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 David McIntyre (“ 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.
Separation Benefits Agreement . It is currently anticipated
that you will be entering into a separation benefits agreement (the
“Separation Benefits Agreement”), to be effective upon
the Closing (as defined in the Merger Agreement).
(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 $2,100,000 (the “
Retention Bonus ”). Such Retention Bonus shall vest in
two equal installments of $1,050,000 (each, a “ Retention
Bonus Installment ”) on (i) the Closing and
(ii) the first anniversary of the Closing; provided
that in the case of each such Retention Bonus Installment (except
as accelerated vesting may occur pursuant to section 2(b) or
3 below) you remain continuously employed through the
relevant vesting date. Once vested, a Retention Bonus Installment
shall be paid to you within five (5) days following the
relevant vesting date.
(b)
Effect of Termination or Resignation . In the event we
terminate your employment for Cause (as defined in the Separation
Benefits Agreement) or you resign without Good Reason (as defined
in the Separation Benefits Agreement), any Retention Bonus
Installment that has not vested as of the date of such termination
or resignation shall be forfeited, and any vested but unpaid
Retention Bonus Installment shall be paid promptly in accordance
with section 2(a) . In the event (i) we terminate your
employment without Cause, (ii) you resign for Good Reason, or
(iii) you resign for any reason after six (6) months of
continuous service with Thoratec after the Closing and pursuant to
at least a three (3) month advance written notice (i.e., at
least nine (9) months of continuous service with Thoratec
after the Closing), any then unvested Retention Bonus Installment
shall vest in full and be paid within sixty (60) days
following such termination or resignation, subject to you signing,
returning to the Company within fifty (50) days, and not
revoking a general release of claims, in form and substance
reasonably acceptable to the Company, and any vested but unpaid
Retention Bonus Installment shall be paid promptly in accordance
with section 2(a) . You acknowledge and agree that any
changes from your current employment with the Company to your
employment with the Company or Thoratec immediately after the
Closing shall not be deemed an occurrence of Good
Reason.
1
3. Death;
Disability . If your employment terminates by reason of death
or disability, any then unvested Retention Bonus Installments shall
vest and be paid within (5) days following such termination of
employment by reason of death or disability, and any vested but
unpaid Retention Bonus Installment shall be paid promptly in
accordance with section 2(a) .
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
Separation Benefits 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
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