**EXHIBIT 10.3**

 

January 24, 2005

 

 

Pratap S. Khanwilkar, MS, MBA1651 E. Shadow CoveSalt Lake City, Utah 84121

 

Dear Pratap:

 

Further to recent discussions, we are please toconfirm our offer of employment with World Heart Corporation’s (the “Company”or “WorldHeart”) subsidiary World Heart Inc. for the position of VicePresident, Rotary Systems and Business Development, reporting to Jal S.Jassawalla, the Company’s President and Chief Executive Officer.

 

As an officer of the Company, you will serve as the seniorexecutive at the Salt Lake City location of the Company and oversee and enablesuccessful development and commercialization of the adult HeartQuest LVAD.  An additional key responsibility will be toevaluate and recommend business development opportunities that would result inexpanding the applicability of existing product lines and the acquisition ofnew products and services that meet the Company’s objectives.

 

The following is designed to serve as a record of theessential terms of employment, which we trust, are in accordance with ourdiscussions.

 
| COMMENCEMENT OF EMPLOYMENT: |   | On the closing of the transactions (the  “Closing Date”) contemplated by the Asset Purchase Agreement, made on or  about January 25, 2005 (“Signing Date”), between World Heart Corporation  and MedQuest Products, Inc. (“MedQuest”). This offer is contingent on  the closing of the above transaction, which is expected to occur in  March 2005.                                                                                                                                                     |
|-----------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| REMUNERATION:               |   | Your initial gross base salary will be  $165,000 per annum payable bi-weekly. Your base salary will be reviewed in  January 2006, in accordance with the Company’s compensation policy.                                                                                                                                                                                                                                                                                                                                                     |
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| OPTIONS:                    |   | On the Closing Date and upon joining the  Company, you will receive a grant of options to purchase 425,000 common  shares of the Company (“Date of Grant”), subject to shareholders’ approval  and regulatory approval. The options shall be exercisable at a price per  share based on the closing price of the common shares of the Company on the  Toronto Stock Exchange on the day immediately prior to the Signing Date. The  options will vest as to one-third on each of the first, second and third  anniversary dates of the |

 

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|              |   | Date of Grant. In the event that your  employment is terminated by the Company without cause (as determined in good  faith by the Company), your unvested options would continue to vest over the  three year vesting period. Except as set out in this letter, the options  shall otherwise be subject to the terms of the Company’s Employee Stock  Option Plan and any option grant documents. At the discretion of the  Company’s Board of Directors, you will also be eligible to receive future  grants of options in the Company.                                                                                                                                                                                                                                                                |
|-------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| BENEFITS:         |   | You will be eligible to participate in  the WorldHeart medical, vision and dental benefit program the first day of  the month following your date of hire. We will arrange medical insurance  coverage such that there is no gap in your coverage in the transition from  MedQuest to WorldHeart. You will be covered under the group life insurance  program effective your date of hire. You will be eligible to participate in  the WorldHeart 401(k) Savings & Investment Plan on the first of the  month following thirty (30) days of employment. The Company’s Employee  Handbook outlines other WorldHeart benefits for which you might be eligible,  and other applicable corporate policies that you are expected to follow, if  not superseded by the terms in this offer of employment. |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| YEARS OF SERVICE: |   | As a result of WorldHeart’s purchase of  certain assets of MedQuest, WorldHeart and MedQuest agreed that your years of  service with MedQuest will be recognized by the Company to determine your  eligibility to participate in our employee benefit plans and programs,  including vacation policies, severance, and vesting of 401K matched  contributions, as in effect from time to time. In accordance with our  vacation policy for 2005, you will accrue vacation in 2005 based on four  (4) weeks of annual vacation. You will also be allowed to carry forward  a maximum of 20 days of accrued vacation from MedQuest to WorldHeart.                                                                                                                                                         |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| OFFICE HOURS:     |   | Your normal workweek will consist of  forty (40) hours to be usually worked over a five-day workweek. Due to the  nature of the Company’s business and the executive status of your position,  it may be necessary from time to time to adjust your schedule and work                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

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|                          |   | additional hours.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| PROPRIETARY RIGHTS AGREEMENT: |   | As a condition of employment you must  sign the attached agreement regarding confidential information and proprietary  rights (Proprietary Rights Agreement). Due to the nature of the transaction  between WorldHeart and MedQuest and your resulting transition from employment  at MedQuest to employment at WorldHeart, it is understood that you will apply  the knowledge, know-how, and information acquired as the result of employment  at MedQuest to your employment and job responsibilities at WorldHeart.  |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ELIGIBILITY TO WORK:          |   | In order to comply with federal  regulations relative to “right to work” authorization (Immigration Reform Act  of 1986), you will be required to present forms and documentation which  establish your eligibility to work in the United States. Please complete  Section I of the enclosed Form I-9, and bring it with you on your  first day of employment with either: One document from List A; or two  documents, one from List B and one from List C. Documents presented must  be originals. |

 

Please bring your employment eligibility documentswith you on your start date.  If you haveany further questions, do not hesitate to call Monica Lippis at (510) 563-4737.

 

This agreement may be terminated by either the Companyor yourself at any time upon delivery of two weeks prior written notice, or anyapplicable minimum notice period prescribed by statutory or regulatory law.

 

This offer does not constitute an agreement ofguaranteed employment for any specific term or any other type of employmentcontract.  As with all Company employees,your employment with the Company is “at will” and may be terminated by your orthe Company at any time and with or without cause.

 

Without in any way limiting the foregoing, the Companyand MedQuest agreed that, as a part of the asset purchase transaction, youwould be entitled to receive severance as follows:

 

(i)                  If your employment is terminated by the Company without cause (asdetermined in good faith by the Company) during the period from the date youcommence employment with the Company through the first anniversary of youremployment with the Company, you will be paid severance (in accordance with theCompany’s normal payroll policies) in the amount equal to your base salary thatwould be payable for a period of 24 months less the number of months you wereemployed by the Company.

 

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(ii)               After the first anniversary of the commencement of your employmentwith the Company, you will be eligible to receive severance consistent with anyseverance plan in effect at that time for similarly executives of the Company.

 

Notwithstanding the foregoing provisions, to theextent required to comply with Section 409A of the U.S. Internal RevenueCode, as amended, no severance payments will be made to you until after theexpiration of six (6) months following your separation from service withthe Company.  This six-month delay inpayment, if applicable, will not reduce the aggregate amount of any severancethat you may receive under the provisions stated above, and any period duringwhich you may be eligible to receive severance as stated in paragraph (i) immediatelyabove will be extended by the period of such delay.

 

This offer letter states the entire agreement of theparties with respect to your employment with the Company and supersedes andreplaces all prior and contemporaneous agreements, understandings, negotiationsand discussions whether oral or written of the parties.  Also, beyond this letter there are nowarranties, representations, understandings or other agreements between theparties in connection with the subject matter except as specifically set forthin this offer letter and none has been relied on.

 

I am certain that you will find working at the Companyto be both challenging and rewarding and we look forward to you joining us.

 
| Sincerely,            |
|-----------------------|
|                  |
| /s/ Jal S. Jassawalla |   |
|                  |
| Jal S. Jassawalla     |
| President and CEO     |

 

 

I have been given a copy of this letter and have readand understand its terms.  I herebyaccept the terms and conditions of employment outlined above.

 

 
| ACCEPTED | Date:      | /s/ Pratap Khanwilkar |   |
|----------|------------|-----------------------|--------|
|     |       |                  |
|     | Signature: | 1/24/05               |   |
|          |            |                       |        |  |

 

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**PROPRIETARY RIGHTSAGREEMENT**

 

I, Pratap Khanwilkar, recognize that World Heart Inc.(the Corporation) is engaged in the commercialization of circulatory supportmedical devices, and that the Corporation will also provide technical support,consultation and training services relating to those products.  I also recognize the importance of protectingthe Corporations Confidential Information and related rights acquired throughthe Corporations expenditure of time, effort and money.

 

Therefore, because I wish to provide services to theCorporation on the terms and conditions of my offer of employment letter datedas of January 24, 2005, between the Corporation and me in the capacity inwhich I will receive and/or contribute to the Corporation’s ConfidentialInformation, and in consideration of the salary and other amounts that I willreceive from the Corporation for my services, I agree to be bound by thefollowing terms and conditions:

 

1.0                                 *For the purposes of this agreement:*

 

1)                                      **Confidential Information** includes any of the following:

 

(i)                                     any and all versions of the products, and related documentationowned or marketed by the Corporation;

 

(ii)                                  all developments (as defined below);

 

(iii)                               information regarding the Corporation business operations, methodsand practices, including marketing strategies, product pricing, margins, staffremuneration and information regarding the financial affairs of theCorporation;

 

(iv)                              the names of the Corporations clients and the names of the suppliersto the Corporation, and the nature of the Corporation relationships with theseclients and suppliers;

 

(v)                                 technical and business information of or regarding the clients ofthe Corporation obtained in order for the Corporation to provide such clients withthe Corporations products and services, including information regarding productrequirements and the business operations, methods and practices and productplans of such clients; and

 

(vi)                              any other Trade Secrets (as defined below) or proprietary informationin the possession or control of the Corporation, but Confidential Informationdoes not include information that I can demonstrate was in my possession inwritten or other tangible form prior to any disclosure from the Corporation;information that I can demonstrate was received from a third party; from thetime it becomes known to the trade; or any invention, device, discovery,concept, idea, algorithm, formulae, know-how, process,

 

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technique, system or improvement, whetherpatentable or not, that is not a Development.

 

2)                                      **Developments** includeall inventions, devices, discoveries, concepts, ideas, algorithms, formulae,know-how, process, techniques, systems and improvements, whether patentable ornot, developed, created, generated or reduced to practice by me alone orjointly with others, which directly relates to the activities of theCorporation during the engagement by the Corporation of my services or whichresult from tasks assigned to me by the Corporation or which result from theuse of the premises or property (including equipment, supplies, or ConfidentialInformation) owned, leased or licensed by the Corporation.

 

3)                                      **Trade Secrets** shallinclude, but not be limited to, all information encompassed in allDevelopments, and in all concepts or ideas, to the extent that such informationhas not been released publicly by duly authorized representatives of WorldHeart Corporation.

 

2.0                                 Non-Disclosure of Confidential Information

 

At alltimes during and subsequent to the engagement of my services by theCorporation, I shall keep in strictest confidence and trust the ConfidentialInformation, I shall take all reasonable precautions against unauthorizeddisclosure of the Confidential Information, and I shall not directly orindirectly disclose, knowingly allow access to, transmit or transfer theConfidential Information to a third party, nor shall I copy or reproduce theConfidential Information except as may be reasonably required for me to performmy duties for the Corporation.

 

3.0                                 Restricted Use of Confidential Information

 

1)                                      At all times during and subsequent to the termination of theengagement of my services by the Corporation, I shall not use the ConfidentialInformation in any manner except as reasonably required for me to perform myduties for the Corporation.

 

2)                                      Without limiting my obligations under subsection 3(a), I agreethat at all times during and subsequent to the termination of my employmentwith the Corporation, I shall not use, or take advantage of, the ConfidentialInformation for creating, maintaining, marketing, patenting or otherwiseprotecting, or aiding in the creation, maintenance, marketing, patenting orotherwise protecting any product which is competitive with any product owner ormarketed by the Corporation.

 

3)                                      Upon the request of the Corporation, and in any event thetermination of my employment with the Corporation, I shall immediately returnto the Corporation all materials, including all copies in whatever form,containing the Confidential Information which are in my possession or under mycontrol.

 

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4.0                                 Ownership of Confidential Information

 

1)                                      I acknowledge and agree that I shall not acquire any right, title orinterest in or to the Confidential Information.

 

2)                                      I agree to make full disclosure to the Corporation of eachDevelopment promptly after its creation. I hereby assign and transfer to the Corporation, and agree that theCorporation shall be the exclusive owner of, all of my right, title, andinterest to each Development throughout the world, including all Trade Secrets,patent rights, copyrights and all other intellectual property rightstherein.  I further agree to cooperatefully at all times during and subsequent to my employment with respect signingfurther documents and doing such acts and other things reasonably requested bythe Corporation to confirm such transfer of ownership of rights, includingintellectual property rights, effective at or after the time the Development iscreated and to obtain patents or copyrights or the like covering the Developments.  I agree that the obligations in this clause (b) shallcontinue beyond the termination of the engagement of my services by theCorporation with respect to Developments created during such period.

 

3)                                      I hereby waive in whole my right to the integrity of theDevelopments, including, without limitation, the rights to restrain or claimdamages for any distortion, mutilation or other modification of theDevelopments in any context and in connection with any product, service, causeor institution.

 

5.0                                 Non-Competition

 

1)                                      In this Section 5.0, any covenant of the Employee not tocompete shall mean that the Employee, either individually or in partnership orjointly or in connection with any person as principal, agent, employee,shareholder (other than a holding of shares of a corporation listed on aCanadian or United States stock exchange, which shareholders do not exceed 2%of the outstanding shares of such corporation) or in any other mannerwhatsoever, shall not carry on or be engaged in or be concerned with orinterested in or advise, lend money to, guarantee the debts or obligations ofor permit his/her name or any part thereof to be used or employed by any personengaged in or concerned with or interested in, within North America, thebusiness of developing and marketing cardiovascular medical devices except withthe prior consent of the Corporation.

 

2)                                      Subject to the provisions of this Section 5.0, the employeeagrees not to compete for the term of the Employee’s employment with theCorporation.

 

3)                                      The Employee confirms that all restrictions in this Section 5.0are reasonable and valid and all defences to the strict enforcement thereof bythe Corporation are waived by the Employee.

 

6.0                                 No Conflicting Obligations

 

1)                                      I acknowledge and represent to the Corporation that the performanceof my duties for the Corporation shall not breach any agreement or otherobligations to keep confidential the proprietary information of any prioremployer of mine or any

 

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otherthird party.  I further acknowledge andrepresent that I am not bound by any obligation with any third party whichconflicts with any of my obligations under this Agreement.

 

2)                                      I represent and agree that I will not bring to the Corporation, andshall not use in the performance of my work with the Corporation, and TradeSecrets, confidential information and other proprietary information of anyemployer of mine or any other third party. I represent and agree that in my work creating Developments I will notknowingly infringe the intellectual property rights, including copyright of anythird party.

 

7.0                                 Enforcement

 

Iacknowledge and agree that damages may not be an adequate remedy to compensatethe Corporation for any breach of my obligations contained in this Agreement,and accordingly I agree that in addition to any and all other remediesavailable, the Corporation shall be entitled to obtain relief by way oftemporary or permanent injunction to enforce the obligations contained in theAgreement.

 

8.0                                 General

 

1)                                      This Agreement shall be governed by the laws in force by the Stateof California.  If any provision of thisAgreement is wholly or partially unenforceable for any reason, suchunenforceable provision or part thereof shall be deemed to be omitted from thisAgreement without any way of invalidating or impairing the other provisions ofthis Agreement.  In this Agreement anyreference to a termination of the engagement of my services shall includetermination for any reason whatsoever and with our without cause.

 

2)                                      Except as stated in Section 5 above, the rights and obligationsunder this Agreement shall survive the termination of the engagement of myservices by the Corporation and shall adapt to the benefit of and shall bebinding upon (i) my heirs and personal representatives and (ii) thesuccessors and assigns of the Corporation.

 

I HAVE READ THIS AGREEMENT, UNDERSTAND IT, HAD THEOPPORTUNITY TO OBTAIN INDEPENDENT LEGAL ADVICE IN RESPECT OF IT AND I AGREE TOITS TERMS.  I acknowledge having receiveda fully executed copy of this Agreement (and the Offer of Employment dated asof January 24, 2005 between the Corporation and me).

 

 
| Signed, sealed and delivered |  ) |                       |   |
|------------------------------|---------|----------------------------|--------|
| in the presence of:          |  ) |                       |   |
|                         |  ) |                       |   |
| /s/ Barbara Madsen           |  ) | /s/ Pratap Khanwilkar |   |
| Witness                      |    | Signature                  |   |

 

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| Barbara Madsen            |                  |              |   |
|---------------------------|-----------------------|-------------------|--------|
| (Name of Witness-printed) |                  | Pratap Khanwilkar |   |
|                      |                  | Name              |   |
|                      |                  |              |   |
|                      |                  | 1/24/05           |   |
|                      |                  |              |   |
|                      |                  |              |   |
| World Heart Inc.          |                  |              |   |
|                      |
|                      |
| By:                       | /s/ Jal S. Jassawalla |              |
|                           |                       |                   |        |  |  |

 

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