Exhibit 10.21

 

SEPARATION BENEFITS AGREEMENT

 

THIS SEPARATION BENEFITS AGREEMENT is made as of this 13th day of October (this
“Agreement”), by and between THORATEC CORPORATION, a California corporation (the
“Company”), and Niamh Pellegrini (the “Executive”) and is intended to supersede
any and all separation benefits plans, offer letters or understandings
previously entered into between Executive and the Company with respect to such
benefits (collectively, the “Original Separation Benefits Agreements”).

 

WITNESSETH

 

WHEREAS, the Company desires to employ Executive and in order to retain the
services of Executive, the Company is willing to provide certain severance and
other benefits to Executive as described herein; and

 

WHEREAS, by reason of Executive’s employment with the Company, Executive will
receive access to and possession of Company Confidential Information (as more
fully set forth in Exhibit A), as shall exist from time to time; and

 

WHEREAS, the Company and Executive each desire to make certain changes to the
Original Separation Benefits Agreements to be reflected in this Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants and promises hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:

 

1.             Effectiveness.  This Agreement is effective as of the date first
noted above.

 

2.             Separation Benefits.

 

(a)           Termination of Executive Without Cause.  If Executive’s employment
is involuntarily terminated by the Company without Cause (as defined below),
Executive shall be paid a severance pay benefit equal to one (1) times
Executive’s then-current annual base salary.  Such amount shall be payable in
compliance with Section 7, in a cash lump sum within sixty (60) days after
Executive’s termination of employment, subject to Executive (i) executing and
not revoking an effective release of claims, in a form acceptable to the Company
(a “Release”) no later than fifty-two (52) days following such termination of
employment and (ii) remaining in compliance with all applicable restrictive
covenants, including those set forth in this Agreement and the Employee
Confidential Information and Inventions Agreement between the Company and
Executive attached as Exhibit A hereto (the “ECII Agreement”).

 

(b)           Termination of Executive After a Change of Control. 
Notwithstanding Section 2(a), if Executive would otherwise have been entitled to
benefits pursuant to Section 2(a) but Executive’s involuntary termination of
employment without Cause

 

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by the Company occurs on or within eighteen (18) months after a Change of
Control (as defined below), or if Executive terminates employment with the
Company for Good Reason (as defined below) during such period, Executive shall
be paid in lieu of the severance pay benefit described in Section 2(a) a Change
of Control severance pay benefit equal to two (2) times Executive’s then-current
annual base salary plus two (2) times the greatest of (i) the target bonus for
the year preceding the year in which Executive’s termination occurs, (ii) the
actual bonus for such prior year or (iii) the target bonus for the year in which
the termination of employment occurs. Such amounts shall be payable in
compliance with Section 7, in a cash lump sum within than sixty (60) days after
Executive’s termination of employment, subject to Executive (i) executing and
not revoking a Release no later than fifty-two (52) days following such
termination of employment and (ii) remaining in compliance with all applicable
restrictive covenants, including those set forth in this Agreement and the ECII
Agreement.

 

(c)           COBRA Benefit.  If Executive is entitled to receive benefits
pursuant to Section 2(a) or 2(b), 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 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 an amount equal to the monthly amount paid by the Company
immediately before termination of employment for Executive’s health coverage.

 

(d)           For purposes of this Agreement, the following terms have the
following meanings:

 

(i)            “Cause” shall mean (A) Executive’s material misappropriation of
personal property of the Company (including its subsidiaries) that is intended
to result in a personal financial benefit to Executive or to members of
Executive’s 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
Executive’s duties and responsibilities as an employee or continued neglect of
Executive’s 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 Company after there has been delivered to Executive a
written demand for performance from the Company that describes the basis for its
belief that Executive has not substantially performed Executive’s duties and
Executive fails to cure such act or omission to the Company’s reasonable
satisfaction, if such act or omission is reasonably capable of being cured, no
later than five (5) business days following delivery of such written demand.

 

(ii)           “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

 

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the Company’s then outstanding voting securities; (B) the consummation of a sale
of substantially all of the Company’s assets; (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 outstanding 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 February 15, 2007 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.

 

(iii)          “Good Reason” shall mean (A) any material reduction in
Executive’s duties or salary or bonus opportunity or (B) a requirement that
Executive works at a facility more than twenty-five (25) miles from the Company
facility where Executive is then employed without Executive’s written consent;
provided, that (A) and (B) shall not constitute grounds for Good Reason
termination unless Executive gives the Company written notice describing such
Good Reason event within thirty (30) days after the event first occurs, such
event is not corrected by the Company within thirty (30) days after the
Company’s receipt of such notice and Executive terminates employment no later
than one hundred eighty (180) days after the expiration of such correction
period.

 

3.     “Best Pay” Provision.  Notwithstanding anything in the Agreement to the
contrary, if any payment or benefit (including without limitation, any
acceleration of equity awards) Executive would receive pursuant to the Agreement
or otherwise (“Payment”) would (i) constitute a “parachute payment” within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”), and (ii) but for this sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then such Payment shall either be
(A) delivered in full or (B) delivered as to such lesser extent which would
result in no portion of such Payment being subject to the Excise Tax, whichever
of the foregoing amounts, taking into account the applicable federal, state and
local income taxes and the Excise Tax, results in the receipt by Executive on an
after-tax basis, of the largest payment, notwithstanding that all or some
portion the Payment may be taxable under Section 4999 of the Code.  Any
reduction in payments and/or benefits will occur in the following order: (1)
reduction of cash payments; (2) cancellation of accelerated vesting of equity
awards other than stock options; (3) cancellation of accelerated vesting of
stock options; and (4) reduction of other benefits paid to Executive.  In the
event that acceleration of vesting of equity award compensation is to be
reduced, such acceleration of vesting will be cancelled in the reverse order of
the date of grant of Executive’s equity awards.

 

4.             Benefits Subject to Execution of Release; Payments upon
Termination of Employment.  Executive shall not be entitled to receive any
amount or benefit pursuant to Section 2 of this Agreement unless Executive
executes and delivers a Release no later than fifty-

 

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two (52) days following such termination of employment and remains in compliance
with all provisions of this Agreement.  Except as otherwise provided in the
Agreement, any compensation provided under this Agreement that is payable upon a
termination of Executive’s employment, shall be paid within sixty (60) days of
such termination of employment.

 

5.             Acceleration of Stock Options and Stock Grants Upon Certain
Terminations Following a Change of Control.  In the event that the Company
terminates the employment of Executive without Cause on or within eighteen (18)
months after a Change of Control, or if Executive terminates employment with the
Company for Good Reason during such period, any options to purchase Company
common stock, shares of restricted stock or restricted stock units
(collectively, “Equity Units”) that have been granted to Executive by the
Company that are 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 termination of employment, 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
Thoratec stock option or incentive stock plan.

 

6.     Exclusivity of Agreement.  The benefits provided in this Agreement are in
lieu of any other severance-type benefits provided by the Company under any
other plan, agreement, arrangement or policy, notwithstanding the terms of any
such other plan, agreement, arrangement or policy.

 

7.     Section 409A.

 

(a)          Notwithstanding anything in this Agreement to the contrary, any
compensation or benefits payable under the Agreement that constitutes
“nonqualified deferred compensation” within the meaning of Section 409A and
which are designated as payable upon Executive’s termination of employment
(other than accrued obligations which must be paid upon such termination under
applicable law) shall be payable upon Executive’s “separation from service” with
the Company within the meaning of Section 409A (a “separation from service”),
regardless of when the termination of employment occurs.

 

(b)           To the maximum extent permitted by applicable law, amounts payable
in connection with a separation from service shall be paid in reliance upon
Treasury Regulation 1.409A-1(b)(9) (Separation Pay Plans) or Treasury Regulation
1.409A-1(b)(4) (Short-Term Deferrals).  However, notwithstanding anything to the
contrary in this Agreement, if Executive is deemed by the Company at the time of
Executive’s separation from service to be a “specified employee” for purposes of
Section 409A, to the extent delayed commencement of any portion of the benefits
to which Executive is entitled under this Agreement is required in order to
avoid a prohibited distribution under Section 409A, such portion of Executive’s
benefits shall not be provided to Executive prior to the earlier of (i) the
expiration of the six-month period measured from the date of Executive’s
separation from service with the Company or (ii) the date of Executive’s death. 
Upon the first business day following the expiration of the applicable period,
all payments deferred pursuant to the preceding sentence shall be paid in a lump
sum to Executive (or Executive’s estate or beneficiaries), and any remaining
payments due to Executive under this Agreement shall be paid as otherwise
provided herein.

 

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(c)           To the extent applicable, this Agreement shall be interpreted in
accordance with, and incorporate the terms and conditions required by, Section
409A and Department of Treasury regulations and other interpretive guidance
issued thereunder, including without limitation any such regulations or other
guidance that may be issued after the effective date of this Agreement. 
Notwithstanding any provision of this Agreement to the contrary, in the event
that the Company determines that any amounts payable hereunder will be
immediately taxable to Executive under Section 409A and related Department of
Treasury guidance, the Company may, to the extent permitted under Section 409A,
(i) cooperate in good faith to adopt such amendments to this Agreement and
appropriate policies and procedures, including amendments and policies with
retroactive effect, that they determine necessary or appropriate to preserve the
intended tax treatment of the benefits provided by this Agreement, preserve the
economic benefits of this Agreement and avoid less favorable accounting or tax
consequences for the Company and/or (ii) take such other actions as mutually
determined necessary or appropriate to exempt the amounts payable hereunder from
Section 409A or to comply with the requirements of Section 409A and thereby
avoid the application of penalty taxes under such section.

 

8.     Non-disparagement.  Except as required by law or legal process, Executive
agrees that during and subsequent to the term of this Agreement, Executive will
not disparage any aspect of the Company or its successors or assigns, including
but not limited to its officers, management, employees and products.

 

9.     Miscellaneous.

 

(a)           Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered personally
or sent by registered or certified mail, postage prepaid, addressed as follows
(or if it is sent through any other method agreed upon by the parties):

 

If to the Company:

 

Thoratec Corporation
6035 Stoneridge Drive
Pleasanton, CA 94588
Attention: Vice President of Human Resources

 

If to Executive:

 

At Executive’s address most recently

provided to the Company by Executive.

 

or to such other address as any party hereto may designate by notice to the
other, and shall be deemed to have been given upon receipt.

 

(b)           This Agreement by and between Executive and the Company
constitutes the entire agreement between the parties hereto with respect to the
matters herein, and

 

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supersedes and is in full substitution for any and all prior understandings or
agreements, whether oral or written, with respect to the matters herein,
including without limitation, any prior separation benefits plan or offer letter
between Executive and the Company, including the Original Separation Benefits
Agreements, provided, however, that the ECII Agreement shall remain in full
force and effect and shall not be superseded or substituted by this Agreement.

 

(c)           This Agreement may be amended only by an instrument in writing
signed by the parties hereto, and any provision hereof may be waived only by an
instrument in writing signed by the party against whom or which enforcement of
such waiver is sought.  Notwithstanding the foregoing, the Company may in its
sole discretion, amend this Agreement at any time as may be necessary to avoid
the imposition of the additional tax under Section 409(A)(a)(1)(B) of the Code;
provided, however, that any such amendment shall be implemented in such a manner
as to preserve, to the greatest extent possible, the terms and conditions of the
Agreement as in existence immediately prior to any such amendment.  The failure
of any party hereto at any time to require the performance by any other party
hereto of any provision hereof shall in no way affect the full right to require
such performance at any time thereafter, nor shall the waiver by any party
hereto of a breach of any provision hereof be taken or held to be a waiver of
any succeeding breach of such provision or a waiver of the provision itself or a
waiver of any other provision of this Agreement.

 

(d)           This Agreement shall be binding upon and inure to the benefit of
the executors, administrators, heirs, successors, and assigns of the parties;
provided, however, that except as herein expressly provided, this Agreement
shall not be assignable either by the Company (except to an affiliate or
successor of the Company) or by Executive without the prior written consent of
the other party.  Any attempted assignment in contravention of this Section 9(d)
shall be void.

 

(e)           The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place.  As used in the Agreement, the “Company” shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.

 

(f)            This Agreement shall be governed by and construed in accordance
with the laws of the state of California, without reference to principles of
conflicts of law.  Executive hereby submits to the jurisdiction and venue of the
courts of the State of California and the Federal Courts of the United States of
America located within the County of Alameda for purposes of any action relating
to or arising out of this Agreement.  Executive further agrees that service upon
Executive in any such action or proceeding may be made by first class mail,
certified or registered, to Executive’s address as last appearing on the records
of the Company.

 

(g)           This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument.

 

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(h)           The headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning of
any provision hereof.

 

(i)            All provisions of this Agreement are intended to be severable. 
In the event any provision or restriction contained herein is held to be invalid
or unenforceable in any respect, in whole or in part, such finding will in no
way affect the validity or enforceability of any other provision of this
Agreement.  The parties hereto further agree that any such invalid or
unenforceable provision will be deemed modified so that it will be enforced to
the greatest extent permissible under law, and to the extent that any court of
competent jurisdiction determines any restriction herein to be unreasonable in
any respect, such court may limit this Agreement to render it reasonable in
light of the circumstances in which it was entered into and specifically enforce
this Agreement as limited.

 

(j)            Executive acknowledges and confirms that Executive has had the
opportunity to seek such legal, financial and other advice and representation as
Executive has deemed appropriate in connection with this Agreement.

 

(k)           The Company may withhold from any amounts payable to Executive
hereunder all federal, state, city or other taxes that the Company may
reasonably determine are required to be withheld pursuant to any applicable law
or regulation.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

EXECUTIVE

 

THORATEC CORPORATION

 

 

 

 

 

 

/s/ Niamh Pellegrini

 

/s/ D. Keith Grossman

Name: Niamh Pellegrini

 

Name:

D. Keith Grossman

 

 

Title:

President & CEO

 

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