EXHIBIT 10.31
THORATEC CORPORATION
EXECUTIVE INCENTIVE PLAN (EIP)
Cardiovascular Business
FY 2006

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I.   Objective       Thoratec’s Executive Incentive Plan, hereinafter referred
to as EIP is intended to reward executive personnel who significantly impact and
influence Thoratec’s productivity in proportion to their accomplishment of
specified objectives.       The purpose of the plan is to ensure maximum return
to Thoratec by encouraging greater initiative, resourcefulness, teamwork and
efficiency on the part of senior management whose performance and
responsibilities directly affect company profits.       Awarding of the bonus
will be based on accomplishing a set of annual objectives, determined by the
Chief Executive Officer (“CEO”) and the Board of Directors, typically at the
beginning of the year. Bonus determinations and payouts will take place after
the financial statements have been prepared for the fiscal year.   II.  
Determination Of The Fund       The availability of, and participants in, the
fund will be set by the CEO and approved by the Board of Directors as part of
the annual budgeting process.   III.   Effective Date       The effective date
of this program is January 1, 2006, the beginning of the plan year, and will
continue in effect until December 30, 2006, or until terminated or amended by
the Board of Directors. This plan supersedes all prior EIP plans.   IV.  
Eligibility       Participation in the plan is limited to Officers and others in
comparable levels of responsibility who have a direct and significant influence
on Thoratec’s growth and profitability. Employees must be regular and not
eligible for any other Thoratec commission, bonus or incentive plan in order to
be eligible to participate in the EIP.       Participating employees will be
determined at the beginning of the fiscal year, or at such time during the
Fiscal Year that an employee achieves an eligible position. Employees will be
notified of their eligibility and plan objectives, as soon as possible after the
determination by the CEO or Board of Directors.       Individuals must be
employed by Thoratec at the close of the fiscal year in order to be eligible for
an award under the EIP except participants who are involuntarily terminated due
to a divestiture, plant closing, reorganization or reduction in force during the
plan year may receive an award on the prorated basis described in Section VIII,
Plan Administration, Prorated Awards, [subject to approval by the CEO]. These
monies will be paid out at the usual and customary time of payment of all
bonuses. For purposes of this plan, termination shall mean the day the employee
leaves the job, which may not necessarily be the last day on the payroll.   V.  
Incentive Objectives       Objectives will be agreed to by the CEO with the
Executive Officers reporting to him and with concurrence by the Board of
Directors as necessary. Generally, there will be a minimum of four up to a
maximum of seven objectives, which will include two or more financial
objectives. Each objective will be weighted according to its importance, which
weight will determine the percentage of the bonus awarded for completion of that
objective. (See Section VI below.)     After approval, copies of these goals
must be submitted to the Vice President of Administration.   VI.   Bonus
Opportunity and Award       The award opportunity will be expressed as a
percentage of the participant’s base salary at the close of the fiscal year. The
award will be approved by the Board of Directors or the CEO, and will be
consistent with the participant’s peers within the company.       The amount
that a participant actually receives for the full fiscal year will be based upon
the extent to which the set objectives have been achieved. The participant will
receive a percentage of the total award opportunity corresponding to the
percentage of each objective accomplished and the weight assigned to the
objective.

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    Evaluations of performance against management and business plan objectives
are made for the full year prior to fiscal year-end payment.   VII.  
Performance Goal and Payout       In addition to your individual goals, everyone
will have two company-oriented financial goals that will be achieved according
to the following guidelines:

                                                              (1)        
Revenue   Non-GAAP Income Before Tax         Goal   Award   Goal   Award        
 
Threshold = to, or >
 
= to, or >
  $ *       50 %   $ *       50 %
Target = to, or >
 
= to, or >
  $ *       100 %   $ *       100 %

Note:   If Cardiovascular division revenue is less than $* (95% of target), no
payment is earned for that objective. If Cardiovascular NGIBT earnings is less
than $* (90% of target), no payment is earned for that objective. If actual
results fall between threshold and target, interpolate between them to get
actual payout percentage. This percentage will be multiplied times the weight
given the objective in your individual plan to determine the achievement.
Quarterly revenue and NGIBT earnings information may be released at the end of
each quarter, after earnings have been disclosed to the public.     (1)
Cardiovascular NGIBT earnings is defined as GAAP net income before taxes for the
Cardiovascular division excluding, as applicable, amortization of intangibles,
in-process R&D, impairment of intangibles, certain litigation, restructuring and
CEO transition expenses and certain other unusual or non-recurring costs, and
also excluding share-based compensation expense under SFAS No. 123(R) and
changes in the value of the “make-whole” provision of our convertible notes and
special incentive awards.   VIII.   OVER-ACHIEVEMENT AWARD
OPPORTUNITY/PERFORMANCE ACCELERATOR       In addition, each EIP participant will
receive a [x]**% increase for every [y]**% increase in Cardiovascular NGIBT
earnings over the target level.   IX.   Plan Administration       Prorated
Awards. Individuals who are promoted to eligible positions during the plan year,
new hires into eligible positions and eligible employees who are either on leave
or on active written warning for part of the year may be awarded partial bonuses
under this program, based on the accomplished objectives and their respective
weights, subject to the approval of the CEO.       Transfers. In the event of
transfer of an eligible participant to another position or department, the
transferring manager will evaluate EIP results for prorated award (see Prorated
Awards above) at the end of the year, and forward copies to the Human Resources
Department. The hiring manager will be responsible for setting the key business
plan objectives for the balance of the year, if applicable, and forwarding the
original to Human Resources for approval. Awards based on these objectives will
be prorated (see Prorated Awards above) as well, for end of the year payment.  
    Authority. The Board of Directors shall have the full power and authority to
construe, interpret and administer the plan. All decisions, actions or
interpretations of the Board of Directors shall be final and conclusive and
binding on all parties. This program shall be administered by the Human
Resources Department.   X.   General Provisions

  •   The Executive Incentive Plan for 2006 may be reviewed and revised at the
Board’s discretion.     •   Nothing in this plan shall be construed to limit in
any way the right of Thoratec Corporation to terminate an employee’s employment
at any time, with or without cause or notice, nor shall it be evidence of any
agreement or understanding, expressed or implied, that Thoratec or any of its
subsidiaries will employ an employee in any particular position, for any
particular period of time, ensure participation in any incentive programs, or
the

 

*   Amounts to be determined by the Compensation and Option Committee of the
Board of Directors.   **   Percentages for [x] and [y] to be determined by the
Compensation and Option Committee of the Board of Directors.

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granting of awards from such programs as they may from time to time exist or be
constituted. Thoratec reserves the right to discontinue or alter the plan at its
sole discretion at any time with or without notice.
ACKNOWLEDGEMENT
I                                          hereby acknowledge that I have
received, read and understand the 2006 Executive Incentive Plan and agree to the
conditions therein.

               
 
     
 
   
 
           
Signature
      Date    

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