Exhibit 10.4


 


WORLD HEART CORPORATION


 


CHANGE OF CONTROL AND SEVERANCE AGREEMENT


 


This Change of Control and Severance
Agreement (the “Agreement”) is dated as of September 8, 2009, by
and between Jal S. Jassawalla (“Employee”)
and World Heart Corporation (the “Company”).  This Agreement is intended to provide
Employee with certain benefits described herein upon the occurrence of specific
events.


 


RECITALS


 


A.            It is expected that another
company may from time to time consider the possibility of acquiring the Company
or that a change in control may otherwise occur, with or without the approval
of the Company’s Board of Directors. The Board of Directors recognizes that
such consideration can be a distraction to Employee and can cause Employee to
consider alternative employment opportunities. 
The Board of Directors has determined that it is in the best interests
of the Company and its stockholders to assure that the Company will have the
continued dedication and objectivity of the Employee, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company.


 


B.            Employee is party to an Employment
Agreement with the Company effective as of February 4, 2009 (the “Employment
Agreement”) which provides Employee with some severance benefits upon
termination of Employee’s employment with the Company.


 


C.            The Company’s Board of Directors believes
it is in the best interests of the Company and its stockholders to retain
Employee and provide incentives to Employee to continue in the service of the
Company.


 


D.            The Board of Directors
further believes that it is imperative to provide Employee with certain
benefits upon termination of Employee’s employment, in connection with a Change
of Control and otherwise, which benefits are intended to provide Employee with
financial security and provide sufficient income and encouragement to Employee
to remain with the Company, notwithstanding the possibility of a Change of
Control.


 


E.             To accomplish the foregoing
objectives, the Board of Directors has directed the Company, upon execution of
this Agreement by Employee, to agree to the terms provided in this Agreement.


 


Now therefore, in consideration of the mutual
promises, covenants and agreements contained herein, and in consideration of
the continuing employment of Employee by the Company, the parties hereto agree
as follows:


 


1.             At-Will
Employment.  The Company
and Employee acknowledge that Employee’s employment is and shall continue to be
at-will, as defined under applicable law, and that Employee’s employment with
the Company may be terminated by either party at any time 


 

















 


for any or no reason.  If Employee’s employment terminates for any
reason, Employee shall not be entitled to any payments, benefits, award or
compensation other than as provided in this Agreement.  The terms of this Agreement shall terminate
upon the earlier of (i) the date on which Employee ceases to be employed
as an officer of the Company, other than as a result of an involuntary
termination by the Company without Cause (as defined below) or Employee’s
resignation for Good Reason (as defined below); or (ii) the date that all
obligations of the parties hereunder have been satisfied.  A termination of the terms of this Agreement
pursuant to the preceding sentence shall be effective for all purposes, except
that such termination shall not affect the payment or provision of compensation
or benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement. 
The rights and duties created by this Section 1 may not be modified
in any way except by a written agreement executed by an officer of the Company
upon direction from the Board of Directors.


 


2.             Benefits
Upon Termination of Employment; Change of
Control Benefits.


 


(a)           Termination In Connection with or Following a Change
of Control.


 


(i)           Prior to February 4,
2011.  In the event that
prior to February 4, 2011, Employee’s employment is terminated as a result
of an involuntary termination other than for Cause (and other than as a result
of death or disability as disability is defined for purposes of the Company’s
long-term disability policies) or if Employee resigns for Good Reason, as of,
immediately prior to or at any time within twelve (12) months following the
effective date of a Change of Control, then, in addition to any severance
benefits provided to Employee pursuant to Section 7(b) and (c) of
the Employment Agreement, Employee will be entitled to receive severance
benefits as follows: (i) a lump sum severance payment equal to 75% of
Employee’s target annual bonus as in effect immediately prior to the Change of
Control, which shall be paid on the date that is sixty (60) days after the
effective date of the termination, (ii) continuation of the health
insurance benefits provided to Employee for Employee and Employee’s eligible
dependents immediately prior to the Change of Control at Company expense
pursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“COBRA”) or other applicable law until the earlier of
the date nine (9) months after the effective date of the termination or
the date upon which Employee is no longer eligible for such COBRA or other
benefits under applicable law, and (iii) each stock option to purchase the
Company’s common shares (“Common Stock”) and all shares of restricted
stock granted to Employee over the course of Employee’s employment with the
Company and held by Employee on the date of termination of employment shall
become immediately vested as to 75% of each of the then unvested options and
shares.  In addition, Employee will
receive payment(s) for all accrued and unpaid salary, bonuses and PTO as
of the date of Employee’s termination of employment.


 


(ii)           On or
After February 4, 2011. 
In the event that on or after February 4, 2011, Employee’s
employment is terminated as a result of an involuntary termination other than
for Cause (and other than as a result of death or disability as disability is
defined for purposes of the Company’s long-term disability policies) or if
Employee resigns for Good Reason, as of, immediately prior to or at any time
within twelve (12) months following the effective date of a Change of Control,
then Employee will be entitled to receive severance benefits as follows: (i) a
lump sum severance payment equal to nine (9) months of the base salary
which Employee was receiving immediately prior to the Change of Control plus
75% of 


 


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Employee’s target annual bonus
as in effect immediately prior to the Change of Control, which shall be paid on
the date that is sixty (60) days after the effective date of the termination, (ii) continuation
of the health insurance benefits provided to Employee for Employee and Employee’s
eligible dependents immediately prior to the Change of Control at Company
expense pursuant to the terms of COBRA or other applicable law until the
earlier of the date nine (9) months after the effective date of the
termination or the date upon which Employee is no longer eligible for such
COBRA or other benefits under applicable law, and (iii) each stock option
to purchase the Company’s Common Stock and all shares of restricted stock
granted to Employee over the course of Employee’s employment with the Company
and held by Employee on the date of termination of employment shall become
immediately vested as to 75% of each of the then unvested options and
shares.  In addition, Employee will
receive payment(s) for all accrued and unpaid salary, bonuses and PTO as
of the date of Employee’s termination of employment.


 


(b)           Termination Not In Connection with or Following a
Change of Control.  In the
event that on or after February 4, 2011, Employee’s employment is
terminated as a result of an involuntary termination other than for Cause (and other
than as a result of death or disability as disability is defined for purposes
of the Company’s long-term disability policies) or if Employee resigns for Good
Reason at any time other than as of, immediately prior to, or within twelve
(12) months following, the effective date of a Change of Control, then Employee
will be entitled to receive severance benefits as follows: (i) severance
payments during the period from the date of Employee’s termination until the
date nine (9) months after the effective date of the termination (the “Benefit
Period”) equal to the base salary which Employee was receiving immediately
prior to the termination date, which shall be paid during the Benefit Period in
equal installments in accordance with the Company’s standard payroll practices,
except that any and all payments that would otherwise have been made before the
sixtieth (60th) day after the date of Employee’s effective date of termination
(the “First Payment Date”) shall be made on the First Payment Date, (ii) continuation
of the health insurance benefits provided to Employee and Employee’s eligible
dependents immediately prior to the termination date at Company expense
pursuant to COBRA or other applicable law until the earlier of the date nine (9) months
after the effective date of the termination or the date upon which Employee is
no longer eligible for such COBRA or other benefits under applicable law, and (iii) if
Employee holds any outstanding options that have not reached the option’s
one-year cliff vesting requirement, the Company will waive the one-year cliff
vesting requirement of each such option and Employee will be credited with
vesting on the Employee’s termination date equal to 1/48th or
1/36th of the option shares,
as applicable based on the vesting schedule of the subject option, multiplied
by each full month of Employee’s employment since the vesting commencement date
of the option.  In addition, Employee
will receive payment(s) for all accrued and unpaid salary, bonuses and PTO
as of the date of Employee’s termination of employment.  Notwithstanding the foregoing, no severance
benefits shall be paid under this Section 2(b) if at or prior to the
time of the Employee’s termination or if in connection with the Employee’s
termination, the Company (i) is in a bankruptcy proceeding, whether
voluntary or involuntary, (ii) is in the process of liquidating or
dissolving, whether voluntary or involuntary, or (iii) the Board of
Directors has approved the liquidation, dissolution or winding down of the
Company.


 


(c)           Termination for Cause or Voluntary Resignation other
than for Good Reason.  If
Employee’s employment is terminated for Cause at any time or if Employee


 


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voluntarily resigns from the
Company at any time for any reason other than Good Reason, then Employee shall
not be entitled to receive payment of any severance benefits under this
Agreement.  Employee will receive payment(s) for
all accrued and unpaid salary and PTO as of the date of Employee’s termination
of employment and Employee’s benefits will be continued under the Company’s
then existing benefit plans and policies in accordance with such plans and
policies in effect on the date of termination and in accordance with applicable
law.


 


3.               Definition of Terms.  The following terms referred to in this
Agreement shall have the following meanings:


 


(a)           Change of Control.  “Change of Control” shall mean the
occurrence, in a single transaction or in a series of related transactions, of
any one or more of the following events: 
(i)  a sale or other disposition of all or
substantially all, as determined by the Board of Directors of the Company in
its sole discretion, of the consolidated assets of the Company and its
subsidiaries; (ii) a
merger, consolidation or similar transaction following which the Company is not
the surviving corporation; or (iii) a
merger, consolidation or similar transaction following which the Company is the
surviving corporation but the shares of the Company’s Common Stock outstanding
immediately preceding the merger, consolidation or similar transaction are
converted or exchanged by virtue of the merger, consolidation or similar
transaction into other property, whether in the form of securities, cash or
otherwise.  Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur (A) on account of the acquisition of securities of the Company by an
investor, any affiliate thereof or any other person that acquires the Company’s
securities in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of
equity securities or (B) on account of a sale of assets, merger or
other transaction effected exclusively for the purpose of changing the domicile
of the Company.


 


(b)           Cause.  “Cause” shall mean the occurrence of
any one or more of the following: (i) Employee’s conviction of any felony
or crime involving fraud, dishonesty or moral turpitude; (ii) Employee’s
participation in a fraud or act of dishonesty against the Company, an affiliate
of the Company or any successor to the Company that results in material harm to
the business of the Company, an affiliate of the Company or any successor to
the Company; or (iii) Employee’s intentional, material violation of any contract
between the Company, an affiliate of the Company or any successor to the
Company and Employee or any statutory duty Employee owes to the Company, an
affiliate of the Company or any successor to the Company that Employee does not
correct within thirty (30) days after written notice thereof has been provided
to Employee.


 


(c)           Good Reason.  “Good Reason” for Employee’s
resignation of Employee’s employment will exist following the occurrence of any
of the following without Employee’s consent: 
(i) a material diminution of Employee’s authority or
responsibilities as Executive Vice President/Chief Technology Officer; (ii) other
than as set forth in Section 3(c) of the Employment Agreement, a
material decrease of Employee’s compensation or benefits, unless the decrease
is proportional to an across-the-board decrease affecting all senior
executives; (iii) a material breach by the Company of any material
provision of this Agreement or any written employment agreement with Employee;
or (iv) an involuntary relocation of Employee’s


 


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principal
work location for the Company outside of San Francisco Bay Area.  Before any resignation for Good Reason,
Employee will provide the Company with specific written notice about the
circumstances allegedly constituting Good Reason within ninety (90) days after
the occurrence of the circumstances, and the Company will have thirty (30) days
to cure, if such conduct is reasonably susceptible to being cured.  A resignation for Good Reason must take place
within sixty (60) days after the end of the cure period.


 


4.             Parachute
Payments.  In the event that the acceleration and
severance benefits provided for in this Agreement (A) constitute “parachute
payments” within the meaning of Section 280G of the Internal Revenue Code
of 1986, as amended (the “Code”) and (B) but for this paragraph,
would be subject to the excise tax imposed by Section 4999 of the Code,
then Employee’s benefits hereunder shall be payable either: (X) in full,
or (Y) as to such lesser amount which would result in no portion of such
severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section 4999,
results in the receipt by Employee on an after-tax basis, of the greatest
amount of benefits hereunder, notwithstanding that all or some portion of such
benefits may be taxable under Section 4999 of the Code.  Any determination required under this
paragraph shall be made in writing by the public accountants designated by the
Company (the “Accountants”), whose determination shall be conclusive and
binding upon Employee and the Company for all purposes.  For purposes of making the calculations
required by this paragraph, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Section 280G and 4999 of
the Code.  The Company and Employee shall
furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this paragraph.  The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this paragraph.  In the
event that a reduction in payments and/or benefits is required under this
section 4, such reduction shall occur in the following order: (1) reduction
of cash payments; (2) reduction of acceleration of vesting of options and
shares; and (3) reduction of other benefits paid to Employee. If the
acceleration of vesting of options and shares is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order of the highest
price option grant or highest purchase price per share down to the lowest
priced option grant or lowest purchase price per share.


 


5.             Limitations
and Conditions on Benefits


 


(a)           Income and Employment
Taxes.  Employee agrees that Employee
shall be responsible for any applicable taxes of any nature (including any
penalties or interest that may apply to such taxes) that the Company reasonably
determines apply to any payment made hereunder, that Employee’s receipt of any
benefit hereunder is conditioned on Employee’s satisfaction of any applicable
withholding or similar obligations that apply to such benefit, and that any
cash payment owed hereunder will be reduced to satisfy any such withholding or
similar obligations that may apply.


 


(b)           Code Section 409A. 
All severance benefits to be paid upon a termination of employment under
this Agreement may be made only upon a “separation of service” within the
meaning of Section 409A of the Code and the Department of Treasury
regulations and other


 


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guidance promulgated thereunder (a “Separation from
Service”).  Notwithstanding any
provision to the contrary in this Agreement, if Employee is deemed by the
Company at the time of Employee’s Separation from Service to be a “specified
employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to
the extent delayed commencement of any portion of the benefits to which
Employee is entitled under this Agreement is required in order to avoid a
prohibited distribution under Section 409A(a)(2)(B)(i) of the Code,
such portion of Employee’s benefits will not be provided to Employee prior to
the earlier of (i) the expiration of the six-month period measured from
the date of the Employee’s Separation from Service or (ii) the date of
Employee’s death.  Upon the first
business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period,
all payments deferred pursuant to this Section 5(b) will be paid in a
lump sum to Employee (or Employee’s estate or beneficiaries), and any remaining
payments due under the Agreement will be paid as otherwise provided
herein.  For purposes of Section 409A
of the Code, Employee’s right to receive the payments of compensation pursuant
to the Agreement will be treated as a right to receive a series of separate
payments and accordingly, each payment will at all times be considered a
separate and distinct payment.  This
paragraph is intended to comply with the requirements of Section 409A of
the Code so that none of the severance payments and benefits to be provided
hereunder will be subject to the additional tax imposed under Section 409A
of the Code and any ambiguities herein will be interpreted to so comply.  Employee and the Company agree to work
together in good faith to consider amendments to this Agreement and to take
such reasonable actions which are necessary, appropriate or desirable to avoid
imposition of any additional tax or income recognition prior to actual payment
to Employee under Section 409A of the Code.


 


(c)           Release Prior to Receipt of
Benefits.  The Company’s
obligation to make the payments and provide the benefits hereunder shall be
conditioned upon (i) Employee’s execution and delivery to the Company of a
release of all claims that Employee then may have, in standard form and
content, within fifty (50) days following Employee’s Separation from Service
and (ii) such release shall not have been revoked by Employee within any
period permitted under applicable law.


 


6.             Conflicts.  Employee represents that
Employee’s performance of all the terms of this Agreement will not breach any
other agreement to which Employee is a party. 
Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement.  Employee further
represents that Employee is entering into or has entered into an employment
relationship with the Company of Employee’s own free will.


 


7.             Successors.  Any successor to the Company (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company’s business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession.  The terms of
this Agreement and all of Employee’s rights hereunder and thereunder shall
inure to the benefit of, and be enforceable by, Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.


 


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8.             Notice.  Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid.  Mailed notices to Employee shall be addressed
to Employee at the home address which Employee most recently communicated to
the Company in writing.  In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Secretary.


 


9.             Miscellaneous
Provisions.


 


(a)           No Duty to
Mitigate.  Employee
shall not be required to mitigate the amount of any payment contemplated by
this Agreement (whether by seeking new employment or in any other manner), nor
shall any such payment be reduced by any earnings that Employee may receive
from any other source.


 


(b)           Waiver.  No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by Employee and by an authorized officer of the
Company (other than Employee).  No waiver
by either party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a waiver of
any other condition or provision or of the same condition or provision at
another time.


 


(c)           Whole
Agreement.  No
agreements, representations or understandings (whether oral or written and
whether express or implied) which are not expressly set forth in this Agreement
or the Employment Agreement have been made or entered into by either party with
respect to the subject matter hereof. 
This Agreement supersedes any agreement concerning similar subject
matter dated prior to the date of this Agreement, except for the Employment
Agreement, and by execution of this Agreement both parties agree that any such
predecessor agreement, except for the Employment Agreement, shall be deemed
null and void.


 


(d)           Choice of
Law.  The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.


 


(e)           Severability.  If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.


 


(f)            Arbitration.  To ensure the rapid and economical resolution
of any and all disputes that arise in connection with this Agreement or
Employee’s termination with the Company, Employee and the Company agree that
any and all disputes, claims, or causes of


 


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action,
in law or equity, arising from or relating to the enforcement or interpretation
of this Agreement or the termination of Employee’s employment (collectively, “Claims”),
will be resolved to the fullest extent permitted by law exclusively by final,
binding, and confidential arbitration in San Francisco, California, conducted
by the American Arbitration Association (“AAA”) or its successors, under
the then applicable AAA rules by a single arbitrator.  Claims subject to this arbitration provision
will (i) include, but not be limited to, Claims pursuant to any federal,
state or local law or statute, including (without limitation) the Age
Discrimination in Employment Act, as amended; Title VII of the Civil Rights Act
of 1964, as amended; the Americans With Disabilities Act of 1990; the federal
Fair Labor Standards Act; and state anti-discrimination statutes; and Claims
pursuant to any common law, tort law or contract law, including (without
limitation) breach of contract or other promise, discrimination, harassment,
retaliation, wrongful discharge, fraud, misrepresentation, defamation, and
emotional distress; and (ii) exclude Claims that by law are not subject to
arbitration.  The arbitrator will:  (1) have the authority to compel
adequate discovery for the resolution of all Claims and to award such relief as
would otherwise be permitted by law; and (2) issue a written arbitration
decision including the arbitrator’s essential findings and conclusions and a
statement of the award.  The Company will
pay all of the arbitrator’s fees.  Employee and the Company acknowledge that, by agreeing to this
arbitration procedure, both Employee and the Company waive the right to resolve
any Claims through a trial by jury or judge or by administrative proceeding.  Nothing in this Agreement is intended to
prevent Employee or the Company from obtaining injunctive relief in court if
the award to which such party might obtain in arbitration may be rendered
ineffectual without provisional relief. 
As provided in the AAA rules, any arbitration award may be enforced by
any court of competent jurisdiction.


 


(g)           Legal Fees
and Expenses.  The parties
shall each bear their own expenses, legal fees and other fees incurred in
connection with the execution of this Agreement.


 


(h)           No
Assignment of Benefits.  The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or
other creditor’s process, and any action in violation of this Section 9(h) shall
be void.


 


(i)            Assignment
by Company.  The Company
may assign its rights under this Agreement to an affiliate, and an affiliate
may assign its rights under this Agreement to another affiliate of the Company
or to the Company.  In the case of any
such assignment, the term “Company” when used in a section of this Agreement
shall mean the corporation that actually employs the Employee.


 


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


 


The parties
have executed this Agreement on the date first written above.


 


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  WORLD
  HEART CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael Sumner Estes

  
	
   

  	
  Title:
  

  	
  Chairman,
  Board of Directors

  
	
   

  	
  Address:
  

  	
  1173
  Brown Avenue, Lafayette, CA 94549

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JAL
  S. JASSAWALLA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature:

  	
  /s/
  Jal S. Jassawalla

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  34
  East Altarinda Drive

  
	
   

  	
   

  	
  Orinda,
  CA 94563.

  
				



 


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