Amended and Restated Employment
Agreement
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
“Agreement”) is made and entered into effective as of
April 23 rd ,
2007 (“Effective Date”), by and between THORATEC
CORPORATION, a California corporation (the “Company”),
and Gerhard F. Burbach (“Executive”) and amends and
restates an employment agreement between the Company and Executive
dated as of January 13, 2006, and amended as of May 12,
2006.
THE
PARTIES AGREE AS FOLLOWS:
1.1
Title . From January 17, 2006 (the “Hire
Date”) until the termination of this Agreement, as provided
herein, Executive shall serve as the President and Chief Executive
Officer 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. During the period that Executive serves as
President and Chief Executive Officer, the Company shall take all
reasonable and lawful action necessary and appropriate to cause
Executive to be nominated for and elected to the Board of Directors
of the Company (the “Board”).
1.2
Duties . Except as provided in Section 4.1, Executive
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. Executive shall report to the Board.
2.1
Base Salary . Effective as of the Effective Date, Executive
shall receive for his services under this Agreement an annual base
salary of four hundred thousand ($400,000) dollars. The base salary
may be increased annually at the sole discretion of the
Board.
2.2
Annual Target Bonus . Effective as of the Effective Date,
Executive will be eligible for an annual incentive bonus equal to a
target amount of eighty percent (80%) of Executive’s base
salary. Such annual incentive bonus shall be subject to the
achievement of certain individual and corporate objectives, as
shall be set by the Board, or a designated committee thereof, in
consultation with Executive, as well as to the terms and conditions
of the Company’s incentive compensation plan applicable to
executive officers. The Board, or a designated committee thereof,
shall meet on an annual basis to determine, in consultation with
Executive, the goals and formula for bonus payment for each year of
employment under this Agreement.
(a)
Initial Stock Options . Effective as of the Hire Date,
Executive shall be granted stock options to purchase 375,000 shares
of the common stock of the Company (the “Initial Stock
Options”). The options shall be incentive stock options to
the maximum extent permissible under applicable tax laws, and the
balance of the options will be non-qualified stock
options. The
exercise price of the Initial Stock Options shall equal the closing
price of the Company’s common stock on the Hire Date, as
determined by the Board, or a designated committee thereof.
Twenty-five percent (25% ) of the Initial Stock Options shares
shall vest and become exercisable after the first twelve
(12) months of continuous service by Executive after the Hire
Date, and the remaining Initial Stock Options shares shall vest and
become exercisable in equal annual installments over the next three
(3) years of continuous service by Executive. Notwithstanding
the terms of any agreements related to the grant of such options to
the contrary, upon the occurrence of a Change of Control, as
defined below, Executive shall vest in all remaining unvested
Initial Stock Options shares. The grant of each such option shall
be subject to the other terms and conditions set forth in the
Company’s 1997 Stock Option Plan and in the Company’s
standard form of stock option agreement.
(b) The
Executive shall be eligible for periodic grants of stock options,
as may be approved by the Board, or a designated committee thereof,
in its sole discretion. Such stock options must be exercised within
the time period specified in the applicable stock option agreement,
the applicable Company equity compensation plan and this
Agreement.
2.4
Restricted Share Grant .
(a)
Initial Restricted Stock Grant . Executive shall be granted,
as soon as administratively practicable, 50,000 shares of
restricted common stock of the Company (“Initial Restricted
Stock”). The restrictions shall lapse as to the first twenty
percent (20%) increment (or 10,000 shares) on February 24,
2007, and thereafter in twenty percent (20%) increments (or 10,000
shares) upon the second, third, fourth and fifth anniversaries of
the Hire Date. Notwithstanding the terms of any agreements related
to the grant of the Initial Restricted Stock to the contrary, upon
the occurrence of a Change of Control (as defined below),
(a) the restrictions on the Initial Restricted Stock shall,
upon such occurrence, immediately lapse as to fifty percent (50%)
of the number of shares of Restricted Stock that at such date are
still restricted and (b) upon the earlier of (i) the one
(1) year anniversary of the effective date of such Change of
Control, or (ii) such date after the date of such Change of
Control when Executive voluntarily terminates his employment for
Good Reason or his employment is involuntary terminated without
Cause by the Company, the restrictions on the Restricted Stock
shall immediately lapse as to the remainder, if any, of the shares
of Restricted Stock that are then still otherwise
restricted.
(b) The
Executive shall be eligible for periodic grants of restricted
stock, as may be approved by the Board, or a designated committee
thereof, in its sole discretion. Such restricted stock will vest
within the time period specified in the applicable equity grant
agreement, the applicable Company equity compensation plan and this
Agreement.
2.5
Acceleration of Stock Options and Stock Grants Upon A Change of
Control .
(a) In
the event of a Change of Control of the Company, any options to
purchase Company common stock, shares of restricted stock or
restricted stock units (collectively, “Equity Units”)
that have been granted to the Executive by the Company that
are
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outstanding,
but not yet exercisable or as to which restrictions have not yet
lapsed, in whole or in part, as of the effective date of such
Change of Control, shall
(i) with
respect to all Equity Units granted to Executive prior to
April 2007, become fully vested and exercisable and shall be
otherwise exercisable in accordance with the terms of the stock
option grant, restricted stock grant or restricted stock unit grant
and applicable Company stock option or incentive stock plan;
and
(ii) with
respect to all Equity Units granted to Executive during or
subsequent to April 2007, if the Company terminates the
employment of the Executive without Cause on or within eighteen
(18) months after a Change of Control, or if the Executive
terminates employment with the Company for Good Reason during such
period, all such Equity Units shall become fully vested and
exercisable and shall be otherwise exercisable in accordance with
the terms of the stock option grant, restricted stock grant or
restricted stock unit grant and applicable Company stock option or
incentive stock plan.
(b) Notwithstanding
anything in this section 2.5 to the contrary, sections 2.5 (a)
(i) and (ii) hereinabove shall not apply to the Initial
Stock Options and the Initial Restricted Stock, which shall be vest
pursuant to section 2.4 above.
3.1
Benefits Generally . Executive shall be eligible to
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. Executive shall be entitled to paid vacation of four
(4) weeks per annum in accordance with the standard policies
and procedures of the Company.
4.1
Other Affiliations . Executive 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 Executive’s
employment under this Agreement, unless Executive has received
written approval to do so from the Board; provided, however, that
it is hereby agreed and acknowledged that Executive may continue to
serve as a director of Digirad Corporation. Executive shall at all
times be subject to the obligations of Executive Confidential
Information and Inventions Agreement to be executed by Executive
pursuant to Section 5 of this Agreement, including when
performing services for others permitted under this
Section 4.1.
4.2
Conflict of Interest . Executive warrants that
(a) Executive is not obligated under any other employment,
consulting, or other agreement which would affect the
Company’s rights or Executive’s duties under this
Agreement, and (b) this Agreement is not in conflict with
Executive’s commitments to any party.
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5.
Confidentiality . On or prior to the Hire Date, Executive
shall execute and deliver to the Company the Executive Confidential
Information and Inventions Agreement in the form attached hereto as
Exhibit A.
6.1
Employment At Will. Executive understands and agrees that
employment with the Company is “at will”, which means
that either Executive or the Company may terminate the employment
relationship at any time with or without cause. The Company may
terminate Executive’s employment for Cause (as defined below)
immediately or other than for Cause upon fifteen
(15) days’ written notice to Executive. Executive may
terminate his employment for any reason upon thirty
(30) days’ written notice to the Company of such
termination. If this Agreement is terminated by the Company for
Cause or by Executive (except for Good Reason after a Change of
Control, each such term as defined below), Executive shall not be
entitled to any benefits under this Section 6 or to any other
separation benefits or severance benefits of any kind.
6.2
Termination of Executive Without Cause . If
Executive’s employment is involuntarily terminated by the
Company without Cause, Executive shall be paid a severance pay
benefit equal to two (2) times Executive’s then-current
annual base salary. Such amount shall be payable in compliance with
Section 6.9, in a cash lump sum as soon as practicable (as
provided by law) after he executes and delivers an effective
release of claims, in a form acceptable to the Company and at the
time specified by the Company, and remains in compliance with all
applicable restrictive covenants, including those set forth in this
Agreement.
6.3
Termination of Executive After a Change of Control .
Notwithstanding Section 6.2, if Executive would otherwise have
been entitled to benefits pursuant to Section 6.2 but his
involuntary termination of employment by the Company occurs on or
within eighteen (18) months after a Change of Control, or if
Executive terminates his employment with the Company for Good
Reason during such period, Executive shall be paid in lieu of the
severance pay benefit described in Section 6.2 a Change of
Control severance pay benefit equal to two and one-half (2.5) times
Executive’s then-current annual base salary plus two and
one-half (2.5) times the greatest of (a) the target bonus for the
year preceding the year in which Executive’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 compliance with
Section 6.9, in a cash lump sum after Executive’s
termination of employment and after he executes and delivers an
effective release of claims, in a form acceptable to the Company
and at the time specified by the Company, and remains in compliance
with all provisions of this Agreement.
6.4
COBRA Benefit . If Executive is entitled to receive benefits
pursuant to Section 6.2 or 6.3, and if Executive elects health care
continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”), as provided by
the Company’s group health plan, then in each of the first
twelve (12) consecutive months following termination of
employment that the Executive has not become employed by another
company which offers health insurance generally comparable with
that of the Company at the time of Executive’s termination,
the Company shall pay in monthly payments at the beginning of
each
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such month, an
amount equal to the monthly amount paid by the Company immediately
before termination of employment for the Executive’s health
coverage.
6.5
Definitions . For purposes hereof, the following terms have
the following meanings:
(a) “Cause”
shall mean (A) Executive’s material misappropriation of
property of the Company (including its subsidiaries) that is
intended to result in a personal financial benefit to himself or to
members of his family; (B) Executive’s conviction of, or
plea of guilty or no contest to, a felony, which the Company
reasonably believes has had or will have a material detrimental
effect on the Company’s reputation or business;
(C) Executive’s act of gross negligence or willful
misconduct (including but not limited to any willfully dishonest or
fraudulent act or omission) taken in connection with the
performance or intentional nonperformance of any of his duties and
responsibilities as an employee or continued neglect of his duties
to the Company (including its subsidiaries); or
(D) Executive’s continued willful or grossly negligent
failure to comply with the lawful directions of the Board;
provided, however, that the Board will deliver to Executive a
written demand for performance that describes the basis for its
belief that Executive has not substantially performed his duties
and Executive fails to cure such act or omission to the
Board’s reasonable satisfaction, if such act or omission is
reasonably capable of being cured, no later than ten
(10) business days following delivery of such written
demand.
(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 (D) a
change in the composition of the Board 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, 2006 or (y) are elected, or nominated for
election, to the Board 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 Executive or a requirement that
Executive work at a facility more than 25 miles from the
Company’s headquarters in Pleasanton, California.
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6.6
Gross-Up for Excise Tax. In the event that any payment and
any separation benefit or other benefit (including without
limitation, any acceleration of Initial Stock Options, Initial
Restricted Stock or Equity Units (as defined herein)) payable or
due to or for the benefit of, or received by or on behalf of, the
Executive, whether under this Agreement or otherwise (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 Executive shall be paid an additional payment (a
“Gross-Up Payment”) in an amount such that after
payment by Executive of all taxes, including, without limitation,
any income taxes and Excise Tax imposed upon the Gross-Up Payment,
Executive shall retain the full amount of the Payment without being
reduced by the Excise Tax imposed upon the Payment. For avoidance
of doubt, Executive and Company agree that this Section 6.6
shall not be i
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