THIS INTERNATIONAL DISTRIBUTION AGREEMENT (the "Agreement") is made effective on 24 of April, 2009 (the "Effective Date"), by and between Cyberonics, Inc. , a corporation organized under the laws of the State of Delaware, United States  ("Cyberonics"), and Nihon Kohden Corporation , a corporation organized under the laws of Japan ("Distributor").

     WHEREAS, Cyberonics is engaged in the research, manufacture, and sale of implantable medical devices, including the “Products” (as defined below), useful in the treatment of epilepsy, depression or other treatment-resistant disorders;

     WHEREAS, Distributor desires to be appointed as exclusive distributor of the “Products” in the “Field” (as defined below) in the “Territory” (as defined below); and

     WHEREAS, Cyberonics is willing to appoint Distributor of such distributorship, subject to the terms and conditions set forth below.

     NOW, THEREFORE, Cyberonics and Distributor, intending to be legally bound, agree as follows:

     1.1      The following capitalized terms shall be defined as follows:

     2.1       Appointment and Acceptance .  Subject to the terms of this Agreement, Cyberonics appoints Distributor as its exclusive distributor of “Products” in the “Field” in the “Territory”.  Distributor accepts this appointment.  Subject to Section 2.4, Cyberonics shall not appoint any other distributor of the “Products” in the “Field” in the “Territory” during the term of this Agreement.  In the event, during the Term of this Agreement, Cyberonics proposes to sell any new product in the “Field” in the  “Territory”, Cyberonics agrees that it will not grant sales, distribution and marketing rights to such new product to any third party in the “Territory” without first offering such product to Distributor on terms and conditions equivalent to those to be offered to the third party.  In the event Distributor has not accepted such new product for sales, distribution and marketing on such terms within sixty (60) days after receipt of Cyberonics’ offer, Cyberonics shall be free to enter into such third-party arrangement in Territory without further obligation to Distributor.

     2.2       Discontinuation of Production .  Distributor acknowledges that Cyberonics reserves the right to discontinue the manufacture, production or distribution of products (including the “Products”) subject to Section 3.4.  To the maximum extent practicable, Cyberonics agrees to give Distributor at least one (1) year  advance written notice of any such decision and shall continue to provide Distributor with repair service, service parts or any other products necessary for after-sales service to the discontinued  “Products” for six (6) years after Cyberonics discontinued any “Products.”   In addition, if Cyberonics changes any specifications of any “Products” that relate to the “Products” safety or effectiveness , Cyberonics shall provide Distributor with as much prior notice as is practicable, endeavoring to give Distributor at least six (6) months prior written notice.

     2.3       Limitation of Appointment .  Nothing in this Agreement is intended to nor shall grant Distributor any rights to distribute (a) any products other than the “Products”; (b) any “Products” for indications outside of the “Field;” or any “Products” outside the “Territory.”

     2.4       Right Reserved by Cyberonics .  Cyberonics expressly reserves the right to (a) make, market and sell products other than “Products”; (b) make, market and sell products (including the “Products”) outside  the “Territory”; (c) make, market and sell products (including the “Products”) in the “Territory” outside of the “Field” either directly for its own account or via distributors or agents.

     2.5       No Activities Outside the “Field” or the “Territory” .  In accordance with Section 2.3, Distributor shall not solicit sales of “Products” or promote the sale, distribution or marketing of “Products” outside of the “Field” or the “Territory”.  Distributor shall not establish an office or warehouse outside the “Territory” for the sale of “Products”.  In the event Distributor receives an inquiry or purchase order from a third party for delivery or sale outside of the “Field” or the “Territory”, Distributor shall promptly refer such third party, and any inquiry or purchase order submitted thereby, to Cyberonics, it being understood that in no event shall Distributor fill any portion of any such purchase order unless Cyberonics first consents in writing.  In addition, Distributor shall not, without the prior written consent of Cyberonics, supply Products to any customer if Distributor knows that such customer will actively sell those Products into territories which are not reserved to Distributor or are allocated exclusively to another reseller. Distributor shall immediately notify Cyberonics upon learning that Product sold by Distributor has been used outside of the “Field” or removed from the “Territory”.

     2.6       Sub-Distributors .  Distributor will purchase the “Products” from Cyberonics for resale on Distributor’s own account and   Distributor shall notify Cyberonics of its Sales subsidiaries  for the distribution of “Products” in the “Field” in the “Territory”.

     3.1       Purchase Orders .  During the term hereof, Distributor shall order “Products” from Cyberonics by submitting a written purchase order identifying:  the “Products” ordered by catalog number and quantity; the requested delivery date(s); and any export/import information required to enable Cyberonics to fill the order.  All purchase orders for “Products” are subject to acceptance by Cyberonics by either shipping the “Products” or issuing a written order acknowledgement. Cyberonics reserves the right to fulfill purchase orders in one or more shipments. In case of such partial shipments, Cyberonics shall follow Distributor’s shipping instruction and shall not ship without prior consent of Distributor.  Cyberonics shall have no liability to Distributor with respect to purchase orders which are not accepted; provided, however, that Cyberonics will use reasonable efforts to accept any purchase order for “Products” which does not require any modification or addition in order to meet the specifications of Distributor or its customers, and which corresponds to quantities of “Products” forecast by Distributor in accordance with Section 3.2. Should Cyberonics decide not to accept a purchase order, Cyberonics shall provide Distributor with a written order rejection within  five(5) days after receiving the purchase order.  If Cyberonics does not provide such an order rejection, the purchase order is considered to be accepted.

     3.2       Forecasts .  To facilitate Cyberonics' production scheduling, within five (5) business days of the beginning of each calendar month during the Term, Distributor shall provide Cyberonics in writing with a rolling, non-binding forecast of Distributor's anticipated monthly requirements of “Products” for the six (6) month period commencing on the month following the month of such forecast.  Distributor agrees to use its best efforts to make each such forecast as accurate as possible.

     3.3       Product Prices .  In consideration of Cyberonics providing “Products” ordered by Distributor, Distributor shall pay Cyberonics the amount set forth on Schedule A.   No price change necessitated by a change in the reimbursement amount shall affect “Products” ordered pursuant to purchase orders accepted by Cyberonics prior to the date such price change becomes effective.  In the event that the “Product” price under this Agreement increases, Distributor’s purchases of “Products” at the previous price shall be limited to the number of “Products” actually purchased by Distributor in the three-month period immediately prior to the price increase.  Any purchase orders for “Products” in excess of this defined amount shall be at Cyberonics’ discretion.

     3.4       Price Increase or Product Discontinuance .  In the event Cyberonics wishes to seek a price increase or Product discontinuance, Cyberonics shall notify Distributor and the parties shall negotiate in good faith regarding the requested price increase or Product discontinuance.  

     3.5       Sole Remuneration .  The difference between Distributor's resale price and the purchase price due to Cyberonics under Section 3.3 shall be Distributor's sole remuneration for the distribution of the “Products” by Distributor pursuant to this Agreement.

     3.6       Cancellation, Rescheduling, and Returns .  Purchase orders placed by Distributor and accepted by Cyberonics shall not be canceled or rescheduled unless mutually agreed upon by both parties, except purchase orders may be canceled if “Products” are not shipped within thirty (30) days of the delivery date requested in the corresponding purchase order.  Except in cases of the return of “Products” which qualify for coverage under the Cyberonics’ Limited Replacement Warranty set forth on Schedule D and the return of “Products” that do not conform to Distributor’s order, “Products” may not be returned for any reason without first obtaining Cyberonics' prior written consent and adhering to Cyberonics’ Return Policy as set forth in Schedule C, as amended by Cyberonics upon six (6) months prior written notice to Distributor. Except in cases of the return of “Products” which qualify for coverage under the Cyberonics’ Limited Replacement Warranty set forth on Schedule D and the return of “Products” that do not conform to Distributor’s order, Distributor will bear the cost of and risk of loss or damage associated with the return of “Products”.

     3.7       Compliance with Laws .  The ultimate shipment of “Products” to Distributor shall be subject to the right and ability of Cyberonics to make such sales, and obtain all required licenses and permits, under all applicable decrees, statutes, rules, laws and regulations then in effect, whether promulgated by the government of the United States, the governments of the countries comprising the Territory or any other governmental body and agencies or instrumentality’s of the foregoing.  Any purchase order, which has been accepted by Cyberonics but which cannot be fulfilled due to any such decree, statute, rule, or regulation shall be considered to have been rejected when submitted to Cyberonics for acceptance or rejection.  Distributor will: (i) apply for all approvals required for the commercialization of the “Products” in the “Territory” in Distributor’s name; (ii), transfer such approvals as directed by Cyberonics upon such termination or expiration of this Agreement as set forth in Section 8.7.1 or 8.7.2,  after Distributor receives the termination fee from Cyberonics according to Section 8.7.1 or 8.7.2, if possible under applicable law; (iii) comply with all decrees, statutes, rules, laws and regulations then in effect, which shall be applicable to Distributor, whether promulgated by the government of the United States (including, but not limited to the Foreign Corrupt Practices Act and Export Administration Regulations), the government of the Territory or any other governmental body and agencies or instrumentality’s of the foregoing; (iv)  maintain the necessary records to comply with such decrees, statutes, rules, laws and regulations; (v) not  export any “Products” except in compliance with such decrees, statutes, rules, laws and regulations; (vi) not sell, transfer or otherwise dispose of “Products” in violation of applicable export decrees, statutes, rules, laws and regulations then in effect; and (vii)  indemnify and hold harmless Cyberonics, its parent, officers, directors, and employees from any and all fines, damages, losses, costs and expenses (including reasonable attorneys' fees) incurred by Cyberonics as a result of any breach of this Section 3.7 by Distributor or any of its sales subsidiaries .    It is further agreed that Distributor will notify Cyberonics of any known, material developments in the applicable decrees, statues, rules, laws and regulations applicable to the sale of the “Products” in the “Territory” to the extent reasonably practicable.

     3.9       Payment .  All amounts due and payable with respect to “Products” purchased by Distributor shall be paid within 60 days after the invoice date .     All such amounts, and any other payment due pursuant to the terms of this Agreement, shall be paid in United States dollars by wire transfer of immediately available funds to the bank listed below (or such other bank as Cyberonics may specify in writing) or, if applicable law or regulation prohibits paying in United States dollars, by other means specified in writing and mutually agreed by both parties to the account information provided by Cyberonics in writing from time to time. All costs incurred in connection with any such wire transfer shall be the responsibility of Distributor.  Whenever any amount hereunder is due on a day which is not a day on which the bank to which payments are to be made by Distributor to Cyberonics hereunder is open for business (a "Business Day"), such amount shall be paid on the next Business Day.  Amounts due hereunder shall be considered paid as of the day such funds are received by the aforementioned bank.  No part of any amount payable to Cyberonics hereunder may be reduced due to any counterclaim, set-off, adjustment or other right which Distributor might have or assert against Cyberonics, its parent, any other party or otherwise.

     3.10      Credit Line. At Cyberonics’ sole option, Cyberonics may from time to time grant Distributor a credit line in an amount and at terms established by Cyberonics.  Cyberonics reserves the unilateral right to modify, decrease, increase or cancel said credit line upon written notice to Distributor.  At all times, the maintenance of the credit line will be conditioned upon the prompt payment by Distributor of all amounts due and payable under this Agreement. No modification or cancellation of the credit line shall constitute a waiver by Cyberonics of any of its rights or Distributor’s obligations pursuant to this Agreement including, but not limited to, the obligation of Distributor to make payments as provided herein.  Subject to the terms of this Article 3, as of the Effective Date, Cyberonics agrees to grant Distributor an initial credit line of $1,500,000.00.

     3.11       Late Payments .  In addition to the other rights of Cyberonics hereunder, all amounts due and owing to Cyberonics hereunder but not paid by Distributor on the due date thereof shall bear interest in United States dollars at the rate of the greater of: (i) One per cent (1%) per annum above the then applicable prime interest rate per annum then in effect by Bank of America in United States dollars on the invoice date; or (ii) the maximum lawful interest rate permitted under applicable law. Such interest shall accrue on the balance of unpaid amounts from time to time outstanding from the date on which portions of such amounts became due and owing until payment thereof in full.  Cyberonics reserves the right to require advance payment or to decline to accept or make shipment against purchase orders if Distributor is delinquent in payments or, in Cyberonics’ sole opinion, Distributor’s ability or willingness to pay appears doubtful.

     3.12       Currency Conversion .  If any currency conversion is required in connection with the calculation of payments hereunder, such conversion shall be made using the selling exchange rate for conversion of the foreign currency into United States dollars, quoted for current transactions reported in The Wall Street Journal for the invoice date.

     3.13       Return Policy .  Except in cases of the return of “Products” which qualify for coverage under the Cyberonics’ Limited Replacement Warranty set forth on Schedule D and the return of “Products” that do not conform to Distributor’s order,, the return of Products shall be made pursuant to the terms of Cyberonics' return policy.  Said return policy is attached hereto as Schedule C, and may be changed by Cyberonics upon six (6) months prior written notice to Distributor.  Cyberonics shall have no duty to accept for return “Products” reported by Distributor to Cyberonics as sold.

     3.14       Governing Document .  This Agreement, together with its Schedules, shall supersede any terms used by Cyberonics or Distributor in the ordering, shipment and receiving of “Products” including, but not limited to, the terms (excluding quantity) appearing on Distributor’s purchase order or other documents, none of which shall apply to transactions entered into for the supply of Products pursuant to this Agreement.

     4.1       Distributor's Efforts .  Distributor will use its best efforts to aggressively and vigorously promote the sale of “Products” in the “Field” in the “Territory” including, but not limited to, maintaining, at its own expense, a suitable place of business in the “Territory” staffed with a competent sales force.  Distributor will use its best efforts to maintain and promote and do nothing to detract from the good name of Cyberonics or the reputation of “Products”.  At Cyberonics' request, Distributor will attend, exhibit and assist at trade shows, physician meetings and other professional gatherings in the “Territory” at Distributor’s own expense.

     4.2       Payment of Account .  Distributor will promptly pay its account with Cyberonics when due.

     4.3       Purchase Goals .  Distributor agrees to establish and work diligently to meet or exceed the minimum purchase goals attached as Schedule B hereto.  The parties expressly agree to review said annual purchase goals (a) on or about ninety (90) days after the initial establishment of the reimbursement amount for the “Products” in the “Territory” by Japan’s Ministry of Health, Labour and Welfare; and (b) on or about sixty (60) days prior to the end of each year of the Term.

     4.4       Reports .  Distributor will provide Cyberonics with quarterly reports of Distributor's sales in the “Territory” on a hospital-by-hospital basis in sufficient detail to allow Cyberonics to confirm that Distributor is meeting its purchase goals.  Distributor will also provide Cyberonics with quarterly reports of its efforts to seek and support reimbursement, the reimbursement environment in the “Territory” and Product approval-related activities.  Upon request, Distributor will provide Cyberonics with adequate financial information, on a confidential basis, or credit references to assure Cyberonics of Distributor's ability to timely pay its account.

     4.5       Regulatory Compliance .  Distributor will comply with all applicable decrees, statutes, rules, laws and regulations applicable to its distribution of “Products” (including prohibitions on the promotion of off-label use) and keep Cyberonics informed with respect to such decrees, statutes, rules, laws and regulations and the “Products”-related regulatory submissions and approvals.  Distributor will submit copies of such regulatory submissions and approvals to Cyberonics  after such submissions are  permitted by or approvals are submitted by the applicable regulatory authority and receipt of such approval by Distributor, provided that, Cyberonics shall not submit regulatory application to  Japan’s Ministry of Health, Labour and Welfare using such copies of the Distributor’s submissions or resulting approvals without obtaining prior written consent of Distributor.    

     4.6       Adverse Event Reporting .  If  either party becomes aware of any death or serious injury (collectively, a “Complaint”) that is, is alleged to be or may have been caused, in whole or in part, by a defect in or malfunction of one or more of the “Products”, it will report such Complaint to the other party in writing within  three (3) business days after having knowledge of said Complaint by facsimile  or electronic mail (to Cyberonics by facsimile at 281-853-1222, Attention: Clinical/Technical Services Department, or by electronic mail at clinicaltechnicalservices@cyberonics.com or to Distributor by facsimile at Japan 3-5348-1518 and provide  the other party with such documentation and assistance in investigating and reporting such Compliant as required by the applicable laws in accordance with Schedule E hereto to the extent reasonable practical and the Pharmaceutical Affairs Law in Japan.  Either party is obligated to notify the other party under this Section 4.6 without regard to whether there is or appears to be a valid basis that any Complaint is related to the Products.  Either party will cooperate with the other party in assuring that all vigilance reporting is completed.  If permitted by applicable regulatory authority, Cyberonics shall be responsible for investigating  and reporting Complaints as required by the applicable laws and Distributor will cooperate with Cyberonics in the conduct of such investigations and reporting or, if the applicable regulatory authority will not permit Cyberonics to do such investigations and reporting, Distributor will be responsible for investigating  and reporting Complaints as required by the applicable laws and Distributor will send Cyberonics copies of all related documents.  It is specifically agreed by the parties that they will endeavor to work together in order to properly report any MDRs as required by applicable law.  To the extent that Distributor is required by law to report MDRs to  Japan’s Ministry of Health, Labour and Welfare, Distributor agrees to provide Cyberonics  with advance copies of any proposed submissions in English and agrees that no such proposed submission will be submitted unless Cyberonics has approved same.   Cyberonics agrees to provide Distributor with any submissions made by it to the U.S. FDA that relates to “Products” sold pursuant to this Agreement.

     4.7       Recalls .  Cyberonics shall be responsible for conducting any recall of any or all of the “Products” initiated by Cyberonics or governmental authority acting within or outside of the “Territory.”  In the event of any Products recall in Japan, whether it is initiated by Cyberonics or Distributor (if such recall is mandated by the Japanese regulatory authorities), both parties shall fully cooperate on the recall.  In principle, if the recall requires the removal of “Products” from the market, Distributor shall recall the “Products” in Japan and shall return the recalled “Products” to Cyberonics. Cyberonics shall provide Distributor with substitute products for the recalled “Products”. 　 Distributor shall also maintain the documentations establishing the effectiveness of its efforts to initiate and/or support the recall, as appropriate, and provide Cyberonics with access to such documentation as requested by Cyberonics.   Cyberonics shall reimburse Distributor for reasonable expenses incurred by Distributor to conduct the recall.  Distributor shall cooperate with Cyberonics in any such recall.  In order to assist Cyberonics in the event of a recall, Distributor will maintain for a period of not less than ten (10) years a complete and current listing of the locations of all “Products” in Distributor's inventory, the names and addresses of customers who have purchased “Products” from Distributor, together with the model number, lot number and serial numbers of “Products” purchased and the date of such purchase.  Distributor agrees to make the foregoing information available to Cyberonics or governmental authority acting within or outside the “Territory” upon request by Cyberonics.  Within 30 days after expiration or termination of this Agreement, Distributor will provide a copy of its records containing the foregoing information to Cyberonics.

     4.8       Traceability, Complaints and Complaint Reporting .  Distributor shall comply with the traceability program that the parties mutually agree upon in writing.   Cyberonics has the right to review said traceability program and the related compliance-related records at reasonable times.

     4.9      [Intentionally Left Blank]

     4.10     No Prohibited Payments to Public Officials .  Distributor will not, directly or indirectly, make any payment which are prohibited under the laws promulgated by the government of the United States, which shall be applicable to Distributor, or any law of the “Territory”  and shall otherwise comply with the laws and regulations then in effect in the “Territory”, if any, governing interactions with government officials, political parties, political officials or candidates for political office (or any agents, employees or representatives thereof).