On September 11, 2012, Cyberonics, Inc., a Delaware corporation (the "Company"), entered into a Warrant Amendment Agreement (the "Amendment") with Merrill Lynch International ("ML"), through its agent Merrill Lynch, Pierce, Fenner & Smith Incorporated, to amend the terms of the warrant transaction (the "Warrant") entered into by the Company and ML on September 21, 2005 in the form of an International Swaps and Derivatives Association confirmation, pursuant to which ML purchased 3,012,050 warrants from the Company, a copy of which was included as Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2005. The Amendment modifies the terms of the Warrant to (i) extend the valuation period for the warrants to 60 trading days, commencing September 12, 2012, (ii) allow for a separate valuation for each trading day during the valuation period, and (iii) provide that the settlement price for each trading day during the valuation period is the per share volume-weighted average price for such day.

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment, a copy of which is being filed as Exhibit 10.1 to this Current Report on Form 8-K. The Amendment and the Warrant are each incorporated herein by reference.

As previously announced, Cyberonics, Inc. (the "Company") will conduct its Annual Meeting of Stockholders on Wednesday, September 19, 2012 at 10:00 a.m. Central Time at the Company's offices at 100 Cyberonics Blvd., Houston, Texas 77058. In advance of the meeting, the Company published and distributed its proxy statement, along with a proxy card, on or about August 8, 2012.

In the proxy statement, our Board of Directors recommended that stockholders vote for Proposal No. 2 to approve the Cyberonics, Inc. 2009 Stock Plan ("2009 Stock Plan"), as amended to increase the aggregate maximum number of shares that can be issued under the plan by 2,200,000 shares.

With this filing, we note that as of June 30, 2012, there were 1,373,962 shares subject to issuance upon exercise of outstanding awards under all of our equity compensation plans, at a weighted average exercise price of $26.50, and with a weighted average remaining life of 4.87 years. There were a total of 840,536 shares of issued and outstanding restricted stock and phantom stock units that remain subject to forfeiture. As of June 30, 2012, there were 574,847 shares available for future issuance of awards under all plans. 1

As described in the table below, the shares subject to outstanding awards and the shares available for future awards under each of our stock plans as of June 30, 2012, including the Cyberonics, Inc. Amended and Restated 1996 Stock Option Plan ("1996 Stock Plan"), the Cyberonics, Inc. Amended and Restated 1997 Stock Plan ("1997 Stock Plan"), the Cyberonics, Inc. 1998 Stock Option Plan ("1998 Stock Plan"), the Cyberonics, Inc. 2005 Stock Plan ("2005 Stock Plan"), the 2009 Stock Plan, and the Cyberonics, Inc. Amended and Restated New Employee Equity Inducement Plan ("New Employee Plan").

                                                    Shares
                                     Outstanding   Available
                       Stock Plan     Options,        for
                                      Warrants      Future
                                     and Rights    Issuance
                       1996 Stock        269,979           0
                       Plan
                       1997 Stock        352,441           0
                       Plan
                       1998 Stock              0           0
                       Plan
                       2005 Stock         34,250           0
                       Plan
                       2009 Stock        641,292     273,948
                       Plan
                       New                76,000     300,899
                       Employee
                       Plan
                       Total           1,373,962     574,847

In addition, our gross annual grant rate of stock options, restricted stock shares ("RSSs"), and phantom stock units ("PSUs") under the 1997 Stock Plan, the 2009 Stock Plan, and the New Employee Plan, the only plans from which awards were granted during the relevant period, excluding the effect of cancellations and forfeitures, in fiscal years 2012, 2011, and 2010 was 2.6%, 3.1%, and 5.2%, respectively, averaging 3.6% for the three-year period. See the table below for details (in thousands, except for percent).

                                           April      April      April
                                          27, 2012   29, 2011   30, 2010
             Total options granted (A)         277        233        327
             Time-based RSSs & PSUs            173        206        394
             granted (B)
             Performance-based RSSs &            ?         51         51
             PSUs vested (C)
             Total dilution                    450        490        772

             Weighted average basic         27,827     28,051     27,703
             common shares outstanding
             (D)

             Dilution*                        2.6%       3.1%       5.2%

*Calculated as follows: (A
+ (B x 2.5) + (C x 2.5)) / D