Building
	Houston, TX 77058