Exhibit 10.1

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INVESTMENT AGREEMENT

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Between

CORAUTUS GENETICS INC.

and

BOSTON SCIENTIFIC CORPORATION

 

Dated as of July 30, 2003

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TABLE OF CONTENTS

Page ARTICLE I     DEFINITIONS     SECTION 1.01. Certain Defined Terms 2  
SECTION 1.02. Additional Definitions 5           ARTICLE II     EQUITY
INVESTMENT; SUBLICENSE     SECTION 2.01. Subscription for Preferred Stock;
Patent Sublicense Agreement 5   SECTION 2.02. The Closing 6           ARTICLE
III     REPRESENTATIONS AND WARRANTIES
OF THE COMPANY     SECTION 3.01. Organization, Authority and Qualification of
the Company 8   SECTION 3.02. Subsidiaries 8   SECTION 3.03. Capital Stock of
the Company 8   SECTION 3.04. Authority and Qualification of the Company 9  
SECTION 3.05. No Conflict 10 SECTION 3.06. Governmental Consents and Approvals
10 SECTION 3.07. Absence of Certain Changes or Events; Conduct in Ordinary
Course 10 SECTION 3.08. SEC Filings; Financial Statements 10 SECTION 3.09.
Litigation 12 SECTION 3.10. Compliance with Laws 12 SECTION 3.11. Material
Contracts 12 SECTION 3.12. Assets 13 SECTION 3.13. Brokers 13 SECTION 3.14.
Employment and Benefits Matters 14 SECTION 3.15. Insurance 14 SECTION 3.16.
Regulatory Compliance 14 SECTION 3.17. Absence of Undisclosed Liabilities 14
SECTION 3.18. Full Disclosure 14 SECTION 3.19. Clinical Trials; Product Data 15
SECTION 3.20. American Stock Exchange 15

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ARTICLE IV       REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR     SECTION 4.01. Organization and Authority of the Investor 16
SECTION 4.02. No Conflict 16 SECTION 4.03. Governmental Consents and Approvals
16 SECTION 4.04. Brokers 16 SECTION 4.05. Investment Intent 16 SECTION 4.06.
Legends 17         ARTICLE V     COVENANTS AND AGREEMENTS     SECTION 5.01.
Conduct of Business 17 SECTION 5.02. Governmental Proceedings 17 SECTION 5.03.
Listing 17 SECTION 5.04. Insurance 17         ARTICLE VI     USE OF PROCEEDS    
  SECTION 6.01. CSEMC License 18         ARTICLE VII     CONDITIONS PRECEDENT  
  SECTION 7.01. Conditions to the Investor’s Obligations 18 SECTION 7.02.
Conditions to the Company’s Obligations 19         ARTICLE VIII    
INDEMNIFICATION     SECTION 8.01. Survival of Representations, Warranties and
Indemnities 19 SECTION 8.02. Indemnification by the Company 20 SECTION 8.03.
Indemnification by the Investor 20 SECTION 8.04. Treatment for Tax Purposes 20
SECTION 8.05. Limitations on Indemnification 20

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ARTICLE IX     TERMINATION     SECTION 9.01. Termination 21 SECTION 9.02. Effect
of Termination 21         ARTICLE X     CONFIDENTIALITY     SECTION 10.01.
Confidentiality 21 SECTION 10.02. Release from Restrictions 22 SECTION 10.03.
Public Announcements and Publications 22         ARTICLE XI     GENERAL
PROVISIONS     SECTION 11.01. Further Action 22 SECTION 11.02. Expenses 23
SECTION 11.03. Notices 23 SECTION 11.04. Interpretation and Rules of
Construction 24 SECTION 11.05. Severability 24 SECTION 11.06. Entire Agreement
25 SECTION 11.07. Assignment 25 SECTION 11.08. No Third Party Beneficiaries 25
SECTION 11.09. Amendment 25 SECTION 11.10. No Waiver 25 SECTION 11.11. Dispute
Resolution 25 SECTION 11.12. Governing Law 26 SECTION 11.13. Counterparts 26
SECTION 11.14. Waiver of Jury Trial 26 SECTION 11.15. Construction;
Interpretation 26 SECTION 11.16. Specific Performance 26

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EXHIBITS AND SCHEDULES

Exhibit A Form of Investor Rights Agreement Exhibit B Form of Loan Agreement
Exhibit C Form of Patent Sublicense Agreement Exhibit D Form of Development
Agreement Exhibit E Form of Distribution Agreement Exhibit F Form of Certificate
of Designation Exhibit G Form of Opinion of Counsel to the Company

Disclosure Schedule

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                   INVESTMENT AGREEMENT, dated as of July 30, 2003 (the “Signing
Date”), between CORAUTUS GENETICS INC., a Delaware corporation (the “Company”),
and BOSTON SCIENTIFIC CORPORATION, a Delaware corporation (the “Investor”, each
a “Party” and together with the Company, the “Parties”).

                   WHEREAS, the Investor is engaged in the business of
developing, manufacturing and marketing, among other things, biomedical
technology used to treat cardiac and vascular disease;

                   WHEREAS, the Company wishes to pursue the development and
distribution of drugs or products that use VEGF-2 for the treatment of the heart
or peripheral vascular system (the “Products”);

                   WHEREAS, the Investor is willing to subscribe for capital
stock of the Company to provide funding to the Company for purposes of such
development and to acquire an ownership interest in the Company;

                   WHEREAS, on the Closing Date, the Parties are entering into
an Investor Rights Agreement, substantially in the form of Exhibit A, to
provide, among other things, for certain rights of the Investor in connection
with its interest in the Company (the “Investor Rights Agreement”);

                   WHEREAS, the Investor is willing to provide additional
funding to the Company to develop the Products by extending credit to the
Company, upon the terms and subject to the conditions set forth in the Loan
Agreement, substantially in the form of Exhibit B, to be entered into by the
Company and the Investor on the Closing Date (the “Loan Agreement”);

                   WHEREAS, the willingness of the Investor to make an equity
investment in the Company is premised upon, among other matters, an agreement by
the Company to grant, or to cause its wholly-owned subsidiary VGI to grant, to
the Investor an exclusive sublicense under U.S. Patent No. 6,121,246, among
other matters, in accordance with and pursuant to the Company’s rights under the
license agreement between Caritas St. Elizabeth’s Medical Center of Boston,
Inc., formerly St. Elizabeth’s Medical Center of Boston, Inc. (“CSEMC”), and
VGI, dated as of February 10, 1999 (the “CSEMC License”), through the execution
and delivery to the Investor of a sublicense agreement, substantially in the
form of Exhibit C (the “Patent Sublicense Agreement”); and

                   WHEREAS, on the Closing Date, the Company and the Investor
will also be entering into (i) a Development Agreement (the “Development
Agreement”) substantially in the form of Exhibit D, whereby the Company and the
Investor provide for, among other things, development of the Products and (ii) a
Distribution Agreement (the “Distribution Agreement”) substantially in the form
of Exhibit E, pursuant to which, among other things, the Investor shall be the
exclusive worldwide distributor of the Products (this Agreement, the Investor
Rights Agreement, the Loan Agreement, the Development Agreement, the Patent
Sublicense Agreement and the Distribution Agreement are hereinafter collectively
referred to as the “Transaction

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Documents”), all of which are a material consideration in the willingness of the
Investor to provide the funding contemplated by this Agreement;

                   NOW, THEREFORE, in consideration of the premises and the
mutual representations and warranties, agreements and covenants hereinafter set
forth, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

                   SECTION 1.01. Certain Defined Terms.   For purposes of this
Agreement:

                   ”Action” means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.

                   ”AE” means any adverse event (within the meaning of
applicable FDA regulations, and including, without limitation, any unfavorable
and unintended sign (including, without limitation, an abnormal laboratory
finding), exacerbation of a pre-existing condition, intercurrent illness, drug
interaction, significant worsening of a disease under investigation or
treatment, significant failure of expected pharmacological or biological action,
or symptom or disease temporally associated with the use of a drug or other
product of the Company, whether or not considered to be related to such drug or
product), which event is associated with the use of such drug or product (i) in
clinical investigation; or (ii) by a patient once such drug or product has been
approved, whether or not such event is considered to be drug-related.

                   ”Affiliate” means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.

                   ”Agreement” or “this Agreement” means this Agreement and
includes the Exhibits and the Disclosure Schedule, and all amendments hereto
made in accordance with the provisions of Section 11.09.

                   ”Board of Directors” means the board of directors of the
Company.

                   ”Business Day” means any day that is not a Saturday, a Sunday
or any other day on which banks are required or authorized by Law to be closed
in The City of New York.

                   ”Capital Lease Obligation” means any obligation owed by a
Person as lessee under leases that have been or should be, in accordance with
U.S. GAAP, recorded as capital leases.

                   ”Common Stock” means the common stock of the Company, par
value $0.001 per share.

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                   ”Confidential Information” means all nonpublic proprietary
information and materials (whether or not patentable), disclosed by a Disclosing
Party to a Receiving Party, irrespective of the manner in which the Disclosing
Party disclosed such information to the Receiving Party, in furtherance of this
Agreement, including, without limitation, substances, formulations, techniques,
methodologies, equipment, data, reports, correspondence, know-how, manufacturing
documentation, financial information and sources of supply.

                   ”control” (including the terms “controlled by” and “under
common control with”), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly or as trustee,
personal representative or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee, personal representative or executor,
by contract, credit arrangement or otherwise.

                   ”Disclosing Party” means a Party disclosing Confidential
Information.

                   ”Disclosure Schedule” means the Disclosure Schedule attached
hereto, dated as of the date hereof and forming a part of this Agreement.

                   ”Encumbrance” means any security interest, pledge,
hypothecation, mortgage, lien (including, without limitation, environmental and
Tax liens) or other encumbrance.

                   ”ERISA” means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.

                   ”FDA” means the United States Food and Drug Administration.

                   ”Governmental Authority” means any United States or
non-United States federal, national, supranational, state, provincial, local, or
similar government, governmental, regulatory or administrative authority, agency
or commission or any court, tribunal, or judicial or arbitral body.

                   ”Governmental Order” means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.

                   ”Law” means any United States or non-United States federal,
national, supranational, state, provincial, local or similar statute, law,
ordinance, regulation, rule, code, order, requirement or rule of law.

                   ”Material Adverse Effect” means any circumstance, change or
effect that, individually or in the aggregate with all other circumstances,
changes or effects: (a) is or is reasonably likely to be materially adverse to
the business, assets, operations, results of operations, prospects, liabilities
(including, without limitation, contingent liabilities) or the financial
condition of the Company and its Subsidiaries, taken as a whole or (b) is
reasonably likely to materially adversely effect the ability of the Company to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents.

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                   ”Person” means any individual, partnership, firm,
corporation, limited liability company, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.

                   ”Plan” means any (a) employee benefit plans (as defined in
Section 3(3) of ERISA) and all bonus, stock option, stock purchase, restricted
stock, incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary is a party, with respect to
which the Company or any Subsidiary has any obligation, or which is maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of the Company or any
Subsidiary, (b) employee benefit plan for which the Company or any Subsidiary
could incur liability under Section 4069 of ERISA in the event such plan has
been or were to be terminated, or (c) plan in respect of which the Company or
any Subsidiary could incur liability under Section 4212(c) of ERISA.

                   ”Receiving Party” means a Party receiving Confidential
Information.

                   ”Subsidiary” of any Person means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency), (b) the interest in the capital or profits of
such limited liability company, partnership, or joint venture or (c) the
beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

                   ”Tax” or “Taxes” means all income, gross receipts, gains,
sales, use, employment, franchise, profits, excise, property, value added and
other taxes, fees, stamp taxes and duties, assessments or charges of any kind,
together with any interest and penalties, additions to tax or additional amounts
imposed by any taxing authority with respect thereto.

                   ”U.S. GAAP” means United States generally accepted accounting
principles applied on a consistent basis.

                   ”VEGF-2” means the Human Genome Sciences angiogenic agent
licensed to and being further developed and modified by the Company, sometimes
referred to as Vascular Endothelial Growth Factor 2 plasmid DNA, and any
modifications or improvements thereto.

                    ”VGI” means Vascular Genetics Inc., a Delaware corporation.

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                    SECTION 1.02.  Additional Definitions. The following terms
have the meanings set forth in the Sections set forth below:

Definition   Location       “Assets”   3.12  “AMEX”   3.20  “Certificate of
Designation”   2.01(a) “Closing”   2.02(a) “Closing Date”   2.02(a) “Company”  
Preamble “Company Financial Statements”   3.08(b) “Company Indemnified Party”  
8.03  “Company SEC Reports”   3.08(a) “Development Agreement”   Recitals
“Distribution Agreement”   Recitals “Exchange Act”   3.08(a) “Investor”  
Preamble “Investor Indemnified Party”   8.02  “Investor Rights Agreement”  
Recitals “Loan Agreement”   Recitals “Loss”   8.02  “Material Contracts”  
3.11(a) “Notice of Disagreement”   11.11  “Parties”   Preamble “Party”  
Preamble “Patent Sublicense Agreement”   Recitals “Preferred Stock”   3.03 
“Products”   Recitals “Reference Statement Date”   3.08(c) “SEC”   3.08(a)
“Securities Act”   3.08(a) “CSEMC”   Recitals “CSEMC License”   Recitals “Series
D Preferred Stock”   2.01(a) “Signing Date”   Preamble “Threshold Amount”  
8.05  “Transaction Documents”   Recitals

ARTICLE II

EQUITY INVESTMENT; SUBLICENSE

                    SECTION 2.01.  Subscription for Preferred Stock; Patent
Sublicense Agreement. (a) Upon the basis of the representations and warranties
set forth in this Agreement and subject to the terms and conditions set forth
herein, (i) the Investor agrees to subscribe for, and the

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Company agrees to issue and sell to the Investor, 1,385,377 shares of Series D
Convertible Preferred Stock of the Company, par value $0.001 per share (the
“Series D Preferred Stock”), having the designations, rights and preferences set
forth in the Certificate of Designation attached as Exhibit F (the “Certificate
of Designation”), and (ii) VGI shall execute and deliver the Patent Sublicense
Agreement to the Investor.

                    (b)        Consideration. In consideration for the issuance
to the Investor of the shares of Series D Preferred Stock, the Investor shall
pay $9,000,000 (Nine Million Dollars), to the Company at the Closing. In
consideration of the rights to be granted to Investor under the Patent
Sublicense Agreement, the Investor shall pay $1,000,000 (One Million Dollars),
to VGI at the Closing.

                    SECTION 2.02.  The Closing. (a) Subject to the terms and
conditions of this Agreement, the closing of the transactions contemplated by
Section 2.01 of this Agreement shall take place at a closing (the “Closing”) to
be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York,
New York at 10:00 A.M. (New York City time) on the second Business Day following
the satisfaction or waiver of all conditions to the obligations of the parties
set forth in Article VII, or at such other time and place that the Company and
the Investor shall agree (the “Closing Date”).

                    (b)        Closing Deliveries of the Company. At the
Closing, the Company shall deliver or cause to be delivered to the Investor:

            (i)                  the Transaction Documents, duly executed by the
Company or VGI, as appropriate;

            (ii)                 a true and complete copy, certified by the
Secretary of the Company, of the resolutions duly and validly adopted by the
Board of Directors evidencing its authorization of the execution and delivery of
the Transaction Documents, the consummation of the transactions contemplated
thereby and the filing of the Certificate of Designation with the Secretary of
State of the State of Delaware, accompanied by the certification of the
Secretary of the Company as to the names and signatures of the officers of the
Company authorized to sign the Transaction Documents and the other documents to
be delivered thereunder;

            (iii)                 the opinion of the Company’s outside counsel,
dated as of the Closing Date, substantially in the form set forth in Exhibit G;

            (iv)                 a copy of (A) the restated certificate of
incorporation of the Company, as amended, certified by the Secretary of State of
the State of Delaware, as of a date not earlier than three Business Days prior
to the Closing Date and accompanied by a certificate of the Secretary of the
Company, dated as of the Closing Date, stating that no amendments, other than
the filing of the Certificate of Designation, have been made to such restated
certificate of incorporation since such date, and (B) the by-laws of the
Company, certified by the Secretary of the Company;

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            (v)                 a good standing certificate for the Company
issued by the Secretary of State of the State of Delaware, dated as of a date
not earlier than five (5) Business Days prior to the Closing Date;

            (vi)                 certificates evidencing the shares of Series D
Preferred Stock issued and sold by the Company to the Investor pursuant to this
Agreement, duly and properly registered in the name of the Investor (or its
designee);

            (vii)                 the certificate, dated as of the Closing Date,
contemplated by Section 7.01(a);

            (viii)                a receipt for the $9,000,000 paid by the
Investor in consideration of the subscription of shares of Series D Preferred
Stock; and

            (ix)                   a receipt for the $1,000,000 paid by the
Investor in consideration of the Patent Sublicense Agreement.

                    (c)        Closing Deliveries of the Investor. At the
Closing Date, the Investor shall deliver or cause to be delivered to the
Company:

            (i)         the sum of $9,000,000 and $1,000,000, by wire transfer
of immediately available funds to a bank account of the Company and VGI,
respectively, in the United States designated in writing by the Company not less
than two (2) Business Days prior to the Closing Date;

            (ii)         the Transaction Documents, duly executed by the
Investor;

            (iii)        a receipt acknowledging delivery of the certificates
representing shares of Series D Preferred Stock; and

            (iv)        the certificate, dated the Closing Date, contemplated by
Section 7.02(a).

ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF THE COMPANY

                    As an inducement to the Investor to enter into this
Agreement and the other Transaction Documents, the Company hereby represents and
warrants to the Investor as of the date hereof and as of the Closing Date
(except for such representations and warranties as are expressly made as of
another date) as follows (it being understood that for purposes of the
Disclosure Schedule, matters that are disclosed in one Section of the Disclosure
Schedule are considered to be disclosed in another Section of the Disclosure
Schedule to the extent that the Disclosure Schedule contains cross-references
that make the relevance of such information to such other Section reasonably
apparent):

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                    SECTION 3.01.  Organization, Authority and Qualification of
the Company. The Company is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Delaware and has all necessary
corporate power and authority to own, operate or lease the properties and assets
now owned, operated or leased by it and to carry on its business as it has been
and is currently conducted. The Company is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not (a) materially adversely affect the ability of the Company to carry
out its obligations under, and to consummate the transactions contemplated by
this Agreement and the other Transaction Documents or (b) otherwise have a
Material Adverse Effect. True and correct copies of the Company’s restated
certificate of incorporation, and by-laws, each as amended to the date hereof,
are attached hereto as Section 3.01 of the Disclosure Schedule.

                    SECTION 3.02.  Subsidiaries. (a) Other than Urogen
Acquisition Corporation and VGI, there are no other corporations, partnerships,
joint ventures, associations or other entities in which the Company or any
Subsidiary thereof owns, of record or beneficially, any direct or indirect
equity or other interest or any right (contingent or otherwise) to acquire the
same. Neither the Company nor either of its two Subsidiaries is a member of (nor
is any part of their business conducted through) any partnership nor is the
Company or either Subsidiary a participant in any joint venture or similar
arrangement.

                    (b)        Each of the Company’s two Subsidiaries: (i) is
duly organized, validly existing and in good standing under the Laws of the
State of Delaware, (ii) has all necessary power and authority to own, operate or
lease the properties and assets owned, operated or leased by such Subsidiary and
to carry on its business as it has been and is currently conducted by such
Subsidiary and (iii) is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary.

                    (c)        All corporate actions taken by VGI have been duly
authorized, and VGI has not taken any action that in any respect conflicts with,
constitutes a default under or results in a violation of any provision of its
certificate of incorporation or by-laws, excluding any such action that would
not have a Material Adverse Effect. True and complete copies of the certificate
of incorporation and by-laws, in each case as in effect on the date hereof, of
VGI have been delivered by the Company to the Investor.

                    (d)        The minute books of VGI made available to the
Investor are the only minute books of VGI and contain an accurate summary of all
meetings of directors (or committees thereof) and stockholders or actions by
written consent.

                    SECTION 3.03.  Capital Stock of the Company. The authorized
capital stock of the Company consists of 100,000,000 shares of Common Stock and
5,000,000 shares of preferred stock of the Company (“Preferred Stock”) (of which
Preferred Stock there are designated 40,000 shares of Series A Preferred Stock,
13,000 shares of Series B Preferred Stock, 17,000 shares of Series C Preferred
Stock and 1,400,000 shares of Series D Preferred Stock). As of the Signing Date,
(a) 9,871,685 shares of Common Stock are issued and outstanding,

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(b) 2,031,178 shares of Common Stock are reserved for issuance pursuant to
outstanding options granted pursuant to the Company’s 1995 Stock Plan, 1995
Directors Option Plan, 1999 Stock Plan, and 2002 Stock Plan, (c) 565,209 shares
of Common Stock are reserved for issuance upon the exercise of outstanding
warrants in the amounts and at the exercise prices disclosed on Section 3.03 of
the Disclosure Schedule, (d) 2,000 shares of Series C Preferred Stock are issued
and outstanding, and no other shares of Preferred Stock are outstanding, (e)
556,903 shares of Common Stock are reserved for issuance to the former
stockholders of VGI to indemnify such stockholders against certain losses as set
forth in an Agreement and Plan of Reorganization dated September 12, 2002, as
amended, between the Company and VGI, (f) sufficient shares of Common Stock are
reserved for issuance upon the conversion of the Series D Preferred Stock and
the conversion of the notes under the Loan Agreement. No shares of capital stock
of the Company are held in its treasury. All of the outstanding shares of the
Company’s capital stock are duly and validly issued, fully paid and
nonassessable. None of the issued and outstanding shares of capital stock of the
Company was issued in violation of any preemptive rights. Except as set forth in
the first sentence of this Section or in Section 3.03 of the Disclosure
Schedule, there are no options, warrants, subscriptions, calls, convertible
securities or other rights, agreements, arrangements or commitments relating to
the capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or any other equity interest in, the Company. There
are no outstanding contractual obligations of the Company to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person. The shares of Series D Preferred Stock to be issued and sold
pursuant to this Agreement have been duly and validly authorized by the Company,
and, at the Closing, the shares of Series D Preferred Stock will have been duly
and validly issued, fully paid and non-assessable, and the issuance of such
shares shall not be subject to preemptive or other similar rights. The shares of
Common Stock into which the Series D Preferred Stock and notes under the Loan
Agreement are convertible, if and when issued, will be duly and validly issued,
fully paid and non-assessable, and the issuance of such shares shall not subject
to any preemptive or similar rights. There are no voting trusts, stockholder
agreements, proxies or other agreements or understanding in effect with respect
to the voting or transfer of any of the Company’s capital stock, except as
described on Section 3.03 of the Disclosure Schedule. There are no accrued and
unpaid dividends on any capital stock of the Company.

                    SECTION 3.04.  Authority and Qualification of the Company.
(a) The Company has all necessary corporate power and authority to enter into
the Transaction Documents, to carry out its obligations thereunder and to
consummate the transactions contemplated thereby. The execution and delivery by
the Company of the Transaction Documents, the performance by the Company of its
obligations thereunder and the consummation by the Company of the transactions
contemplated thereby have been duly authorized by all requisite action on the
part of the Company. Each Transaction Document has been, or upon its execution
shall be, duly executed and delivered by the Company, and (assuming due
execution and delivery thereof by each other party thereto, if applicable) each
Transaction Document constitutes, or upon its execution shall constitute, the
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, subject to (i) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
Laws relating to or affecting creditors’ rights and remedies generally, and (ii)
the effect of general equitable principles, regardless of whether asserted in a
proceeding in equity or at law.

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                    (b)        All corporate actions taken by the Company have
been duly authorized, and the Company has not taken any action that in any
respect conflicts with, constitutes a default under or results in a violation of
any provision of its restated certificate of incorporation or by-laws, excluding
any such action that would not have a Material Adverse Effect.

                    (c)        The minute books of the Company made available to
the Investor are the only minute books of the Company and contain an accurate
summary of all meetings of the Board of Directors (or committees thereof) and
stockholders or actions by written consent.

                    SECTION 3.05.   No Conflict. Except as provided in Section
3.05 of the Disclosure Schedule, the execution, delivery and performance by the
Company of the Transaction Documents does not (a) violate, conflict with or
result in the breach of any provision of its restated certificate of
incorporation or by-laws, (b) conflict with or violate any Law or Governmental
Order applicable to the Company, or any of its assets, properties or businesses,
or (c) conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation of,
or result in the creation of any Encumbrance on any of the properties as assets
of the Company pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Company is a party or by which any of assets or
properties is bound or affected, except, with respect to clause (c), for any
such conflicts, violations, breaches, defaults or other occurrences that have
not had, and would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect.

                    SECTION 3.06.   Governmental Consents and Approvals. The
execution, delivery and performance of the Transaction Documents by the Company
does not require any consent, approval, authorization or other order of, action
by, filing with or notification to, any Governmental Authority other than (a)
any approval of, filing with or notification to the American Stock Exchange, (b)
the filing of the Certificate of Designation with the Secretary of State of
Delaware, (c) such registrations, filings and authorizations as may be required
under federal securities laws, and (d) the regulatory approvals contemplated by
the Development Agreement and Distribution Agreement in connection with clinical
trials and commercialization of the Products and the Injection Catheters (as
defined in such agreements).

                    SECTION 3.07.   Absence of Certain Changes or Events;
Conduct in Ordinary Course. Except as set forth in Section 3.07 of the
Disclosure Schedule, since the Reference Statement Date, the business of the
Company has been conducted in the ordinary course, in a manner consistent with
past practices and there has been no Material Adverse Effect.

                    SECTION 3.08.   SEC Filings; Financial Statements.  (a)  The
Company has filed all forms, reports and documents required to be filed by it
with the Securities and Exchange Commission (the “SEC”). The Company heretofore
has delivered to Investor, in the form filed with the SEC, (i) its Annual Report
on Form 10-K for the fiscal year ended December 31, 2002, (ii) its Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2003, (iii) all
proxy statements relating to the Company’s meetings of stockholders (whether
annual or special) held since January 1, 2003 and (iv) all other forms, reports
and other registration statements

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(other than Quarterly Reports on Form 10-Q not referred to in clause (ii) above)
filed by the Company with the SEC since January 1, 2003 (the forms, reports and
other documents referred to in clauses (i), (ii), (iii) and (iv) above being,
collectively, the “Company SEC Reports”). As of their respective filings dates,
the Company SEC Reports (x) were prepared in accordance with either the
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the
case may be, and the rules and regulations promulgated thereunder, and (y) did
not, at the time they were filed, or, if amended, as of the date of such
amendment, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary of the Company is required to file any form,
report or other document with the SEC.

                    (b)       Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Company SEC
Reports (the “Company Financial Statements”) was prepared in accordance with
U.S. GAAP applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in
all material respects, the consolidated financial position, results of
operations and cash flows of the Company and its consolidated Subsidiaries as at
the respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which would not have had, and would not have, a Material Adverse
Effect). The Company maintains systems of internal accounting controls that are,
in all material respects, typical for companies of its size and in its industry
and sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with U.S. GAAP and to maintain asset accountability,
(iii) access to its assets is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for its
assets is compared with its existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Except as
specifically disclosed in the notes to the Company Financial Statements, there
are no material special or non-recurring items of income or expense during the
periods covered by the Company Financial Statements and the balance sheets
included in the Company Financial Statements do not reflect any writeup or
revaluation increasing the book value of any assets.

                    (c)        Except as and to the extent set forth on the
consolidated balance sheet of the Company and the consolidated Subsidiaries as
of March 31, 2003, including the notes thereto (the “Reference Statement Date”)
or in Section 3.08(c) of the Disclosure Schedule, neither the Company nor any
Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice which
have not had and would not reasonably be expected to have a Material Adverse
Effect.

                    (d)        As of the date of this Agreement, the Company has
heretofore furnished to the Investor complete and correct copies of (i) all
agreements, documents and other instruments not yet filed by the Company with
the SEC but that are currently in effect and that the Company expects to file
with the SEC after the date of this Agreement and (ii) all amendments and

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modifications that have not been filed by the Company with the SEC to all
agreements, documents and other instruments that previously had been filed by
the Company with the SEC and are currently in effect.

                    SECTION 3.09.  Litigation.   Except as set forth on Section
3.09 of the Disclosure Schedule, there is no Action pending (or, to the
knowledge of the Company, threatened) by or against the Company or either of its
two Subsidiaries. Neither the Company nor either of its two Subsidiaries is
subject to any Governmental Order (nor, to the knowledge of the Company, are
there any Governmental Orders threatened to be imposed by any Governmental
Authority) which has resulted or would reasonably be expected to have a Material
Adverse Effect.

                    SECTION 3.10.  Compliance with Laws.   Except as set forth
in Section 3.10 of the Disclosure Schedule and except as would not reasonably be
expected to have a Material Adverse Effect, (a) the Company and its Subsidiaries
have conducted and continue to conduct their business in all respects in
accordance with all Laws and Governmental Orders applicable to the Company and
such Subsidiaries, and (b) neither the Company nor any Subsidiary is in
violation of any such Law or Governmental Order.

                    SECTION 3.11.  Material Contracts.  (a)  Section 3.11(a) of
the Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral agreements) of the Company (such contracts
and agreements, together with all contracts, agreements, leases and subleases
concerning the use, occupancy, management or operation of any leased real
property listed in Section 3.12(b) of the Disclosure Schedule being “Material
Contracts”):

            (i)         each contract, agreement, invoice, purchase order and
other arrangement for the purchase or lease of personal property, with any
supplier or for the furnishing of services to the Company under the terms of
which the Company (A) is likely to pay or otherwise give consideration of more
than $150,000 in the aggregate during the calendar year ended December 31, 2003,
or (B) is likely to pay or otherwise give consideration of more than $200,000 in
the aggregate over the remaining term of such contract;

            (ii)         all contracts with clinical investigators or clinical
sites;

            (iii)        all distributor, agency, sales promotion, market
research and development agreements to which the Company is a party;

            (iv)        each contract, agreement, invoice, sales order and other
arrangement, for the sale of personal property or for the furnishing of services
by the Company which (A) is likely to involve consideration of more than $50,000
in the aggregate during the calendar year ended December 31, 2003, or (B) is
likely to involve consideration of more than $100,000 in the aggregate over the
remaining term of the contract;

            (v)        all contracts and agreements under which the Company has
incurred, or has agreed to incur, indebtedness or Capital Lease Obligations of
more than $100,000;

            (vi)        all contracts and agreements with any Governmental
Authority;

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            (vii)         all contracts and agreements that limit or purport to
limit the ability of the Company to compete in any line of business or with any
Person or in any geographic area or during any period of time;

            (viii)        all warrant agreements, and all other contracts and
agreements between or among the Company and any holder of more than five percent
(5%) of the Common Stock of the Company;

            (ix)        any agreement providing for the guarantee by the Company
or either of its Subsidiaries;

            (x)        any licenses of intellectual property to or from any
Person, except for any commercial off-the-shelf software license, label
licenses, “shrink wrap” or “click through” licenses or any other similar
publicly available end user license agreements; or

            (xi)         any agreement containing registration rights with
respect to any of its securities or pursuant to which the Company may be
obligated to register any securities.

                    (b)        Except as set forth in Section 3.11(b) of the
Disclosure Schedule, (i) the Company is not in breach of, or default under, any
Material Contract, (ii) to the knowledge of the Company no other party to any
Material Contract is in breach thereof or default thereunder, and (iii) the
Company has not received any notice of termination, cancellation, breach or
default under any Material Contract.

                    (c)        The Company has made available to the Investor
true and complete copies of all written Material Contracts.

                    SECTION 3.12.  Assets.   (a)   Except as disclosed in
Section 3.12(a) of the Disclosure Schedule, the Company (directly or through its
subsidiary VGI) owns, lease or has the legal right to use all the properties and
assets used or intended to be used in the conduct of the business of the Company
or otherwise owned, leased or used by the Company (collectively, the “Assets”).

                    (b)        Attached on Section 3.12(b) of the Disclosure
Schedule is a list of all leases (other than personal property leases for which
the Company is obligated to pay less than $20,000 in the calendar year ended
December 31, 2003 and likely to pay less than $20,000 in each subsequent
calendar year) to which the Company or either of its Subsidiaries is bound.

                    (c)        The Assets, together with the leases referred to
on Section 3.12(b) of the Disclosure Schedule, constitute all the properties,
assets and rights forming a part of, used or held in, and all such properties,
assets and rights as are necessary in the conduct of, the business of the
Company.

                    SECTION 3.13.  Brokers.  Except as provided in Section 3.13
of the Disclosure Schedule, no broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by the Transaction Documents based upon arrangements
made by or on behalf of the Company.

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                    SECTION 3.14.  Employment and Benefits Matters.  (a)  None
of the Plans is subject to Title IV of ERISA or Section 412 of the Code, nor
does the Company or any Subsidiary contribute to any “multiemployer plan” as
defined in Section 3(37) of ERISA. The Company has performed all material
obligations required to be performed by it under, is not in any material respect
in default under or in material violation of, and has no knowledge of any
material default or violation by any party to, any Plan.

                    (b)        Except as set forth on Section 3.14(b) of the
Disclosure Schedule, all directors, officers, management employees, technical
and professional employees and consultants of the Company are under written
obligation to the Company to maintain in confidence all confidential or
proprietary information acquired by them in the course of their employment and
to assign to the Company all inventions made by them within the scope of their
employment during such employment and for a reasonable period (as determined by
the Board of Directors in good faith) thereafter.

                    SECTION 3.15.  Insurance.  Section 3.15 of the Disclosure
Schedule sets forth, with respect to each insurance policy under which the
Company or any Subsidiary has been an insured, a named insured or otherwise the
principal beneficiary of coverage at any time within the past three years, the
following information, in each case as of the date of this Agreement: (a) the
names of the insurer, the principal insured and each named insured, (b) the
policy number, (c) the period, scope and amount of coverage and (d) the premium
charged. All material insurable risks of the Company and its Subsidiaries in
respect of the businesses of each are covered by such insurance policies, and
the types and amounts of coverage provided therein are usual and customary when
compared to those of other companies of substantially similar size in the
context of the businesses and operations in which the Company and the
Subsidiaries are engaged.

                    SECTION 3.16.  Regulatory Compliance.   Each product or drug
related to VEGF-2 that is tested or created by the Company is being tested or
created in compliance with all material requirements of applicable Law. As of
the date of this Agreement, the Company is not testing anything other than
VEGF-2 or products or drugs related thereto. Except as disclosed in Section 3.16
of the Disclosure Schedule, the Company has not received any notice from the FDA
or any other Governmental Authority alleging any violation by the Company of any
Law relating to VEGF-2. Except as disclosed in Section 3.16 of the Disclosure
Schedule, the Company has not received any written notice that the FDA or any
other Governmental Authority has threatened to investigate or suspend any
research activities, pre-clinical programs or clinical trials being conducted by
the Company relating to VEGF-2.

                    SECTION 3.17.  Absence of Undisclosed Liabilities.   There
are no liabilities of the Company or either of its Subsidiaries of any nature
(whether absolute, accrued, contingent or otherwise) other than (a) those
liabilities reflected or reserved against on the March 31, 2003 balance sheet
that is set forth in the Company SEC Reports, including the notes thereto, (b)
those liabilities set forth in Section 3.17 of the Disclosure Schedule and (c)
liabilities which would not reasonably be expected to have a Material Adverse
Effect.

                    SECTION 3.18.  Full Disclosure.  No representation or
warranty of the Company in this Agreement, nor any statement or certificate
furnished or to be furnished by the Company

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to the Investor pursuant to this Agreement, or in connection with the
transactions contemplated thereby, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. The Company is not aware of any
facts pertaining to the Company, its Subsidiaries or their business which would
reasonably be expected to materially affect adversely any of them and which have
not been disclosed in this Agreement, the Disclosure Schedule or the Company
Financial Statements or otherwise disclosed to the Investor by the Company in
writing.

                    SECTION 3.19.   Clinical Trials; Product Data. (a)   Except
as disclosed in Section 3.19 of the Disclosure Schedule, the Company has
provided the Investor with all protocols for all clinical studies that the
Company has sponsored with respect to VEGF-2 and has made available to the
Investor all summary data material to clinical studies generated in the course
of such clinical studies. The Company has notified the Investor of all AE’s, of
which Company is aware, in connection with such clinical studies of VEGF-2 and
has made available to the Investor the results of its investigation thereof. To
the Company’s knowledge, the clinical sites and clinical investigations for
VEGF-2 have abided by the protocols of all clinical sites that the Company has
sponsored. To the Company’s knowledge, no participant has withdrawn from any
such clinical studies of VEGF-2, and the Company has not been advised that any
clinical investigation or clinical site wishes to withdraw from any such
clinical study. The information provided by the Company to the Investor
concerning the Products accurately reflects, in all material respects, their
specifications and characteristics.

                    (b)         Except as set forth in Section 3.19 of the
Disclosure Schedule, the clinical, pre-clinical, safety and other studies and
tests conducted by or on behalf of or sponsored by the Company or its agents or
in which the Company’s product candidates under development have participated,
were and, if still pending, are, to the Company’s knowledge, being conducted in
accordance with medical and scientific research procedures. The Company and, to
the Company’s knowledge, its agents have operated within, and currently are in
compliance with, all applicable rules, regulations and policies of the FDA and
other applicable foreign authorities. Except as set forth in Section 3.19 of the
Disclosure Schedule, neither the Company nor, to the Company’s knowledge, its
agents have received any notices or other correspondence from the FDA, other
foreign authority, or any other governmental entity requiring the termination,
suspension, or modification of any clinical, pre-clinical, safety or other
studies or tests.

                    SECTION 3.20.   American Stock Exchange.   Except as
disclosed in Section 3.20 of the Disclosure Schedule, the Company represents
that it is in compliance with all the applicable requirements of the rules and
regulations of the American Stock Exchange (“AMEX”). Attached as Section 3.20 of
the Disclosure Schedule are copies of all correspondence between the Company and
AMEX in the last twelve months.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR

                    The Investor hereby represents and warrants to the Company
as follows:

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                    SECTION 4.01.   Organization and Authority of the
Investor.  The Investor is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware and has all necessary
corporate power and authority to enter into the Transaction Documents, to carry
out its obligations thereunder and to consummate the transactions contemplated
thereby. The execution and delivery by the Investor of the Transaction
Documents, the performance by the Investor of its obligations thereunder and the
consummation by the Investor of the transactions contemplated thereby have been
duly authorized by all requisite corporate action on the part of the Investor.
Each Transaction Document has been, or upon its execution shall be, duly
executed and delivered by the Investor, and (assuming due execution and delivery
thereof by each other party thereto, if applicable) each Transaction Document
constitutes, or upon its execution, shall constitute, the legal, valid and
binding obligations of the Investor, enforceable against the Investor in
accordance with its terms, subject to (a) the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar Laws
relating to or affecting creditors’ rights and remedies generally, and (b) the
effect of general equitable principles, regardless of whether asserted in a
proceeding in equity or at law.

                    SECTION 4.02.    No Conflict.  The execution, delivery and
performance by the Investor of the Transaction Documents do not (a) violate,
conflict with or result in the breach of any provision of the certificate of
incorporation or the by-laws of the Investor, (b) conflict with or violate any
Law or Governmental Order applicable to the Investor or any of its assets,
properties or businesses or (c) conflict with, or result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Investor is a party, which, in the case of this clause
(c), would adversely affect the ability of the Investor to carry out its
obligations under, and to consummate the transactions contemplated by, the
Transaction Documents.

                    SECTION 4.03.    Governmental Consents and Approvals.  The
execution, delivery and performance by the Investor of the Transaction Documents
does not require any consent, approval, authorization or other order of, action
by, filing with, or notification to any Governmental Authority other than the
regulatory approvals contemplated by the Development Agreement and Distribution
Agreement in connection with clinical trials and commercialization of the
Products and the Injection Catheters (as defined in such agreements).

                    SECTION 4.04.   Brokers.   No broker, finder or investment
banker is entitled to any brokerage, finder’s or other fee or commission in
connection with the transactions contemplated by the Transaction Documents based
upon arrangements made by or on behalf of the Investor.

                    SECTION 4.05.   Investment Intent.  The Investor is
acquiring the Series D Preferred Stock of the Company for its own account solely
for the purpose of investment and not as a nominee or agent and not with a view
to, or for offer or sale in connection with, any distribution thereof.

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                    SECTION 4.06.   Legends.  The Investor understands that,
until such time as the Series D Preferred Stock and the Common Stock into which
it is convertible may be sold under an effective registration statement under
the Securities Act, or an exemption under the Securities Act and applicable
state securities Laws, the Series D Preferred Stock and the Common Stock into
which it is convertible will bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for such securities):

              “The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”),
or under the securities Laws of any other jurisdiction. These securities have
been acquired for investment and not with a view to, or in connection with, the
distribution thereof. The securities may not be offered, sold, pledged,
transferred or assigned in the absence of an effective registration statement
for the securities under the Securities Act and applicable state securities
Laws, unless sold pursuant to an exemption under the Securities Act and
applicable state securities Laws.”

ARTICLE V

COVENANTS AND AGREEMENTS

                    SECTION 5.01.   Conduct of Business.  As and from the date
hereof until the earlier of the Closing Date and the date that this Agreement is
terminated in accordance with its terms, the Company shall refrain from taking
any action that would be inconsistent with the Certificate of Designation or the
Investor Rights Agreement were such agreements in effect on the date hereof.

                    SECTION 5.02.   Governmental Proceedings.  Each of the
Parties shall promptly advise the other of the existence of the commencement of
any Action or the existence of any Governmental Order, in each case of which
such Party is or becomes aware, which Action would reasonably be expected to
affect the legality, validity or enforceability of this Agreement or any other
Transaction Document or the consummation of any of the transactions contemplated
by this Agreement or thereby.

                    SECTION 5.03.   Listing.  The Company shall use its
reasonable best efforts to obtain approval for the listing on the AMEX (or such
other national securities exchange as the Common Stock may be listed) of Common
Stock into which the Series D Preferred Stock and the notes issued under the
Loan Agreement are convertible, and the Company shall cooperate with the
Investor with respect to such listing.

                    SECTION 5.04.   Insurance.  Within 60 days after Closing,
the Company shall obtain comprehensive general liability insurance, including
products liability, with a minimum liability coverage limit of ten million
dollars ($10,000,000) per occurrence, naming the Investor as an additional
insured and shall provide the Investor with a copy of a certificate of insurance
evidencing compliance with this Section. Such certificate of insurance shall
also provide the Investor with thirty (30) days’ prior written notice of
cancellation, modification or termination.

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ARTICLE VI

USE OF PROCEEDS

                    SECTION 6.01.   CSEMC License.  (a)  In consideration of the
$1,000,000 to be paid by Investor at the Closing for the Patent Sublicense
Agreement, so long as the Investor and its Sublicensees (as defined in the
Patent Sublicense Agreement) remain in material compliance with the terms of the
Patent Sublicense Agreement and the Sublicensees’ respective sublicense
agreements, as applicable, the Company shall use its best efforts to keep the
CSEMC License in full force and effect and shall apply a portion of such
consideration towards such purpose as necessary or appropriate.

                    (b)         Research and Development.  The Company shall
apply the $9,000,000 to be paid at Closing for the subscription of Series D
Preferred Stock and all proceeds from the notes issued under the Loan Agreement,
toward the performance of its obligations under the Development Agreement and
the Distribution Agreement, to obtain the insurance contemplated by Section 5.04
and for general corporate purposes.

ARTICLE VII

CONDITIONS PRECEDENT

                    SECTION 7.01.   Conditions to the Investor’s
Obligations.  The obligations of the Investor to consummate the transactions
contemplated by Article II are subject to the satisfaction, or waiver by the
Investor, on the Closing Date, of each of the following conditions:

            (a)         Representations and Warranties; Covenants and
Agreements.  The representations and warranties of the Company contained in this
Agreement shall have been true and correct in all material respects when made
and shall be true and correct in all material respects as of the Closing with
the same force and effect as if made as of the Closing, other than such
representations and warranties as are made as of another date, which shall be
true and correct in all material respects as of such date (provided, however,
that if any portion of any representation or warranty is already qualified by
materiality, for purposes of determining whether this Section 7.01(a) has been
satisfied with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true and
correct in all respects), and the covenants and agreements contained in this
Agreement to be complied with by the Company on or before the Closing shall have
been complied with in all material respects, and the Investor shall have
received a certificate of the Company to such effect signed by a duly authorized
officer thereof;

            (b)          No Proceedings.  No Governmental Order shall be in
effect, and no Action shall be pending, in each case against the Company or the
Investor, seeking to restrain the consummation of the transactions contemplated
by the Transaction Documents;

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            (c)          No Insolvency Event.  Neither the Company nor either of
its Subsidiaries has made a general assignment for the benefit of creditors, nor
has any proceeding been instituted by or against the Company, the Company or any
Subsidiary seeking to adjudicate any of them a bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment, protection,
relief or composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; and

            (d)          Consents.  The Company shall have received all consents
referred to in Section 3.06.

                    SECTION 7.02.    Conditions to the Company’s
Obligations.  The obligations of the Company to consummate the transactions
contemplated by Article II are subject to the satisfaction, or waiver by the
Company, on the Closing Date, of each of the following conditions:

            (a)          Representations and Warranties; Covenants and
Agreements.  The representations and warranties of the Investor contained in
this Agreement shall have been true and correct in all material respects when
made and shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing Date, other than
such representations and warranties as are made as of another date, which shall
be true and correct in all material respects as of such date (provided, however,
that if any portion of any representation or warranty is already qualified by
materiality, for purposes of determining whether this Section 7.02(a) has been
satisfied with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true and
correct in all respects), and the covenants and agreements contained in this
Agreement to be complied with by the Investor on or before the Closing shall
have been complied with in all material respects, and the Company shall have
received a certificate from the Investor to such effect signed by a duly
authorized officer thereof; and

            (b)          No Proceedings.  No Governmental Order shall be in
effect, and no Action shall be pending, in each case against the Company or the
Investor, seeking to restrain the consummation of the transactions contemplated
by the Transaction Documents.

ARTICLE VIII

INDEMNIFICATION

                    SECTION 8.01.   Survival of Representations, Warranties and
Indemnities.  (a)  Unless this Agreement is earlier terminated pursuant to
Article IX, the representations, warranties and indemnities of the Company
contained in this Agreement shall survive the Closing Date and remain in full
force and effect until the second anniversary of the Closing Date; provided,
however, that Sections 3.03 and 3.13 shall survive indefinitely. Neither the
period of survival nor the liability of the Company with respect to its
representations, warranties and indemnities shall be reduced by any
investigation made at any time by or on behalf of the Investor. If written
notice of a claim has been given prior to the expiration of the applicable
representations, warranties and indemnities by the Investor to the Company, then
the relevant

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representations, warranties and indemnities shall survive as to such claim,
until such claim has been finally resolved.

                    (b)         Unless this Agreement is earlier terminated
pursuant to Article IX, the representations, warranties and indemnities of the
Investor contained in this Agreement shall survive the Closing Date and remain
in full force and effect until the second anniversary thereof; provided,
however, that Section 4.04 shall survive indefinitely. Neither the period of
survival nor the liability of the Investor with respect to the Investor’s
representations, warranties and indemnities shall be reduced by any
investigation made at any time by or on behalf of the Company.

                    SECTION 8.02.   Indemnification by the Company. The Investor
and its Affiliates, officers, directors, employees, agents, successors and
assigns (each, an “Investor Indemnified Party”) shall be indemnified and held
harmless by the Company for and against any and all liabilities, losses,
damages, claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable attorneys’ and consultants’ fees and
expenses) actually suffered or incurred by them (including, without limitation,
any Action brought or otherwise initiated by any of them) (hereinafter a
“Loss”), arising out of or resulting from the breach of any representation or
warranty, covenant or agreement made by the Company contained in this Agreement.
To the extent that the undertakings of the Company set forth in this
Section 8.02 may be unenforceable, the Company shall contribute the maximum
amount that it is permitted to contribute under applicable Law to the payment
and satisfaction of all Losses incurred by the Investor Indemnified Parties.

                    SECTION 8.03.  Indemnification by the Investor. The Company
and its Affiliates, officers, directors, employees, agents, successors and
assigns (each a “Company Indemnified Party”) shall be indemnified and held
harmless by the Investor for and against any and all Losses arising out of or
resulting from the breach of any representation or warranty, covenant or
agreement made by the Investor contained in this Agreement. To the extent that
the Investor’s undertakings set forth in this Section 8.03 may be unenforceable,
the Investor shall contribute the maximum amount that it is permitted to
contribute under applicable Law to the payment and satisfaction of all Losses
incurred by the Company Indemnified Parties.

                    SECTION 8.04.  Treatment for Tax Purposes. To the extent
permitted by Law, the Parties agree, solely for Tax purposes, to treat all
payments made under this Article VIII, under any other indemnity provision
contained in this Agreement, and for any misrepresentations or breach of
warranties or covenants, as adjustments to the consideration paid by the
Investor under Article II for all Tax purposes, except to the extent the Law of
a particular jurisdiction provides otherwise.

                    SECTION 8.05.  Limitations on Indemnification. The
indemnification obligations of the Company and the Investor for breach of
representation or warranty pursuant to Section 8.02 and Section 8.03,
respectively, shall not be effective unless the aggregate dollar amount of all
Losses that would otherwise be indemnifiable pursuant thereto exceeds $1,000,000
(“Threshold Amount”), at which time the indemnification obligations shall be
effective as to all Losses, including the Threshold Amount; provided, however,
that the Threshold Amount shall not apply to any Losses arising out of or
relating to Section 3.03. The indemnification

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obligations of the Company and the Investor pursuant to Section 8.02 and 8.03,
respectively, shall be effective only until the dollar amount paid in respect of
Losses under such Section aggregates to $10,000,000 and no indemnification
pursuant to such provisions shall be payable thereafter.

ARTICLE IX

TERMINATION

                    SECTION 9.01.   Termination.  This Agreement may be
terminated at any time prior to the Closing:

            (a)         by either the Company or the Investor if the Closing
shall not have occurred by August 1, 2003; provided, however, that the right to
terminate this Agreement under this Section 9.01(a) shall not be available to
any party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the Closing to
occur on or prior to such date;                 (b)         by either the
Investor or the Company in the event that any Governmental Authority shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable; or                 (c)         by the mutual written consent
of the Company and the Investor.

                    SECTION 9.02.  Effect of Termination.  In the event of
termination of this Agreement as provided in Section 9.01, all further
obligations of the Parties under this Agreement shall terminate, except for
those set forth in Articles VIII, IX, X and XI (other than Section 11.01) and
that nothing herein shall relieve either party from liability for any breach of
this Agreement.

ARTICLE X

CONFIDENTIALITY

                    SECTION 10.01.  Confidentiality.  The Receiving Party shall
maintain Confidential Information in confidence, and shall not disclose, divulge
or otherwise communicate such Confidential Information to others, or use it for
any purpose, except pursuant to, and in order to carry out, the terms and
objectives of this Agreement. The Receiving Party hereby shall exercise every
reasonable precaution to prevent and restrain the unauthorized disclosure of
such Confidential Information by any of its directors, officers, employees,
consultants, subcontractors, or agents. Upon termination of this Agreement, or
as soon as practicable following the Closing, each Party hereby shall return to
the other Party, upon demand, all Confidential Information in its possession or,
upon demand, to destroy such

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Confidential Information and provide a certificate to the other Party of such
destruction signed by an officer of the destroying Party.

                    SECTION 10.02.   Release from Restrictions.  The provisions
of Section 10.01 shall not apply to any information disclosed hereunder that:

            (a)         is lawfully disclosed to the Receiving Party by an
independent, unaffiliated third party rightfully in possession of the
Confidential Information and under no confidentiality or fiduciary obligation
not to make disclosure;                 (b)         becomes published or
generally known to the public through no fault or omission on the part of the
Receiving Party;                 (c)         is developed independently by the
Receiving Party without access to the Confidential Information of the Disclosing
Party;                 (d)         is legally required to be disclosed to the
FDA; provided, however, the Receiving Party shall continue to treat such
information as confidential pursuant to Section 10.01 unless and until such
information becomes published or generally known to the public through no fault
or omission on the part of the Receiving Party; or                 (e)         a
Party is legally compelled to disclose; provided, however, that the Receiving
Party shall provide prompt written notice of such requirement to the Disclosing
Party so that the Disclosing Party may seek a protective order or other remedy
or waive compliance with Section 10.01; and provided further that if such
protective order or other remedy is not obtained or the Disclosing Party waives
compliance with Section 10.01, the Receiving Party shall be permitted to furnish
only that portion of such Confidential Information that is legally required to
be provided and the Receiving Party shall exercise its reasonable best efforts
to obtain assurances that confidential treatment shall be accorded such
information.

                   SECTION 10.03.   Public Announcements and
Publications.  Except as required by Law or by the requirements of any
securities exchange on which the securities of a Party hereto are listed, no
Party to this Agreement shall make, or cause to be made, any press release or
public announcement in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media in respect of
this Agreement or the transactions contemplated hereby without the prior written
consent of the other Party. The Parties shall cooperate as to the timing and
contents of any such press release or public announcement.

ARTICLE XI

GENERAL PROVISIONS

                    SECTION 11.01.  Further Action.  Each of the Parties shall
use commercially reasonable efforts to take, or cause to be taken, all
appropriate action, do or cause to be done all things necessary, proper or
advisable under applicable Law, and to execute and deliver such

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documents and other papers, as may be required to carry out the provisions of
this Agreement and consummate and make effective the transactions contemplated
hereby.

                    SECTION 11.02.  Expenses.  Except as otherwise specified in
this Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the Party incurring such costs and expenses.

                    SECTION 11.03.  Notices.  All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
given or made by delivery in person, by an internationally recognized overnight
courier service, by telecopy or registered or certified mail (postage prepaid,
return receipt requested) to the respective Parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 11.03):

(a) if to the Company:           Corautus Genetics Inc.     430 Tenth Street, NW
    Suite S-204     Atlanta, GA 30318     Telecopy:  (404) 526-6218    
Attention:  Chief Executive Officer           with a copy to:           McKenna
Long & Aldridge LLP     303 Peachtree Street, Suite 5300     Atlanta, GA 30308  
  Telecopy:  (404) 527-4198     Attention:  Robert E. Tritt         (b) if to
the Investor:           Boston Scientific Corporation     One Boston Scientific
Place     Natick, MA 01760-1537     Telecopy:  (508) 650 8956    
Attention:  General Counsel           with a copy to:           Shearman &
Sterling     599 Lexington Ave.     New York, New York 10022-6069    
Telecopy:  (212) 848-7179     Attention:  Clare O’Brien, Esq.  

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                    Any notice, if mailed and properly addressed with postage
prepaid or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if transmitted by facsimile, shall be
deemed given when the confirmation of transmission thereof is received by the
transmitter.

                    SECTION 11.04.  Interpretation and Rules of
Construction.  In this Agreement, except to the extent that the context
otherwise requires:

            (a)         when a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference is to an Article or
Section of, or a Schedule to, this Agreement unless otherwise indicated;

            (b)         the table of contents and headings in this Agreement are
for reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement;

            (c)         whenever the words “include”, “includes” or “including”
are used in this Agreement, they are deemed to be followed by the words “without
limitation”;

            (d)         the words “hereof”, “herein” and “hereunder” and words
of similar import, when used in this Agreement, refer to this Agreement as a
whole and not to any particular provision of this Agreement;

            (e)         all terms defined in this Agreement have such defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise defined therein;                 (f)        
the definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms;

            (g)         any Law defined or referred to herein or in any
agreement or instrument that is referred to herein means such Law or statute as
from time to time amended, modified or supplemented, including by succession of
comparable successor Laws;

            (h)         references to a Person are also to its permitted
successors and assigns;

            (i)         the use of “or” is not intended to be exclusive unless
expressly indicated otherwise; and

            (j)         all references to currency, monetary values and dollars
shall mean United States (U.S.) dollars and all payments hereunder shall be made
in United States dollars.

                    SECTION 11.05.  Severability.  If any term or other
provision of this Agreement is invalid, illegal or incapable of being enforced
by any Law or public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect for so long as the economic
or legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good

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faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner in order that the
transactions contemplated by this Agreement are consummated as originally
contemplated to the greatest extent possible.

                    SECTION   11.06.  Entire Agreement.  The Transaction
Documents constitute the entire agreement of the Parties with respect to the
subject matter thereof and supersede all prior agreements and undertakings, both
written and oral, among the Parties with respect to the subject matter hereof
and thereof.

                    SECTION   11.07.   Assignment.  This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns. Neither Party may assign this Agreement
without the prior written consent of the other Party. No assignment by either
Party permitted hereunder shall relieve the applicable Party of its
then-existing obligations under this Agreement.

                    SECTION   11.08.   No Third Party Beneficiaries.  This
Agreement shall be binding upon and inure solely to the benefit of the Parties
and their permitted assigns and nothing herein, express or implied, is intended
to or shall confer upon any other Person any legal or equitable right, benefit
or remedy of any nature whatsoever.

                    SECTION   11.09.   Amendment.  This Agreement may not be
amended or modified except by an instrument in writing signed by authorized
representatives of the Company and the Investor.

                    SECTION   11.10.   No Waiver.  The delay or failure of
either Party to enforce at any time for any period the provisions of or any
rights deriving from this Agreement shall not be construed to be a waiver of
such provisions or rights or the right of such Party thereafter to enforce such
provisions.

                    SECTION   11.11.   Dispute Resolution.  Except to the
limited extent necessary to (i) avoid expiration of a claim, (ii) comply with
deadlines under applicable Law, or (iii) obtain interim relief, including
injunctive relief, to preserve the status quo or prevent irreparable harm,
neither Party shall file an action or institute legal proceedings with respect
to any dispute, controversy, or claim arising out of this Agreement or the
validity, interpretation, breach or termination thereof, including claims
seeking redress or asserting rights under any Law, until:

                    (a)         the aggrieved Party has given the other Party
written notice (“Notice of Disagreement”), in accordance with Section 11.03 of
this Agreement, of its grievance setting forth the basis for such dispute and
the remedy desired;

                    (b)         the other Party has failed to provide a prompt
and effective remedy (in the view of the aggrieved Party);

                    (c)         the aggrieved Party has requested in writing
senior executives for both Parties to promptly meet and discuss the matter
detailed in the Notice of Disagreement in order to consider informal and
amicable means of resolution; and

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                    (d)         (i) the senior executives for both Parties have
met at least three times and have not been able to resolve the dispute to the
mutual satisfaction of the Parties or (ii) more than sixty (60) Business Days
have passed since the date of the Notice of Disagreement.

                    SECTION   11.12.   Governing Law.  This Agreement shall be
governed by, and construed in accordance with, the Laws of the State of New
York. The Parties unconditionally and irrevocably agree and consent to the
exclusive jurisdiction of the federal and state courts located in the Borough of
Manhattan, State of New York and waive any objection with respect thereto, for
the purpose of any action, suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, and further agree not to
commence any such action, suit or proceeding except in any such court.

                    SECTION   11.13.   Counterparts.  This Agreement may be
executed and delivered (including by facsimile transmission) in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile shall be
effective as delivery of a manually executed counterpart of this Agreement.

                    SECTION   11.14.   Waiver of Jury Trial.  Each of the
Company and the Investor hereby knowingly, voluntarily and irrevocably waives
all right to trial by jury in any action, proceeding or counterclaim (whether
based on contract, tort or otherwise) arising out of or relating to this
Agreement or any course of conduct, course of dealing or statements (whether
oral or written) or actions of the Company or the Investor in the negotiation,
administration, performance or enforcement thereof.

                    SECTION   11.15.   Construction; Interpretation.  The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.

                    SECTION   11.16.   Specific Performance.  The Parties hereto
agree that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
Parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.

[Signature Page Follows]

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                    IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed as of the date first written above.

  CORAUTUS GENETICS INC.           By: /s/ RICHARD E. OTTO    

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    Name: Richard E. Otto     Title: Chief Executive Officer           BOSTON
SCIENTIFIC CORPORATION           By: /s/ LAWRENCE C. BEST    

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    Name: Lawrence C. Best     Title: Senior Vice President & Chief Financial
Officer

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Exhibit A

Form of Investor Rights Agreement

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Exhibit B

Form of Loan Agreement

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Exhibit C

Form of Patent Sublicense Agreement

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Exhibit D

Form of Development Agreement

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Exhibit E

Form of Distribution Agreement

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Exhibit F

Form of Certificate of Designation

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Exhibit G

Form of Opinion of Counsel to the Company