On February 1, 2008, Richard L. Rudolph, M.D., Vice President, Clinical, Regulatory and Medical Affairs and Chief Medical Officer, resigned his position as an officer of Cyberonics, Inc. (the "Company") and entered into a letter agreement (the "Agreement") with the Company pursuant to which he will continue to provide services to the Company on a part-time employment basis. The Agreement provides that Dr. Rudolph will be compensated on an hourly basis at the rate of $250 per hour for up to 40 hours per two-week period for work as requested by the Company and at the rate of $125 per hour for time spent traveling at the request of the Company. In addition, Dr. Rudolph will be entitled to receive a lump-sum payment of up to $150,000 subject to conditions set forth in the Agreement. The Agreement further provides for termination of the Employment Agreement dated June 15, 2006 and the Severance Agreement dated January 1, 2003 between Dr. Rudolph and the Company.