EXHIBIT 10.31

         
TO:
       

       
 
       

  2005 EXECUTIVE INCENTIVE PLAN (EIP)    

THORATEC CORPORATION

EXECUTIVE INCENTIVE PLAN (EIP)

Cardiovascular Business

FY 2005

 

--------------------------------------------------------------------------------

 

         
TO:
       

       
 
       

  2005 EXECUTIVE INCENTIVE PLAN (EIP)    

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 2, 2005, the beginning of the plan year, and will
continue in effect until December 31, 2005, 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

 

--------------------------------------------------------------------------------

 

         
TO:
       

       
 
       

  2005 EXECUTIVE INCENTIVE PLAN (EIP)    

   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 corporate
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
Human Resources.   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. 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:

                                                      Revenue Cash     Operating
Earnings (1)               Goal     Award     Goal     Award  
Threshold
  = to, or >   $ *       50 %   $ *       50 %
Target
  = to, or >   $ *       100 %   $ *       100 %

     Note: If revenue is less than $* (95% of target), no payment is earned for
that objective. If Cash Operating 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 cash
operating earnings information may be released at the end of each quarter, after
earnings have been disclosed to the public.

--------------------------------------------------------------------------------

(1)     Cash operating earnings is defined as GAAP net income for the
Cardiovascular Division excluding the effect of amortization of goodwill and
purchased intangibles, in process research and development, merger restructuring
and unusual costs, stock-based employee compensation   * Amounts to be
determined by the Compensation and Option Committee of the Board of Directors.

 

--------------------------------------------------------------------------------

 

         
TO:
       

       
 
       

  2005 EXECUTIVE INCENTIVE PLAN (EIP)    

    expense, income tax expense (benefit) and special incentive awards.
Additionally, other income/expenses at the Corporate level are excluded as well
as all Corporate departmental expenses related to Corporate Administration,
Investor Relations, Finance & Accounting, Human Resources and Information
Technology and income and expenses related to the ITC Division.   VIII.  
Over-Achievement Award Opportunity/Performance Accelerator            In
addition, each EIP participant will receive a [x]** % increase for every [y]**%
increase in Cash Operating 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 2005 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 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.

--------------------------------------------------------------------------------

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

 

--------------------------------------------------------------------------------

 

         
TO:
       

       
 
       

  2005 EXECUTIVE INCENTIVE PLAN (EIP)    

ACKNOWLEDGEMENT

I
                                                                                
hereby acknowledge that I have received, read and understand the 2005 Executive
Incentive Plan and agree to the conditions therein.

                  Signature   Date