Exhibit 10.6

 

FOURTH AMENDED AND RESTATED EXECUTIVE

EMPLOYMENT AGREEMENT

 

This Amended and Restated Executive Employment Agreement (“Agreement”) is made effective as of November 30, 2002 (the “Effective Date”), between CryoCor, Inc., a Delaware corporation, hereinafter referred to as “CryoCor,” and Gregory M. Ayers, hereinafter referred to as “Ayers.”

 

RECITALS

 

WHEREAS, Ayers and CryoCor entered into that certain Executive Employment Agreement effective as of September 1, 2000 (the “Original Agreement”);

 

WHEREAS, Ayers and CryoCor entered into that certain Amended and Restated Executive Employment Agreement effective as of November 1, 2001 (the “First Amendment”);

 

WHEREAS, Ayers and CryoCor entered into that certain Second Amended and Restated Executive Employment Agreement effective as of January 1, 2002 (the “Second Amendment”);

 

WHEREAS, Ayers and CryoCor entered into that certain Third Amended and Restated Executive Employment Agreement effective as of July 1, 2002 (the “Prior Agreement”)

 

WHEREAS, the Prior Agreement requires that it may only be amended with the written consent of Ayers and the Board of Directors of CryoCor;

 

WHEREAS, CryoCor and Ayers desire to amend and restate the Prior Agreement; and

 

WHEREAS, this Agreement is subject to and shall be effective and binding on Ayers and CryoCor only upon the written consent of Ayers and the Board of Directors of CryoCor.

 

In consideration of the promises and of the mutual covenants contained herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

1. Employment. CryoCor hereby employs Ayers, and Ayers hereby accepts such employment, upon the terms and conditions set forth herein.

 

2. Duties.

 

2.1 Position. Subject to the provisions hereof, Ayers is employed as President and Chief Executive Officer (“CEO”) and shall have the duties and

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responsibilities assigned by CryoCor’s Board of Directors (“Board of Directors”) as may be reasonably assigned from time to time; provided CryoCor reserves the right to modify Ayers’ position and duties at any time in its sole and absolute discretion, provided that the duties assigned are consistent with the position of a senior executive and that Ayers continues to report to the Board of Directors. Ayers shall perform faithfully and diligently all duties assigned to him.

 

2.2 Level of Efforts; Loyalty. During Ayers’ employment by CryoCor, Ayers shall devote Ayers’ full business energies, interest, abilities and productive time, during normal business hours, to the proper and efficient performance of Ayers’ duties under this Agreement. Notwithstanding this Section 2.2, CryoCor agrees that Ayers may engage in the board and other activities described in Exhibit A hereto, as long as: (i) such activities do not interfere with his duties to CyroCor; (ii) such activities are not for the benefit of an entity that competes with CyroCor and/or any of its Affiliates (as defined herein), either directly or indirectly, in any manner or capacity, in any phase of the business of developing, manufacturing and marketing of products or services which are in the same field of use or which otherwise compete with the products or services or proposed products or services of CyroCor and/or any of its Affiliates; and (iii) Ayers acknowledges that he is not serving on any such board or engaging in such other activities at the request of CyroCor and will not seek any indemnification from CyroCor under the Bylaws of CyroCor, this Agreement or any other agreement or as a matter of law with respect to such service and Ayers will not serve on any public company board unless that company carries director and officer liability insurance with customary coverage from reputable highly rated insurance carriers and indemnity agreements that provide for advances of Ayers’ expenses should he be sued in his capacity as director. For purposes of this Agreement, “Affiliate” means, with respect to any specific entity, any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified entity.

 

3. Term.

 

3.1 Initial Term. The employment relationship pursuant to this Agreement shall be for an initial term commencing on July 1, 2002 and continuing for one year (“Initial Term”), unless sooner terminated in accordance with the provisions hereof.

 

3.2 Renewal. On completion of the Initial Term specified in subsection 3.1 above, subject to any other termination provided herein, this Agreement will automatically renew for a subsequent one-year term unless both parties mutually agree not to renew this Agreement for a subsequent one-year term.

 

4. Compensation.

 

4.1 Base Salary. As compensation for Ayers’ performance of his duties hereunder, CryoCor shall pay to Ayers an initial Base Salary of Four Hundred Fifty Thousand Dollars ($450,000) per year, payable in accordance with CryoCor’s normal payroll practices, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions.

 

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4.2 Stock Options.

 

(a) Ayers has previously been granted an incentive stock option to purchase (i) 233,333 shares of CryoCor common stock (“Common Stock”) under CryoCor, Inc.’s 2000 Stock Option Plan (the “Plan”) at an exercise price equal to $0.42 per share, subject to the terms of the option agreement related thereto, and (ii) 384,030 shares of Common Stock under the Plan, at an exercise price equal to $0.27 subject to the terms of the option agreement related thereto (the “Options”). The Options have been adjusted to reflect a 1 for 3 reverse stock split of the Company’s capital stock.

 

(b) In the event of a Change of Control (as defined in subsection 7.6(c) below) where the Options remain in place or where Ayers is to receive comparable substitute options in the acquiror or the resultant entity, then there shall be immediate vesting as of the consummation of such transaction as to 50% of the remaining unvested shares (i.e., 50% of CryoCor’s right to repurchase such shares, as applicable) shall terminate (and remaining amounts shall vest ratably over the course of the remaining applicable vesting term). In the event of a Change of Control that results in the Options being canceled with no comparable substitute options being issued, then there shall be immediate vesting as of the consummation of such transaction of 100% of the remaining unvested shares. The Options will otherwise be subject to the terms and conditions of the Plan and the standard stock option agreement provided pursuant to the Plan, which Ayers will be required to sign as appropriate as a condition of receiving the Options.

 

4.3 Performance and Salary Review. The Board of Directors will periodically review Ayers’ performance on no less than an annual basis. Adjustments to salary or other compensation, if any, will be made by the Board of Directors in its sole and absolute discretion, subject to the terms hereof.

 

5. Executive Benefits.

 

5.1 Customary Fringe Benefits. Ayers will be eligible for all customary and usual fringe benefits generally available to senior executives of CryoCor subject to the terms and conditions of CryoCor’s benefit plan documents. CryoCor reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Ayers.

 

5.2 Use of Company Vehicle. During Ayers’ employment, CryoCor shall lease and insure for the benefit of and provide to Ayers a leased vehicle (not to exceed $700/month) for his sole and exclusive use in connection with the performance of his duties under this Agreement.

 

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5.3 Vacation. Ayers shall be entitled to accrue consistent with the policies CryoCor establishes for paid vacation. Ayers agrees not to take vacation at times that would be detrimental to CryoCor’s interests.

 

5.4 Life Insurance. During Ayers’ employment with CryoCor, CryoCor will maintain a term life insurance policy insuring Ayers with a death benefit payable to Ayers’ estate in an amount equivalent to at least $450,000, provided Ayers is insurable in that amount pursuant to reasonable policy requirements and premiums (maximum $12,000 annually). Ayers agrees to cooperate with CryoCor in obtaining such life insurance, including submitting to a physical examination if required to do so by the insurance carrier.

 

5.5 Loan. The Company agrees to make available to Ayers a bridge loan (the “Loan”) in an amount not to exceed one hundred seventy-five thousand dollars ($175,000), upon the repayment of a previous mortgage assistance loan in the amount of six hundred fifty thousand dollars ($650,000) made by the Company to Ayers pursuant to the terms of a Secured Promissory Note. The Loan will be secured by the equity in Ayers’ current residence at 7304 Noche Tapatia, Rancho Santa Fe, CA 92067, and will be made pursuant to the terms of the Secured Promissory Note attached hereto as Exhibit B.

 

5.6 Annual Bonus. Ayers shall be eligible to earn an annual bonus of [$58,333] for years 2003-2004 and [$58,334] for year 2005 (the “Annual Bonus”). The Annual Bonus will be paid in the last pay period in November of the applicable fiscal year and is subject to standard payroll deductions and withholdings. Ayers must be employed by the Company at the time the bonus is payable in order to earn and receive the Annual Bonus. In the event Ayers’ employment with the Company terminates, for any reason, prior to the time the annual bonus is payable, he will receive a pro rata bonus calculated by multiplying his annual bonus amount by a fraction, the numerator of which shall be the number of days in the applicable fiscal year beginning with the date of the last Annual Bonus payment and ending with Ayer’s date of termination, and the denominator of which shall be three hundred sixty five (365). In addition, in the event the Company files a registration statement under the Securities Act of 1933, as amended, covering the registration of shares of the Company’s Common Stock in connection with a public offering, the Annual Bonus payment shall be accelerated in full, such that Ayers shall receive the amount he would be entitled to receive pursuant to Section 5.6 if he remained employed by CryoCor through November of fiscal year 2005, provided that, the foregoing payments shall be subject to standard deductions and withholdings.

 

6. Expenses.

 

6.1 Business Expenses. Ayers will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of his duties on behalf of CryoCor. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with CryoCor’s policies.

 

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6.2 Payment Upon execution of this Agreement, Ayers shall receive two hundred twenty five thousand dollars ($225,000) as satisfaction for any Relocation Allowance he was otherwise entitled to receive pursuant to Section 6.2 of the Prior Agreement.

 

7. Termination of Ayers’ Employment.

 

7.1 Termination for Cause by CryoCor. Although CryoCor anticipates a mutually rewarding employment relationship with Ayers, CryoCor may terminate Ayers’ employment immediately (except where this subsection 7.1 otherwise provides for notice and an opportunity to cure) at any time for Cause. For purposes of this Agreement, “Cause” is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Ayers with respect to Ayers’ obligations or otherwise relating to the business of CryoCor; (b) Ayers’ material breach of this Agreement or CryoCor’s Employee Innovations and Proprietary Rights Agreement; (c) Ayers’ conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Ayers’ willful neglect of duties as determined in the sole and exclusive discretion of the Board of Directors; (e) Ayers’ failure to perform the essential functions of Ayers’ position, with or without reasonable accommodation, due to a mental or physical disability; and (f) Ayers’ death. In the event Ayers’ employment is terminated in accordance with subsections 7.1(d) or (e), Ayers shall be given notice of the violation or failure and thirty (30) days opportunity to cure any such violation or failure; provided however, that Ayers shall only be entitled to a cure period once under this subsection 7.1 in any consecutive three (3) month period. In the event Ayers’ employment is terminated in accordance with this subsection 7.1, Ayers shall be entitled to receive only the Base Salary then in effect and the Annual Bonus, both prorated to the date of termination. All other CryoCor obligations to Ayers pursuant to this Agreement will become automatically terminated and completely extinguished as of such termination; and Ayers will not be entitled to receive the Separation Package described in subsection 7.2(a) below.

 

7.2 Termination Without Cause by CryoCor; Severance. CryoCor may terminate Ayers’ employment under this Agreement without Cause at any time on thirty (30) days’ advance written notice to Ayers. In the event of such termination, Ayers will receive the “Separation Package” described in subsection 7.2(a) below, provided that Ayers complies with the conditions set forth in 7.2(b) below. All other CryoCor obligations to Ayers pursuant to this Agreement will become automatically terminated and completely extinguished as of such termination of employment; provided Ayers shall have rights with respect to the Options as provided in the respective option agreements related thereto.

 

(a) Separation Package. The Separation Package shall consist of the following: a severance payment equal to (a) the greater of (i) one (1) year’s Base Salary as in effect at the time of termination or (ii) $450,000, provided that the foregoing payment shall be subject to standard deductions and withholdings and payable in equal installments over twelve months in accordance with CryoCor’s regular payroll cycle, and

 

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(b) the Annual Bonus payment shall be accelerated in full, such that Ayers shall receive the amount he would be entitled to receive pursuant to Section 5.6 if he remained employed by CryoCor through November of fiscal year 2005, provided that the foregoing payments shall be subject to standard deductions and withholdings. Ayers agrees that the severance payments may be reduced by CryoCor to fulfill any outstanding payments or debts due and owing by Ayers to CryoCor following written notice of its intent to make such deductions.

 

(b) Conditions to Receive Separation Package. The Separation Package described in subsection 7.2 (a) above will be paid provided the following conditions are met: (i) Ayers executes a full general release, releasing all claims, known or unknown, suspected or unsuspected, that Ayers may have against CryoCor arising out of or any way related to Ayers’ employment or termination of employment with CryoCor; and (ii) Ayers complies with all surviving provisions of this Agreement as specified in subsection 13.8 below.

 

7.3 Voluntary Resignation by Ayers for Good Reason/Severance. Ayers may voluntarily resign Ayers’ position with CryoCor for Good Reason at any time on thirty (30) days’ advance written notice. In the event of Ayers’ resignation for Good Reason, Ayers will be entitled to receive the Separation Package described in subsection 7.2(a) above, provided that Ayers complies with all of the conditions in subsection 7.2(b) above. All other CryoCor obligations to Ayers pursuant to this Agreement will become automatically terminated and completely extinguished as of such termination of employment. Ayers will be deemed to have resigned for Good Reason upon resignation in the event of any of the following without Ayers’ consent: (a) CryoCor’s material breach of this Agreement; (b) Ayers’ Base Salary is reduced by more than twenty-five percent (25%) below Ayers’ Base Salary in effect at any time during the preceding twelve months, unless the reduction is made as part of, and is generally consistent with, a general reduction of senior executive salaries; (c) Ayers’ position and/or duties are modified so that Ayers’ duties are no longer consistent with the position of a senior executive or Ayers no longer reports to the Board of Directors; (d) the relocation of CryoCor’s executive offices or principal business location to a point more than thirty (30) miles from the San Diego County, California area; or (e) a failure by CryoCor to obtain from any successor, before the succession takes place, an agreement to assume the obligations and perform all of the terms and conditions of this Agreement.

 

7.4 Voluntary Resignation by Ayers Without Good Reason. Ayers may voluntarily resign Ayers’ position with CryoCor without Good Reason, on thirty (30) days’ advance written notice. In the event of Ayers’ resignation without Good Reason, Ayers’ will be entitled to receive only the Base Salary earned and accrued through the thirty-day notice period and no other amount for the remaining months of the one-year renewal term, if any. All other CryoCor obligations to Ayers pursuant to this Agreement will become automatically terminated and completely extinguished as of such termination of employment (e.g., Ayers will not be entitled to receive the Separation Package described in subsection 7.2(a) above); provided, however, that Ayers may, if

 

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applicable, still be entitled to the benefit specified at subsection 7.7 hereof, and provided further that Ayers shall have rights with respect to the Options as provided in the respective option agreements related thereto.

 

7.5 Termination by Mutual Agreement or Expiration of the Agreement. Ayers’ employment may also terminate immediately upon the express, written and mutual agreement signed by Ayers and a member of CryoCor’s Board of Directors (upon authorization of the Board of Directors), other than Ayers. In the event of such termination, Ayers will receive only the Base Salary then in effect, prorated to the date of termination. All other CryoCor obligations to Ayers will become automatically terminated and completely extinguished as of such termination of employment (e.g., Ayers will not be entitled to the Separation Package described in subsection 7.2(a) above); provided, however, that Ayers may, if applicable, still be entitled to the benefit specified at subsection 7.7 hereof, and provided further that Ayers shall have rights with respect to the Options as provided in the respective option agreements related thereto.

 

7.6 Termination Upon A Change In Control.

 

(a) Change of Control Separation Package. If Ayers’ employment is terminated by CryoCor or its successor within twelve (12) months after a Change in Control (as that term is defined below), other than for Cause (as defined in subsection 7.1 above), or Ayers resigns for Good Reason (as defined in subsection 7.3 above), Ayers shall be entitled to receive the following “Change of Control Separation Package,” provided that Ayers complies with all the conditions described i