Exhibit 10.1
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of
July 1, 2009, by and between CARDIOGENESIS CORPORATION, a California corporation
(the “Company”), and Paul McCormick, an individual (the “Executive”).
R E C I T A L
     The Company desires to employ Executive in the capacity hereinafter stated,
and the Executive desires to enter into the employ of the Company in that
capacity pursuant to the terms and conditions set forth herein.
A G R E E M E N T
     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the Company and the Executive, intending to be
legally bound, hereby agree as follows:
     1. EMPLOYMENT AND COMPENSATION.
          1.1 EMPLOYMENT. The Company hereby agrees to employ the Executive as
the Executive Chairman of the Board of Directors of the Company, and the
Executive accepts such employment and agrees to devote approximately
seventy-five percent (75%) of all his business time, efforts and skills on such
reasonable duties commensurate with such position. The term of this Agreement
shall commence on July 1, 2009 and expire on July 1, 2010 unless sooner
terminated pursuant to the terms and provisions herein stated. This Agreement
shall automatically be extended for additional one (1) year renewal terms
(unless sooner terminated pursuant to the terms and provisions herein) unless
either party gives written notice to the other to terminate this Agreement at
least thirty (30) days prior to the end of the preceding term.
          1.2 COMPENSATION.
               (a) Base Salary. For all of the services rendered by Executive
hereunder, Executive’s annual base salary shall be $250,000 (as may be increased
by the Board of Directors from time to time, the “Base Salary”), payable in
accordance with the Company’s ordinary payroll practices (but in any event no
less often than monthly). Such Base Salary shall not be reduced during the term
of this Agreement without the express written consent of Executive. The Company
agrees that Executive’s Base Salary and performance will thereafter be reviewed
at least annually by the Company to determine if an increase in compensation is
appropriate, which increase shall be in the sole discretion of the Board of
Directors of the Company.
               (b) Benefits. During the term of employment Executive shall be
provided such benefits and be permitted to participate in all equity
compensation and fringe benefit plans made available to employees of the Company
generally and to management level employees of the Company which, from time to
time at the Company’s discretion may be provided. Such benefits shall include,
at a minimum, medical insurance (including prescription drug) for Executive and
his spouse. Executive shall be entitled to no less than three (3) weeks paid
vacation per year.
               (c) Expenses. The Company shall reimburse Executive on a timely
basis for all ordinary and necessary business expenses incurred in the discharge
of his duties and

 

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responsibilities under this Agreement, in line with Company policy and in
accordance with the Company’s expense approval procedures then in effect upon
presentation to the Company of an itemized account and appropriate written proof
of such expenses.
     2. EQUITY AWARDS. Notwithstanding any provisions of the Company’s option or
stock incentive plan, or of the Executive’s stock option or restricted stock
agreements, in the event of a “Corporate Transaction” or “Change in Control,” as
defined below, during the period of the Executive’s employment with the Company,
all of the Executive’s stock options shall vest in full and all rights of the
Company to repurchase restricted stock of the Executive shall terminate in full.
     For purposes hereof, “Change in Control” shall mean a change in ownership
or control of the Company effected through the acquisition, directly or
indirectly, by any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company), of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company’s outstanding securities pursuant to a tender or exchange offer made
directly to the Company’s stockholders which the Board does not recommend such
stockholders to accept.
     For purposes hereof, “Corporate Transaction” shall mean either of the
following stockholder-approved transactions to which the Company is a party:
               (a) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction; or
               (b) the sale, transfer or other disposition of all or
substantially all of the Company’s assets in complete liquidation or dissolution
of the Company.
     3. TERMINATION.
          3.1 TERMINATION BY THE COMPANY FOR CAUSE. Any of the following acts or
omissions shall constitute grounds for the Company to terminate the Executive’s
employment pursuant to this Agreement for “cause”:
               (a) willful misconduct by Executive causing material harm to the
Company or repeated failure by the Executive to follow the reasonable directives
of the Board of Directors (or a designated committee thereof), but only if, in
either case, Executive shall not have discontinued such misconduct or failure
within thirty (30) days after receiving written notice from the Company
describing the misconduct or failure and stating that the Company will consider
the continuation of such misconduct or failure as cause for termination of this
Agreement,
               (b) any material act or omission by the Executive involving gross
negligence in the performance of the Executive’s duties to, or material
deviation from any of the policies or directives of, the Company, other than a
deviation taken in good faith by the Executive for the benefit of the Company,

 

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               (c) any illegal act by the Executive which materially and
adversely affects the business of the Company, provided that the Company may
suspend the Executive with pay while any allegation of such illegal act is
investigated, or
               (d) any felony committed by Executive, as evidenced by conviction
thereof, provided that the Company may suspend the Executive with pay while any
allegation of such felonious act is investigated.
     Termination by the Company for cause shall be accomplished by written
notice to the Executive and, in the event of a termination pursuant to
Sections 3.1(a), 3.1(b), and/or 3.1(c) above, shall be preceded by a written
notice providing a reasonable opportunity for the Executive to correct his
conduct.
          3.2 TERMINATION FOR DEATH OR DISABILITY. In addition to termination
for cause pursuant to Section 3.1 hereof, the Executive’s employment pursuant to
this Agreement shall be immediately terminated without notice by the Company
(i) upon the death of the Executive or (ii) upon the Executive becoming totally
disabled. For purposes of this Agreement, the term “totally disabled” means an
inability of Executive, due to a physical or mental illness, injury or
impairment, to perform a substantial portion of his duties for a period of one
hundred eighty (180) or more consecutive days, as determined by a competent
physician selected by the Company’s Board of Directors and reasonably agreed to
by the Executive, following such one hundred eighty (180) day period.
          3.3 TERMINATION FOR GOOD REASON. Executive’s employment pursuant to
this Agreement may be terminated by the Executive for “good reason” if the
Executive voluntarily terminates his employment as a result of any of the
following; provided, however, that Executive shall be required to give written
notice to the Company of any condition that would constitute the “good reason”
event within ninety (90) days of the initial existence of the condition and the
Company shall have thirty (30) days thereafter to cure any such “good reason”
condition:
               (a) without the Executive’s prior written consent, a reduction in
his then current Base Salary; or
               (b) without the Executive’s prior written consent, the assignment
to Executive of duties substantially and materially inconsistent with the
position and nature of Executive’s employment as set forth in Section 1 of this
Agreement, or
               (c) without Executive’s prior written consent, a relocation of
the Executive’s place of employment outside of Orange County, California.
          3.4 TERMINATION WITHOUT CAUSE. The Company may terminate this
Agreement, and the employment of the Executive under this Agreement, without
cause, at any time upon at least thirty (30) days’ prior written notice to the
Executive. This Section 3.4 shall not apply to a termination of the Executive by
the Company as a result of a “Corporate Transaction” or “Change in Control,”
but, instead, the provisions of Section 3.5 below shall apply.

 

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          3.5 PAYMENTS UPON REMOVAL OR TERMINATION.
               (a) If, during the term of this Agreement, the Executive resigns
for one of the reasons stated in Section 3.3, or if the Company terminates
Executive’s employment pursuant to Section 3.4 above, or the Company terminates
Executive’s employment pursuant to Section 3.4 above or the Executive terminates
his employment pursuant to Section 3.4 above, the Executive shall be entitled to
the following compensation: (i) the remainder of his then current Base Salary
for the remainder of the term in which Executive resigns or is terminated by the
Company, as applicable and (ii) any payments for unused vacation and
reimbursement expenses, which are due, accrued or payable at the date of
Executive’s termination. The payments provided by this Section 3.6(a) shall be
Executive’s complete and exclusive remedy for any such termination.
               (b) All payments required to be made by the Company to the
Executive pursuant to this Section 3 shall be paid on a regular basis in
accordance with the Company’s normal payroll procedures and policies. If the
Company terminates the Executive’s employment pursuant to Sections 3.1 or 3.2,
or if the Executive voluntarily resigns (except as provided in Section 3.3),
then the Executive shall be entitled to the following compensation: (i) the
portion of his then current Base Salary which has accrued through his date of
termination and (ii) any payments for unused vacation and reimbursement
expenses, which are due, accrued or payable at the date of Executive’s
termination.
               (c) To the extent that any or all of the payments and benefits
provided for in this Agreement constitute “parachute payments” within the
meaning of Section 280G of the Internal Revenue Code (the “Code”) and, but for
this paragraph, would be subject to the excise tax imposed by Section 4999 of
the Code, then at the Executive’s election:
                    (i) The Executive shall receive all such payments and
benefits the Executive is entitled to receive hereunder, and any liability for
taxes pursuant to the above shall be the liability solely of the Executive; or
                    (ii) The aggregate amount of such payments and benefits
shall be reduced such that the present value thereof (as determined under the
Code and applicable regulations) is equal to 2.99 times the Executive’s “base
amount” (as defined in Section 280G of the Code).
     The determination of any reduction or increase of any payment or benefits
under this paragraph pursuant to the foregoing provision shall be made by a
nationally recognized public accounting firm chosen by the Company in good
faith, and such determination shall be conclusive and binding on the Company and
the Executive.
               (d) Notwithstanding anything to the contrary in this Agreement,
in the event any payment required to be made pursuant to this Section 3 (in any
case, a “Section 3 Payment”) or any other benefits under this Agreement are
determined, in whole or in part, to constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code and Executive is a
specified employee as defined in Section 409A(2)(B)(i) of the Code, such amounts
will not be paid before the date which is six (6) months after the termination
of Executive’s employment. Although it is contemplated that the Section 3
Payment and other benefits resulting from an involuntary termination of
employment without Cause will be short-term deferrals that will not constitute
“nonqualified deferred compensation” within the meaning of Section 409A of the
Code, it is not clear that such treatment will be available in all instances,
including, for example, a voluntary termination by you for good reason. The
determination of whether and what amount of the

 

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Section 3 Payment or other benefits constitute deferred compensation and whether
Executive is a specified employee within the meaning of Section 409A(2)(B)(i) of
the Code shall be determined by the by the Board of Directors of the Company or
its delegate and any such determination shall be final and binding on the
Company and the Executive, unless such decisions are determined to be arbitrary
and capricious by a court having jurisdiction. The Company makes no
representation and the Company shall have no liability to Executive or any other
person if any Section 3 Payment or other benefits provided pursuant to the terms
of this agreement are determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code and the payment
terms of such Section 3 Payment or other benefits do not satisfy the additional
conditions applicable to nonqualified deferred compensation under Section 409A
of the Code and this Section 3.6(d).
     4. MISCELLANEOUS.
          4.1 ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Company may, without the consent of the Executive, assign its rights
and obligations under this Agreement to an affiliate or to any corporation, firm
or other business entity (i) with or into which the Company may merge or
consolidate, or (ii) to which the Company may sell or transfer all or
substantially all of its assets. After any such assignment by the Company, the
Company shall be discharged from all further liability hereunder and such
assignee shall thereafter be deemed to be the Company for the purposes of all
provisions of this Agreement including this Section 4.1.
          4.2 SUCCESSORS. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive’s devisee, legatee, or other
designee or, if there be no such designee, to the Executive’s estate.
          4.3 GOVERNING LAW. This Agreement is made under and shall be governed
by and construed in accordance with the laws of the State of California.
          4.4 PRIOR AGREEMENTS. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, including
that certain Consulting Agreement, dated January 15, 2009, between Executive and
the Company, which agreement shall be hereby terminated, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement which are not set forth herein.
          4.5 ARBITRATION. In the event of any controversy, claim or dispute
between the parties hereto arising out of or relating to this Agreement, the
matter shall be determined by arbitration, which shall take place in Orange
County, California, under the rules of the American Arbitration Association. The
arbitrator shall be a retired Superior Court judge mutually agreeable to the
parties and if the parties cannot agree such person shall be chosen in
accordance with the rules of the American Arbitration Association. The
arbitrator shall be bound by applicable legal precedent in reaching his or her
decision. Any judgment upon such award may be entered in any court having
jurisdiction thereof. Any decision or award of such arbitrator shall be final
and binding upon the parties and shall not be appealable. The parties hereby
consent to the jurisdiction of such arbitrator

 

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and of any court having jurisdiction to enter judgment upon and enforce any
action taken by such arbitrator. The fees payable to the American Arbitration
Association and the arbitrator shall be paid by the Company.
          4.6 WITHHOLDING TAXES. The Company may withhold from any salary and
benefits payable under this Agreement all federal, state, city or other taxes or
amounts as shall be required to be withheld pursuant to any law or governmental
regulation or ruling.
          4.7 AMENDMENTS. No amendment or modification of this Agreement shall
be deemed effective unless made in writing signed by the parties hereto.
          4.8 NO WAIVER. No term or condition of this Agreement shall be deemed
to have been waived nor shall there be any estoppel to enforce any provisions of
this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
          4.9 SEVERABILITY. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
          4.10 COUNTERPART EXECUTION. This Agreement may be executed by
facsimile and in counterparts, each of which shall be deemed an original and all
of which when taken together shall constitute but one and the same instrument.
          4.11 ATTORNEYS’ FEES. Should any legal action or arbitration be
required to resolve any dispute over the meaning or enforceability of this
Agreement or to enforce the terms of this Agreement, the prevailing party shall
be entitled to recover its or his reasonable attorneys fees and costs incurred
in such action, in addition to any other relief to which that party may be
entitled.
          4.12 NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and may be personally served or sent by United States Mail,
and shall be deemed to have been given when personally served or two days after
having been deposited in the United States Mail, registered mail, return receipt
requested, with first class postage prepaid and properly addressed as follows:

         
 
  If to Executive:   Paul McCormick
 
      11 Musick
 
      Irvine, CA 92618
 
       
 
  If to the Company:   Cardiogenesis Corporation
 
      11 Musick
 
      Irvine, CA 92618
 
      Attn: Chief Financial Officer

          4.13 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Executive
agrees to sign the Company’s standard form of employee proprietary information
and inventions agreement if and when asked to do so during the term of this
Agreement and thereafter.

 

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          IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and year set forth above.

              “COMPANY”
 
            CARDIOGENESIS CORPORATION
 
       
 
  By:    
 
       
 
      William Abbott
 
  Its:   Chief Financial Officer
 
            “EXECUTIVE”  
 
                  Paul McCormick