Employment Agreement
Exhibit 10.3
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective as of
August 15, 2005 (“Effective Date”), by and between THORATEC CORPORATION, a California corporation
(the “Company”), and Xxxxxxx Xxxxxx (“Employee”).
THE PARTIES AGREE AS FOLLOWS:
1. Position and Duties.
1.1 Title. During the term of this Agreement, Employee shall serve as the President,
Cardiovascular Division of the Company, subject to policies of the Company and the terms and
conditions of this Agreement. If there is any conflict between this Agreement and any written
Company policy, this Agreement shall control.
1.2 Duties. Employee agrees that he shall perform, to the best of his ability, the
employment duties assigned to him by the Company, and shall devote his full time and attention,
with undivided loyalty, to the business and affairs of the Company while employed pursuant to this
Agreement. Employee shall report to the Chief Executive Officer of the Company.
2. Compensation.
2.1 Base Salary. Effective as of the date of this Agreement, the Employee shall
receive for his services under this Agreement an annual base salary of three hundred and five
thousand ($305,000) dollars. Employee shall not be eligible for any further merit increase in base
salary until January of 2007.
2.2 Annual Target Bonus. Employee will be eligible for an annual incentive bonus
equal to a target amount of seventy (70%) percent of Employee’s base salary. Such annual incentive
bonus shall be subject to the achievement of certain individual and corporate objectives, as shall
be annually established by the Company’s Chief Executive Officer, as well as to the terms and
conditions of the Company’s incentive compensation plan applicable to executive officers.
2.3 Incentive Bonus. Employee shall receive a one-time incentive bonus in a total
aggregate amount equal to one-hundred and fifty percent (150%) of Employee’s annual base salary
(the “Incentive Bonus”), payable as follows: (i) one-half the Incentive Bonus shall be paid upon
the six (6) months anniversary of the hire date of a new chief executive officer of the Company,
and (ii) one-half the Incentive Bonus shall be paid on the twelve (12) months anniversary of the
Effective Date of this Agreement (each such date a “Bonus Payment Date”), provided that Employee is
still employed with the Company on the Bonus Payment Date. Notwithstanding anything in the
foregoing to the contrary, if Employee is not employed by the Company on a Bonus Payment Date due
to an involuntary termination (other than for Cause) or voluntarily for Good Reason (as such terms
are defined herein), the unpaid portion of the Incentive Bonus will be paid to Employee on the
effective date of such termination. If Employee is not an employee of the Company for any other
reason as of a Bonus Payment Date, Employee
will not be eligible to receive the Incentive Bonus payment that otherwise would have been
paid on such Bonus Payment Date.
2.4 Stock Options. Employee shall be eligible for periodic grants of stock options,
as may be approved by the Board of Directors. Stock options must be exercised within the time
period specified in the Option Agreement and the Company’s Stock Option Plan.
3. Benefits.
3.1 Benefits Generally. Employee shall be eligible to continue participate in such of
the Company’s benefit plans as are generally available to senior officers of the Company,
including, without limitation, medical, dental, life and disability insurance plans.
4. Outside Employment.
4.1 Other Affiliations. Employee shall not perform consultation or other services for
any other company, corporation, or other commercial enterprise (other than for subsidiaries or
affiliates of the Company), during the term of Employee’s employment under this Agreement, unless
Employee has received written approval to do so from the Chief Executive Officer.
4.2 Conflict of Interest. Employee warrants that (a) Employee is not obligated under
any other employment, consulting, or other agreement which would affect the Company’s rights or
Employee’s duties under this Agreement, and (b) this Agreement is not in conflict with Employee’s
commitments to any party.
5. Confidentiality. Employee warrants that he is obligated under the Company Employee
Confidential Information and Inventions Agreement as previously signed.
6. Term. This Agreement shall have a term of four (4) years commencing on the
Effective Date, unless extended or terminated sooner in accordance with the terms provided herein.
7. Separation Benefits.
7.1 Employment At Will. Employee understands and agrees that employment with the
Company is “at will”, which means that either Employee or the Company may, subject to the terms of
this Agreement, terminate the employment relationship at any time with or without cause. The
Company may terminate Employee’s employment For Cause or Other Than For Cause immediately upon
notice to Employee. Employee may terminate his employment for any reason upon 30 days’ written
notice to the Company of such termination. If this Agreement is terminated by the Company For
Cause or by the Employee (except for “Good Reason” after a Change of Control), Employee shall
receive no separation benefits or other severance benefits of any kind.
7.2 Termination of Employee Without Cause. If the Employee’s employment is
involuntarily terminated by the Company (other than for Cause) and the Employee has not declined
another comparable position with the Company, an affiliate of the Company, or a
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successor or assignee of the Company, the Employee shall be paid a standard severance pay
benefit equal to one (1) times the Employee’s then-current annual base salary. Such amount shall
be payable in a cash lump sum as soon as reasonably practicable after the Employee’s termination of
employment.
7.3 Termination of Employee After a Change of Control or for Good Reason.
Notwithstanding Section 7.2, if the Employee would otherwise have been entitled to benefits
pursuant to Section 7.2 but his involuntary termination of employment by the Company occurs within
eighteen (18) months after a Change of Control, or if the Employee terminates his employment with
the Company for Good Reason during such period, the Employee shall be paid in lieu of the standard
severance pay benefit described in Section 7.2 a Change of Control severance pay benefit equal to
two (2) times the Employee’s then-current annual base salary plus two (2) times the greatest of (a)
the target bonus for the year preceding the year in which the Employee’s termination occurs, (b)
the actual bonus for such prior year, or (c) the target bonus for the year in which the termination
of employment occurs. Such amounts shall be payable in a cash lump sum as soon as reasonably
practicable after the Employee’s termination of employment.
7.4 COBRA Benefit. If the Employee is entitled to receive benefits pursuant to
Section 7.2 or 7.3, and if the Employee elects “COBRA” as provided by the Company’s group health
plan, then the Company shall pay in one lump sum payment at the time of any other payments pursuant
to Section 7.2 or 7.3, an amount equal to the monthly amount paid by the Company immediately before
termination of employment for the Employee’s health coverage multiplied by (i) one (1), if benefits
are paid pursuant to Section 7.2, or (ii) twelve (12) if benefits are paid pursuant to Section 7.3.
7.5 Accelerated Vesting of Stock Options. In the event that the Employee is
terminated for any of the reasons described in sections 7.2 or 7.3, in addition to any other right
or privilege hereunder, any options to purchase Company common stock that have been granted to
Employee by the Company as of the date hereof or that may be granted in the future (collectively,
the “Stock Options”) that are outstanding, but not yet exercisable, in whole or in part, as of the
effective date of such termination, shall become fully vested and exercisable effective on the last
day of Employee’s employment with the Company and shall be otherwise exercisable in accordance with
the terms of the stock option grant and applicable Company stock option plan.
7.6 Definitions. For purposes hereof, the following terms have the following
meanings:
(a) “Cause” shall mean (A) any act of personal dishonesty taken by Employee in connection with
his responsibilities as an employee that is intended to result in substantial personal enrichment
of Employee, (B) Employee’s conviction of a felony which the Company reasonably believes has had
or will have a material detrimental effect on the Company’s reputation or business, or (C)
continued willful violations by Employee of Employee’s obligations to the Company after there has
been delivered to Employee a written demand for performance from the Company that describes the
basis for its belief that Employee has not substantially performed his duties.
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(b) “Change of Control” shall mean the occurrence of any of the following events: (A) any
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company’s then outstanding voting
securities; or (B) the consummation of a sale of substantially all of the Company’s assets; or (C)
the consummation of a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining out-standing or by being
converted into voting securities of the surviving entity or its parent) at least fifty percent
(50%) of the total voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or consolidation; or (iv)
a change in the composition of the Company Board of Directors occurring within a two-year period,
as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent
Directors” shall mean directors who either (x) are directors of the Company as of January 1, 2004
or (y) are elected, or nominated for election, to the Board of Directors with the affirmative votes
of at least a majority of those directors whose election or nomination was not in connection with
any transaction described in subsections (A), (B), or (C) above, or in connection with an actual or
threatened proxy contest relating to the election of directors to the Company.
(c) “Good Reason” shall mean any material reduction in the duties or salary or bonus
opportunity of the Employee or a requirement that the Employee work at a facility more than 25
miles from the Company’s current headquarters in Pleasanton, California.
7.7 Gross-Up for Excise Tax. In the event that any payment hereunder to or for the
benefit of Employee (determined without regard to any additional payment required under this
paragraph) (a “Payment”) is subject to the excise tax (the “Excise Tax”) imposed by section 4999 of
the Internal Revenue Code of 1986, as amended (the “Code”), then Employee shall be paid an
additional payment (a “Gross-Up Payment”) in an amount such that after payment by Employee of all
taxes, including, without limitation, any income taxes and Excise Tax imposed upon the Gross-Up
Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment.
7.8 Benefits Subject to Execution of Waiver of Claims. Employee shall not be entitled
to receive any amount pursuant to this Section 7 unless Employee executes a release of claims in a
form acceptable to the Company at the time specified by the Company.
7.9 Exclusivity of Agreement. The benefits provided hereunder are in lieu of any
other severance-type benefits provided by the Company under any other plan, agreement, arrangement
or policy.
7.10 Section 409A Compliance. The parties intend that any separation benefits
described in this Section 7 or other compensation under this Agreement be paid in compliance with
Section 409A of the Code such that there are no adverse tax consequences, interest, or penalties as
a result of the payments. The parties agree to modify this Agreement, the timing (but
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not the amount(s)) of the separation benefits or both to the extent necessary to comply with
Section 409A.
8. Non-disparagement. Except as required by law or legal process, Employee agrees not
to disparage any aspect of the Company or its successors or assigns, including but not limited to
its officers, management, employees and products.
9. Injunctive Relief. Employee acknowledges that damages will not be an adequate
remedy in the event of a breach of any of Employee’s obligations under Sections 4, 5 or 8 of this
Agreement. Employee therefore agrees that the Company shall be entitled (without limitation of any
other rights or remedies otherwise available to the Company and without the necessity of posting a
bond) to obtain an injunction from any court of competent jurisdiction prohibiting the continuance
or recurrence of any such breach of this Agreement. Employee hereby submits to the jurisdiction
and venue of the courts of the State of California and the Federal Courts of the United State of
America located within the County of Alameda for purposes of any such action. Employee further
agree that service upon him in any such action or proceeding may be made by first class mail,
certified or registered, to his address as last appearing on the records of the Company.
10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the executors, administrators, heirs, successors, and assigns of the parties; provided, however,
that except as herein expressly provided, this Agreement shall not be assignable either by the
Company (except to an affiliate or successor of the Company) or by the Employee without the prior
written consent of the other party.
11. Notice. Any notice or communication under this Agreement shall be in writing and
shall be given by personal delivery, facsimile or Unites States mail, certified or registered with
return receipt requested, postage prepaid, and shall be deemed to have been duly given three
business days after the mailing if mailed, or upon receipt if delivered personally, or the first
business day after transmission if sent by facsimile, to the other party at the following
addresses, or such other address as one party may from time to time give the other in writing:
| If to the Company: | Thoratec Corporation | |||
| Attention: Vice President of Human Resources | ||||
| 0000 Xxxxxxxxxx Xxxxx | ||||
| Xxxxxxxxxx, XX 00000 | ||||
| Tel: (000) 000-0000, Fax: (000) 000-0000 | ||||
| If to Employee: | Xxxxxxx Xxxxxx | |||
| c/o Thoratec Corporation | ||||
| 0000 Xxxxxxxxxx Xxxxx | ||||
| Xxxxxxxxxx, XX 00000 | ||||
| Tel: (000) 000-0000, Fax: (000) 000-0000 |
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12. Survival of Certain Agreements. The covenants and agreements contained in
Sections 5 and 8 of this Agreement shall be continuous and survive the termination of this
Agreement and shall remain in full force and effect regardless of the cause of such termination.
13. Captions. The captions to Sections of this Agreement have been inserted for
identification and reference purposes and shall not by themselves determine the construction or
interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument.
15. Governing Law. This Agreement shall be construed in accordance with, and shall be
governed by, the procedural and substantive laws of the State of California, without reference to
principles of conflicts of law.
16. Waiver. The waiver of the breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach of the same or any other provision
hereof.
17. Withholding. The Company may withhold from any amounts payable to the Employee
hereunder all federal, state, local, and other withholdings and similar taxes and payments required
by applicable law or regulation.
18. Enforceability. If any provision of this Agreement is determined to be invalid or
unenforceable, in whole or in part, this determination will not affect any other provision of this
Agreement and the provision in question will be modified by the court so as to render it
enforceable.
19. Entire Agreement and Modifications. This Agreement constitutes the complete,
final and exclusive embodiment of the entire agreement between Employee and the Company with regard
to its subject matter, and supersedes and replaces in its entirety the Separation Benefits
Agreement executed by Employee on February 15, 2005, and the offer letter from the Company to
Employee dated July 6, 2002. This Agreement is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein, and it supersedes any
other such promises, warranties or representations. This Agreement may not be modified or amended
except in a writing signed by Employee and a duly authorized officer of the Company.
20. Advice of Counsel. Employee acknowledges and confirms that he has had the
opportunity to seek such legal, financial and other advice and representation as Employee deems
appropriate in connection with this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed effective as of the
date set forth in the first paragraph above.
| THORATEC CORPORATION |
||||
| By: | /s/ D. Xxxxx Xxxxxxxx | |||
| D. Xxxxx Xxxxxxxx | ||||
| President and Chief Executive Officer | ||||
| AGREED: |
||||
| /s/ Xxxxxxx Xxxxxx | ||||
| Xxxxxxx Xxxxxx | ||||
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