EMPLOYMENT AGREEMENT

EXHIBIT 99.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), effective as of February 4, 2005 (the “Effective Date”), between RICHARD E. OTTO (the “Executive”) and CORAUTUS GENETICS INC ., a Delaware corporation (the “Company”);

W I T N E S S E T H:

WHEREAS , the Company desires to continue to employ the Executive, and the Executive desires to accept such continued employment with the Company; and

WHEREAS , the Company and the Executive previously entered into that certain Employment Agreement, effective as of February 5, 2003, which was executed on May 14, 2003 (the “2003 Employment Agreement”), and now desire to document their agreement regarding the terms and conditions of the continued employment in this new Employment Agreement, which shall supercede the 2003 Employment Agreement;

NOW, THEREFORE , in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:

ARTICLE 1

DUTIES AND AUTHORITY

1.1 Employment . The Company hereby agrees to employ the Executive during the Employment Period (as defined in Article 2) as its Chief Executive Officer and President, and the Executive hereby accepts such employment by the Company, upon the terms and conditions set forth in this Agreement. The Executive may also hold such additional corporate offices to which he may be elected from time to time by the Board of Directors of the Company (the “Board”).

1.2 Duties of Executive as Employee . The Executive shall perform the duties customary for the position of Chief Executive Officer and President of the Company, and such other duties as the Board may from time to time assign to him. During the Employment Period, the Executive shall perform the duties properly assigned to him hereunder, shall devote substantially all of his business time (in no event less than 40 hours per week), attention and effort to the affairs of the Company and shall use his best efforts to promote the interests of the Company. Executive shall not, without the prior written consent of the Board engage in any other business activities, whether or not such business activity is pursued for profit, gain or other pecuniary advantage; provided, however, that (i) Executive may invest his assets in a form or manner consistent with Section 5.3 herein and as shall not require any services on his part in the operation of the affairs of the enterprises in which the investments are made, and (ii) Executive may serve on civic or charitable boards or committees if such service does not individually or in the aggregate significantly interfere with the performance of his duties under this Agreement.

Executive shall conduct himself at all times in a business-like and professional manner as appropriate for his position and shall represent the Company in all respects in compliance with good business and ethical practices. In addition, the Executive shall be subject to and abide by the policies and procedures of the Company applicable to personnel of the Company, as may be adopted from time to time.

1.3 Board Membership . Executive is currently a member of the Board. In connection with each annual meeting of shareholders (or action by written consent in lieu thereof) of the Company during the Employment Period, the Board shall nominate Executive for reelection as a member of the Board, and subject to election by the shareholders of the Company, Executive also agrees to serve as a member of the Board during the Employment Period and to resign from such position at the end of the Employment Period, unless requested to remain by the Board.

ARTICLE 2

TERM

Unless terminated earlier as provided in Article 4, this Agreement shall extend for a period of two (2) years from the Effective Date. For purposes of this Agreement, the term of employment (the “Employment Period”) shall commence on the Effective Date and end on the date as of which this Agreement is terminated under this Article 2 or Article 4, whichever is earlier. The term of this Agreement (as specified in this Article 2) may be extended by mutual written consent of the parties.

ARTICLE 3

COMPENSATION

3.1 Base Salary . Subject to any adjustments pursuant to Section 3.8, the Company hereby agrees to pay Executive a base salary of $300,000 per annum (pro rated for partial years) during the Employment Period, payable monthly in arrears pursuant to the normal payroll practices of the Company.

3.2 Annual Bonus . The Executive may receive any annual incentive, performance or other bonuses (“Annual Bonus”), in cash, options or common stock of the Company or other property, as may be recommended by the Compensation Committee and approved by the independent members of the Board.

3.3 Long-Term Incentives . In accordance with and subject to the terms of the Corautus Genetics Inc. 2002 Stock Plan (the “Plan”) and the recommendation of this grant by the Compensation Committee, the Company agrees to grant to the Executive nonqualified stock options to purchase 500,000 shares of the Company’s common stock according to the following terms and conditions (any additional terms and conditions of such option grant to be as specified in the option agreement):

(a) The date of grant shall be the date the grant is approved by Compensation Committee and the independent members of the Board;

(b) The per share option exercise price shall be the fair market value per share (as defined in the Plan) on the date of grant;

(c) The Options shall become exercisable as follows, provided that the Executive shall remain actively employed by the Company ( i.e ., not in Transition) on such dates:

(i) Options for 200,000 shares shall become exercisable on the date that enrollment of the final patient in CAD Phase IIb Trial (based on the number of patients required to meet the minimums of the trial as determined by the Food and Drug Administration) is completed;

(ii) Options for 200,000 shares shall become exercisable upon the later of (i) the date of formal approval by the Food and Drug Administration of a CAD Phase III Trial, and (ii) commencement of dosing or treatment of the first patient in such Phase III trial; and

(iii) Options for 100,000 shares shall become exercisable upon the effective date of hiring of a Chief Operating Officer of the Company, following approval of the selection of such person and the terms of an employment contract for such person by the independent members of the Board, following recommendation by the Compensation Committee.

(d) The options shall have a 10-year term and, except as specified herein, shall be subject to the terms and provisions of the Plan; and

(e) Subject to the provisions of the Plan regarding Changes in Control and the maximum 10-year term of the options, the options, once exercisable, shall remain exercisable for the periods stated below following the Executive’s termination of all of his Service Provider (as defined in the Option Plan) relationships with the Company:

(i) If such termination is a voluntary termination by Executive without Transition (as defined in Section 4.1(f)) or by the Company for Cause, for three (3) months following the date of termination;

(ii) If such termination is a voluntary termination by Executive with Transition, for seven (7) years following the date of termination; and

(iii) If such termination occurs for any other reason, the remaining term of the options.

3.4 Employee Benefits . At all times during the Employment Period, Executive shall be entitled to participate in any employee benefits (including but not limited to retirement plans, group insurance, hospitalization, medical, dental, health and accident, disability or similar plan or program) of the Company now existing or established hereafter to the extent that he is eligible under the general provisions thereof and on the same basis as similarly-situated employees. However, Executive acknowledges and agrees that the Company may, in its sole discretion and from time to time, establish, curtail, modify or eliminate any such plans or programs under the applicable plan provisions and applicable law.

3.5 Special Employee Benefits Provisions . In addition to Executive’s rights under Section 3.4 of this Agreement, the Company agrees to provide Executive with the following special employee benefits during the Employment Period:

(a) Supplemental AD&D Coverage . The Company shall provide to Executive at no cost to him supplemental accidental death and disability (“AD&D”) insurance in a face amount which, when combined with the face amount of group AD&D insurance provided to Executive under the Company’s base AD&D insurance program for employees shall total $1,000,000.

(b) Certain Reimbursement for Medical Coverage . In the event that the Executive waives coverage under the Company’s medical plan for himself and his dependents, the Company shall reimburse Executive during the Employment Period for his premium cost of maintaining alternative personal medical insurance for himself and any of his dependents that would have been eligible dependents under the Company medical plan, provided however that such reimbursement shall be paid within 30 days following a written request from Executive including reasonable substantiation of such expense. With each such reimbursement payment to Executive, the Company shall also pay a cash bonus sufficient to pay all federal, state and local income taxes with respect to such reimbursement and the cash bonus related payments, such bonus payments to be withheld by the Company and paid as required by law to the applicable taxation authorities on Executive’s behalf. Notwithstanding any other provision of this Section, the aggregate payments to or on behalf of the Executive pursuant to this Section 3.5(b) with respect to a given period shall be limited to the cost the Company would otherwise incur to extend its present medical plan to cover Executive and his eligible dependents in the State of Georgia for such period (determined on a pro rata basis).

3.6 Vacation . During the Employment Period, Executive shall be entitled to a period of paid vacation time of a maximum of twenty (20) business days for each 12-month period beginning on the Effective Date, in accordance with the practices and policies of the Company. The days selected for Executive’s vacation shall be mutually and reasonably agreeable to Company and Executive.

3.7 Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable expenses that Executive incurs in connection with the duties of his employment by the Company, in accordance with the Company’s normal policies regarding business expense reimbursement, as in effect from time to time. Any reimbursements under this paragraph shall be made upon Executive’s presentation to the Company, from time to time, of an account of such expenses in such form and in such detail as the Company may request. Executive shall not be permitted to approve his own expenses.

3.8 No Other Compensation; Review . Executive shall not be entitled to any compensation for services from the Company as an employee, Director or otherwise during the Employment Period other than the compensation specified in this Agreement. The Board may elect to review the Executive’s performance and base salary from time to time, and may increase, but not decrease, the Executive’s salary as provided herein. Any such increase in salary shall be deemed to constitute an amendment of this Agreement solely with respect to the base salary provided in Section 3.1.

ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Termination . The Executive understands and agrees that employment with the Company is at-will, which means that either the Executive or the Company may terminate this agreement at any time, subject to the provisions of this Agreement. This Agreement shall terminate prior to the end of the Employment Period specified in Article 2 upon the occurrence of the first of the following:

(a) Death or Disability. This Agreement shall also terminate upon (i) the death of the Executive, or (ii) the effective date of a written determination by the Board that the Executive is not able, due to injury or illness, to continue to meet his obligations under this Agreement for all or a substantial portion of the then-remaining Employment Period.

(b) Termination by Company For Cause . The Board may terminate this Agreement for Cause (as defined below) at any time after providing the Executive with written notice, and in such event, the Executive shall forfeit as of the date of such termination specified in such notice any right to any compensation, bonuses, stock options or other benefits under this Agreement accruing, vesting or becoming exercisable after the date of termination. Notwithstanding anything in this Section 4.1(b) to the contrary, the effect of the termination of the Executive’s employment on the Executive’s subsequent entitlement to benefits under any bonus arrangement, stock option agreement and plan or employee benefit plan shall be determined in accordance with the governing documents with respect to such arrangements, agreements or plans, respectively.

(c) Termination by Company Without Cause . The Company may terminate this Agreement at any time for any reason at its discretion upon written notice to Executive.

(d) Termination by Employee for Good Reason . Executive may terminate this Agreement for Good Reason (as defined below) at any time after providing the Company with written notice and a reasonable opportunity to cure.

(e) Voluntary Termination by Executive without Transition. Executive may terminate this Agreement at any time for any reason without Transition (as defined in Section 4.1(f)).

(f) Voluntary Termination by Executive with Transition. Executive may terminate this Agreement at any time for any reason with Transition.

For purposes of this Agreement, “ Transition ” by the Executive shall mean giving reasonable written notice to the Company of a desire to terminate the Agreement and working with and assisting the Board over a reasonable period of time (but not beyond the Employment Period) to

identify, hire and train a successor for Executive’s position with the objective of achieving a smooth transition with minimal disruption to the Company. Such Transition may include remaining employed by the Company for a period of time to be agreed upon after the replacement is hired to effectuate the transition and thereafter for a reasonable period (but not beyond the Employment Period) being available to consult with the replacement on a part-time basis as reasonably required.

4.2 Payment Upon Termination . Upon termination of this Agreement, Executive shall be entitled to the following:

(a) Accrued Compensation and Benefits. Except as otherwise specified in this Agreement, Executive shall receive any compensation, bonuses, stock options, accrued but unused vacation any other benefits under this Agreement which had accrued, vested, become exercisable or become due and payable as of the date of termination; provided, however, that except as otherwise provided in this Agreement, (i) no bonus for a given period shall be deemed to have accrued or become due and payable unless and until the Executive has remained employed through the last day of such period, (ii) notwithstanding any stock options becoming exercisable, the exercise of such options shall be governed by the applicable terms and conditions of the relevant option grant and the stock option plan pursuant to which it was granted, and (iii) notwithstanding anything in this Section 4.2(a) to the contrary, the effect of the termination of the Executive’s employment on the Executive’s subsequent entitlement to benefits under any bonus arrangement, stock option agreement and plan or employee benefit plan shall be determined in accordance with the governing documents with respect to such arrangements, agreements or plans, respectively.

(b) Termination Due to Death, Disability, Without Cause or for Good Reason . In the event that this Agreement terminates pursuant to Sections 4.1(a), 4.1(c) or 4.1(d), Executive shall also receive, in addition to any other benefits to which Executive may be entitled under Section 4.2(a), a severance payment equal to one (1) year’s salary at his then current rate of base salary. This severance payment shall be due and payable on the date six (6) months following the date of the Executive’s termination.

(c) Termination Due to Expiration of Agreement, Cause or Voluntary Termination . In the event that this Agreement terminates because of (A) expiration at the end of the Employment Period specified in Article 2, (B) termination for Cause under Section 4.1(b), or (C) voluntary termination by Executive under Section 4.1(e) or (f), the Executive shall not be entitled to any severance payment from the Company.

(d) Change in Control. In the event that this Agreement terminates within one (1) year prior to, or two (2) years following, a Change in Control (as defined below) for any reason other than (A) expiration at the end of the Employment Period specified in Article 2, (B) termination for Cause, or (C) voluntary termination by Executive under Section 4.1(e) or (f), the Company shall give to Executive as a severance payment, in addition to any other benefits to which Executive may be entitled under Section 4.2(a), but in lieu of any other benefits to which Executive may be entitled under Sections 4.2(b), a lump sum cash payment equal to one (1) year’s salary at his then current rate of base salary. This severance payment shall be due and payable on the date six (6) months following the date of the Executive’s termination.

4.3 Definitions .

(a) Cause . For purposes of this Agreement, “ Cause ” shall mean:

(i) the willful and continuous failure of Executive to substantially perform the Executive’s duties (other than as a result of a written determination of injury or illness as provided in Section 4.1(a)), after the Company delivers to the Executive a written demand for substantial performance that specifically identifies the manner in which the Company believes that the Executive has not substantially performed the Executive’s duties and the Executive has failed to cure the identified deficiencies within ten (10) business days of receipt of such notice;

(ii) the Executive’s conviction of a felony or a crime of moral turpitude (including, without limitation, any nolo contendere plea), or any adjudication of a perpetration by the Executive of a common law fraud;

(iii) the Executive’s engagement in any activity that is in conflict of interest or competitive with the Company or its affiliates (other than any isolated, insubstantial and inadvertent action not taken in bad faith and which is promptly remedied by the Executive upon notice by the Company);

(iv) Executive’s engaging in any knowing act of fraud or dishonesty against the Company or any of its affiliates or any material breach of federal or state securities laws or regulations;

(v) the Executive’s harassment of any individual in the workplace based on age, gender or other protected status or class or violation of any policy of the Company regarding harassment, but only following an investigation by an independent third party into the harassment claim which substantiates such claim.

(b) Change in Control . For purposes of this Agreement, a “ Change in Control ” of the Company shall mean the occurrence of any one of the following events, as determined under the provisions of Section 409A of the Internal Revenue Code of 1986, as amended:

(i) Change in Ownership . A change in the ownership of a corporation occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of such corporation. However, if any one person or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of a corporation, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the corporation (or to cause a change in the effective control of the corporation (within the meaning of subsection (ii) herein). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the corporation acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this section. This applies only when there is a transfer of stock of a corporation (or issuance of stock of a corporation) and stock in such corporation remains outstanding after the transaction.

(ii) Change in Effective Control. A change in the effective control of a corporation occurs on the date that either:

(A) Any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the corporation possessing 35 percent or more of the total voting power of the stock of such corporation; or

(B) a majority of members of the corporation’s board of directors is replaced during any 12-month period by di