RETENTION BONUS
AGREEMENT
This agreement is
dated February 12, 2009, and is between HEARTWARE, INC., a
Delaware corporation (the “ Company ,” “
us ,” “ we ,” or “ our
”), and Douglas Godshall (“ you ” or
“ your ”).
The Board of
Directors of the Company (the “ Board ”)
considers it essential to foster the continued employment of key
executives. The Board believes it is in the best interests of the
Company, HeartWare International, Inc., a Delaware corporation that
is the ultimate parent corporation of the Company (the “
Parent ”), and the Parent’s stockholders to have
your continued dedication, notwithstanding the possibility, threat,
or occurrence of a change in control of the Parent and/or the
Company.
On the date
hereof, the Parent has entered into an Agreement and Plan of Merger
with Thoratec Corporation, a California corporation (“
Thoratec ”), Thomas Merger Sub I, Inc., a Delaware
corporation and wholly owned subsidiary of Thoratec, and Thomas
Merger Sub II, Inc., a Delaware corporation and direct wholly owned
subsidiary of Thoratec (the “ Merger Agreement
”).
Consequently, in
consideration of the mutual covenants contained in this agreement,
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1.
Employment Agreement . You currently are party to an
employment agreement with the Company dated December 5, 2008
(the “ Employment Agreement ”), which remains in
full force and effect and is not amended hereby.
(a)
Vesting and Payment . Subject to the provisions of this
section 2 , you shall be paid by the Company a cash
retention bonus in the aggregate amount of $3,300,000 (the “
Retention Bonus ”). Such Retention Bonus shall vest
and be paid within thirty (30) days following the consummation
of the transactions contemplated by the Merger Agreement (the
“ Closing ”), subject to you signing, returning
to the Company within twenty-one (21) days following the
Closing, and not revoking a general release of claims, in form and
substance reasonably acceptable to the Company; provided
that (except as accelerated vesting may occur pursuant to
section 2(b) or 3 below) you remain continuously
employed through the Closing; and provided, further, that you enter
into a consulting agreement with Thoratec or the Company, prior to
the Closing, for at least a three-month consultancy relationship
with Thoratec or the Company at $7,211.54 per week (pro-rated for
any partial weeks), to commence immediately after the
Closing.
(b)
Effect of Termination or Resignation . In the event that,
prior to the Closing, we terminate your employment for Cause (as
defined in the Employment Agreement) or you resign without Good
Reason (as defined in the Employment Agreement), the Retention
Bonus shall be forfeited. In the event that, prior to Closing, we
terminate your employment without Cause or you resign for Good
Reason, the Retention Bonus shall vest in full and be paid on the
later to occur of (i) the Closing and (ii) within sixty
(60) days following such termination or resignation, subject
to you signing, returning to the Company within fifty
(50) days following such termination or resignation, and not
revoking a general release of claims, in form and substance
reasonably acceptable to the Company.
3. Death;
Disability . If your employment terminates by reason of death
or disability prior to the Closing, the Retention Bonus shall vest
and be paid within five (5) days following the
Closing.
4.
Non-Exclusivity of Payments . Except as otherwise provided
in this section 4 , nothing in this agreement prevents or
limits your continuing or future participation in any Company
benefit plan, policy, or practice for which you may qualify; nor
does anything in this agreement limit or affect any right that you
may have under that plan, policy, or practice, or under the
Employment Agreement.
5 Limitation on
Payments and Benefits .
(a)
Tax Liability . You shall bear all expense of, and be solely
responsible for, all federal, state, local, or non-U.S. taxes due
with respect to any payment received under this agreement,
including, without limitation, any excise tax imposed by section
4999 of the Internal Revenue Code of 1986, as amended (the
“Code”).
(b)
Modified Cut-Back Rule . Notwithstanding anything to the
contrary in this agreement, if any payment to be made under this
agreement, together with any other payment or benefit that you have
the right to receive from us or from any entity that is a member of
an “affiliated group” (as defined under Code section
1504(a) without regard to Code section 1504(b)) of which we are a
member (together with the Retention Bonus, the “ Total
Payments ”), constitutes an “excess parachute
payment” (as defined under Code section 280G(b)), the Total
Payments will be reduced to the extent necessary to prevent any
portion of the Total Payments from becoming nondeductible by the
Company under Code section 280G or subject to the excise tax
imposed under Code section 4999 but only if, by reason of such
reduction, the net after-tax benefit received by you will exceed
the net after-tax benefit that you would receive if no such
reduction was made. For this purpose, “ net after-tax
benefit ” means ( i ) the total of all payments
and the value of all benefits which you receive or are then
entitled to receive from the Company that would constitute
“excess parachute payments” within the meaning of Code
section 280G, less ( ii ) the amount of all federal, state,
and local income taxes payable with respect to the foregoing
calculated at the maximum marginal income tax rate for each year in
which the foregoing shall be paid to you (based on the rate in
effect
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