Cyberonics, Inc. (NDAQ:CYBX) holder Metropolitan Capital Advisors demanded today that director Kevin Moore immediately be removed from the company's board, calling his position a "glaring violation of law and appropriate corporate governance practices". The move was backed by the Coalition of Concerned Cyberonics Shareholders, who collectively own 7.33% of the company. According to a letter filed with the SEC:

"'Given Mr. Moore’s longstanding close friendship with Robert Cummins — dating back to their days at Dartmouth together in the 1970’s —we are particularly disturbed that Mr. Moore, who we believe was not lawfully a Member of the Board, served on the Board’s Compensation and Nominating and Governance committees and participated in the decision to not only approve the new compensation package for Mr. Cummins in 2005, despite the existing contract having nearly three more years left to run, but his severance package as well,' Karen Finerman and Jeffrey Schwarz of MCA said.

According to the Company’s public filings, Cyberonics entered into a March 28, 1997 letter agreement (the "Letter Agreement") with the Clark Estates that, upon closing of its pending investment in the common stock of Cyberonics, entitled the Clark Estates to designate one member to the Cyberonics Board to serve for as long as the Clark Estates retained at least 600,000 of the 901,408 shares of the Company that it purchased on that date. Purportedly pursuant to this provision, approximately seven years later Mr. Moore was appointed to the Company’s Board on January 13, 2004 and has remained on the Board since then, despite not standing for election at the Company’s 2004 or 2005 annual meetings of shareholders. Mr. Moore’s purported status as a perpetual director of the Company, however, violates the Letter Agreement, the Company’s bylaws and the Delaware General Corporation Law.

Given that the Company is not, and could not be, contractually bound to allow Mr. Moore to serve as a director despite not being elected by the Company’s shareholders, MCA demands that the Company immediately relieve Mr. Moore of his position as director and that he return the fees and stock options he was awarded during the period when he was improperly serving as a director. If the Company fails to take such action within 10 business days, Metropolitan Capital Advisors, Inc. and The Committee for Concerned Cyberonics Inc. Shareholders will bring an action in the Delaware Court of Chancery to compel it to do so." (Read More)

Just recently, the coalition succeeded in ousting ex-CEO Robert Cummins; however, he was awarded a generous severance package due to Moore and others close to him that serve on the compensation committee. After the removal of the director, the coalition plans to locate a new CEO which it hopes will help turn the company around. This stock is definitely one worth watching as corporate governance is improved and changes are made to help the company turn itself around.

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