**Exhibit 10.4**

 

**WORLD HEART CORPORATION**

 

**CHANGE OF CONTROL AND SEVERANCE AGREEMENT**

 

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

 

RECITALS

 

A.            It is expected that anothercompany may from time to time consider the possibility of acquiring the Companyor that a change in control may otherwise occur, with or without the approvalof the Company’s Board of Directors. The Board of Directors recognizes thatsuch consideration can be a distraction to Employee and can cause Employee toconsider alternative employment opportunities. The Board of Directors has determined that it is in the best interestsof the Company and its stockholders to assure that the Company will have thecontinued 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 EmploymentAgreement with the Company effective as of February 4, 2009 (the “EmploymentAgreement”) which provides Employee with some severance benefits upontermination of Employee’s employment with the Company.

 

C.            The Company’s Board of Directors believesit is in the best interests of the Company and its stockholders to retainEmployee and provide incentives to Employee to continue in the service of theCompany.

 

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

 

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

 

Now therefore, in consideration of the mutualpromises, covenants and agreements contained herein, and in consideration ofthe continuing employment of Employee by the Company, the parties hereto agreeas follows:

 

1.             **At-WillEmployment**.  The Companyand Employee acknowledge that Employee’s employment is and shall continue to beat-will, as defined under applicable law, and that Employee’s employment withthe Company may be terminated by either party at any time 

 

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

 

2.             **Benefits****Upon Termination of Employment; Change ofControl Benefits.**

 

(a)           **Termination In Connection with or Following a Changeof Control**.

 

(i)           **Prior to February 4,2011**.  In the event thatprior to February 4, 2011, Employee’s employment is terminated as a resultof an involuntary termination other than for Cause (and other than as a resultof death or disability as disability is defined for purposes of the Company’slong-term disability policies) or if Employee resigns for Good Reason, as of,immediately prior to or at any time within twelve (12) months following theeffective date of a Change of Control, then, in addition to any severancebenefits provided to Employee pursuant to Section 7(b) and (c) ofthe Employment Agreement, Employee will be entitled to receive severancebenefits as follows: (i) a lump sum severance payment equal to 75% ofEmployee’s target annual bonus as in effect immediately prior to the Change ofControl, which shall be paid on the date that is sixty (60) days after theeffective date of the termination, (ii) continuation of the healthinsurance benefits provided to Employee for Employee and Employee’s eligibledependents immediately prior to the Change of Control at Company expensepursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act of1985, as amended (“COBRA”) or other applicable law until the earlier ofthe date nine (9) months after the effective date of the termination orthe date upon which Employee is no longer eligible for such COBRA or otherbenefits under applicable law, and (iii) each stock option to purchase theCompany’s common shares (“Common Stock”) and all shares of restrictedstock granted to Employee over the course of Employee’s employment with theCompany and held by Employee on the date of termination of employment shallbecome immediately vested as to 75% of each of the then unvested options andshares.  In addition, Employee willreceive payment(s) for all accrued and unpaid salary, bonuses and PTO asof the date of Employee’s termination of employment.

 

(ii)           **On orAfter February 4, 2011**. In the event that on or after February 4, 2011, Employee’semployment is terminated as a result of an involuntary termination other thanfor Cause (and other than as a result of death or disability as disability isdefined for purposes of the Company’s long-term disability policies) or ifEmployee resigns for Good Reason, as of, immediately prior to or at any timewithin twelve (12) months following the effective date of a Change of Control,then Employee will be entitled to receive severance benefits as follows: (i) alump sum severance payment equal to nine (9) months of the base salarywhich Employee was receiving immediately prior to the Change of Control plus75% of 

 

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Employee’s target annual bonusas in effect immediately prior to the Change of Control, which shall be paid onthe date that is sixty (60) days after the effective date of the termination, (ii) continuationof the health insurance benefits provided to Employee for Employee and Employee’seligible dependents immediately prior to the Change of Control at Companyexpense pursuant to the terms of COBRA or other applicable law until theearlier of the date nine (9) months after the effective date of thetermination or the date upon which Employee is no longer eligible for suchCOBRA or other benefits under applicable law, and (iii) each stock optionto purchase the Company’s Common Stock and all shares of restricted stockgranted to Employee over the course of Employee’s employment with the Companyand held by Employee on the date of termination of employment shall becomeimmediately vested as to 75% of each of the then unvested options andshares.  In addition, Employee willreceive payment(s) for all accrued and unpaid salary, bonuses and PTO asof the date of Employee’s termination of employment.

 

(b)           **Termination Not In Connection with or Following aChange of Control**.  In theevent that on or after February 4, 2011, Employee’s employment isterminated as a result of an involuntary termination other than for Cause (and otherthan as a result of death or disability as disability is defined for purposesof the Company’s long-term disability policies) or if Employee resigns for GoodReason 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 Employeewill be entitled to receive severance benefits as follows: (i) severancepayments during the period from the date of Employee’s termination until thedate nine (9) months after the effective date of the termination (the “BenefitPeriod”) equal to the base salary which Employee was receiving immediatelyprior to the termination date, which shall be paid during the Benefit Period inequal installments in accordance with the Company’s standard payroll practices,except that any and all payments that would otherwise have been made before thesixtieth (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) continuationof the health insurance benefits provided to Employee and Employee’s eligibledependents immediately prior to the termination date at Company expensepursuant to COBRA or other applicable law until the earlier of the date nine (9) monthsafter the effective date of the termination or the date upon which Employee isno longer eligible for such COBRA or other benefits under applicable law, and (iii) ifEmployee holds any outstanding options that have not reached the option’sone-year cliff vesting requirement, the Company will waive the one-year cliffvesting requirement of each such option and Employee will be credited withvesting on the Employee’s termination date equal to 1/48th or1/36th** **of the option shares,as applicable based on the vesting schedule of the subject option, multipliedby each full month of Employee’s employment since the vesting commencement dateof the option.  In addition, Employeewill receive payment(s) for all accrued and unpaid salary, bonuses and PTOas of the date of Employee’s termination of employment.  Notwithstanding the foregoing, no severancebenefits shall be paid under this Section 2(b) if at or prior to thetime of the Employee’s termination or if in connection with the Employee’stermination, the Company (i) is in a bankruptcy proceeding, whethervoluntary or involuntary, (ii) is in the process of liquidating ordissolving, whether voluntary or involuntary, or (iii) the Board ofDirectors has approved the liquidation, dissolution or winding down of theCompany.

 

(c)           **Termination for Cause or Voluntary Resignation otherthan for Good Reason**.  IfEmployee’s employment is terminated for Cause at any time or if Employee

 

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voluntarily resigns from theCompany at any time for any reason other than Good Reason, then Employee shallnot be entitled to receive payment of any severance benefits under thisAgreement.  Employee will receive payment(s) forall accrued and unpaid salary and PTO as of the date of Employee’s terminationof employment and Employee’s benefits will be continued under the Company’sthen existing benefit plans and policies in accordance with such plans andpolicies in effect on the date of termination and in accordance with applicablelaw.

 

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

 

(a)           **Change of Control**.  “Change of Control” shall mean theoccurrence, in a single transaction or in a series of related transactions, ofany one or more of the following events: (i)  a sale or other disposition of all orsubstantially all, as determined by the Board of Directors of the Company inits sole discretion, of the consolidated assets of the Company and itssubsidiaries; (ii) amerger, consolidation or similar transaction following which the Company is notthe surviving corporation; or (iii) amerger, consolidation or similar transaction following which the Company is thesurviving corporation but the shares of the Company’s Common Stock outstandingimmediately preceding the merger, consolidation or similar transaction areconverted or exchanged by virtue of the merger, consolidation or similartransaction into other property, whether in the form of securities, cash orotherwise.  Notwithstanding the foregoing, a Change of Control shall not be deemed tooccur (A) on account of the acquisition of securities of the Company by aninvestor, any affiliate thereof or any other person that acquires the Company’ssecurities in a transaction or series of related transactions the primarypurpose of which is to obtain financing for the Company through the issuance ofequity securities or (B) on account of a sale of assets, merger orother transaction effected exclusively for the purpose of changing the domicileof the Company.

 

(b)           **Cause**.  “Cause” shall mean the occurrence ofany one or more of the following: (i) Employee’s conviction of any felonyor crime involving fraud, dishonesty or moral turpitude; (ii) Employee’sparticipation in a fraud or act of dishonesty against the Company, an affiliateof the Company or any successor to the Company that results in material harm tothe business of the Company, an affiliate of the Company or any successor tothe Company; or (iii) Employee’s intentional, material violation of any contractbetween the Company, an affiliate of the Company or any successor to theCompany and Employee or any statutory duty Employee owes to the Company, anaffiliate of the Company or any successor to the Company that Employee does notcorrect within thirty (30) days after written notice thereof has been providedto Employee.

 

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

 

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principalwork 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 thecircumstances allegedly constituting Good Reason within ninety (90) days afterthe occurrence of the circumstances, and the Company will have thirty (30) daysto cure, if such conduct is reasonably susceptible to being cured.  A resignation for Good Reason must take placewithin sixty (60) days after the end of the cure period.

 

4.             **ParachutePayments.**  In the event that the acceleration andseverance benefits provided for in this Agreement (A) constitute “parachutepayments” within the meaning of Section 280G of the Internal Revenue Codeof 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 suchseverance benefits being subject to excise tax under Section 4999 of theCode, whichever of the foregoing amounts, taking into account the applicablefederal, 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 greatestamount of benefits hereunder, notwithstanding that all or some portion of suchbenefits may be taxable under Section 4999 of the Code.  Any determination required under thisparagraph shall be made in writing by the public accountants designated by theCompany (the “Accountants”), whose determination shall be conclusive andbinding upon Employee and the Company for all purposes.  For purposes of making the calculationsrequired by this paragraph, the Accountants may make reasonable assumptions andapproximations concerning applicable taxes and may rely on reasonable, goodfaith interpretations concerning the application of Section 280G and 4999 ofthe Code.  The Company and Employee shallfurnish to the Accountants such information and documents as the Accountantsmay reasonably request in order to make a determination under this paragraph.  The Company shall bear all costs theAccountants may reasonably incur in connection with any calculationscontemplated by this paragraph.  In theevent that a reduction in payments and/or benefits is required under thissection 4, such reduction shall occur in the following order: (1) reductionof cash payments; (2) reduction of acceleration of vesting of options andshares; and (3) reduction of other benefits paid to Employee. If theacceleration of vesting of options and shares is to be reduced, suchacceleration of vesting shall be cancelled in the reverse order of the highestprice option grant or highest purchase price per share down to the lowestpriced option grant or lowest purchase price per share.

 

5.             **Limitationsand Conditions on Benefits**

 

## (a)           **Income and EmploymentTaxes**.  Employee agrees that Employeeshall be responsible for any applicable taxes of any nature (including anypenalties or interest that may apply to such taxes) that the Company reasonablydetermines apply to any payment made hereunder, that Employee’s receipt of anybenefit hereunder is conditioned on Employee’s satisfaction of any applicablewithholding or similar obligations that apply to such benefit, and that anycash payment owed hereunder will be reduced to satisfy any such withholding orsimilar obligations that may apply.

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(b)           **Code****Section 409A**. All severance benefits to be paid upon a termination of employment underthis Agreement may be made only upon a “separation of service” within themeaning of Section 409A of the Code and the Department of Treasuryregulations and other

 

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guidance promulgated thereunder (a “Separation fromService”).  Notwithstanding anyprovision to the contrary in this Agreement, if Employee is deemed by theCompany at the time of Employee’s Separation from Service to be a “specifiedemployee” for purposes of Section 409A(a)(2)(B)(i) of the Code, tothe extent delayed commencement of any portion of the benefits to whichEmployee is entitled under this Agreement is required in order to avoid aprohibited distribution under Section 409A(a)(2)(B)(i) of the Code,such portion of Employee’s benefits will not be provided to Employee prior tothe earlier of (i) the expiration of the six-month period measured fromthe date of the Employee’s Separation from Service or (ii) the date ofEmployee’s death.  Upon the firstbusiness 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 alump sum to Employee (or Employee’s estate or beneficiaries), and any remainingpayments due under the Agreement will be paid as otherwise providedherein.  For purposes of Section 409Aof the Code, Employee’s right to receive the payments of compensation pursuantto the Agreement will be treated as a right to receive a series of separatepayments and accordingly, each payment will at all times be considered aseparate and distinct payment.  Thisparagraph is intended to comply with the requirements of Section 409A ofthe Code so that none of the severance payments and benefits to be providedhereunder will be subject to the additional tax imposed under Section 409Aof the Code and any ambiguities herein will be interpreted to so comply.  Employee and the Company agree to worktogether in good faith to consider amendments to this Agreement and to takesuch reasonable actions which are necessary, appropriate or desirable to avoidimposition of any additional tax or income recognition prior to actual paymentto Employee under Section 409A of the Code.

 

## (c)           **Release Prior to Receipt ofBenefits**.  The Company’sobligation to make the payments and provide the benefits hereunder shall beconditioned upon (i) Employee’s execution and delivery to the Company of arelease of all claims that Employee then may have, in standard form andcontent, within fifty (50) days following Employee’s Separation from Serviceand (ii) such release shall not have been revoked by Employee within anyperiod permitted under applicable law.

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## 6.             **Conflicts****. **Employee represents thatEmployee’s performance of all the terms of this Agreement will not breach anyother agreement to which Employee is a party. Employee has not, and will not during the term of this Agreement, enterinto any oral or written agreement in conflict with any of the provisions ofthis Agreement.  Employee furtherrepresents that Employee is entering into or has entered into an employmentrelationship with the Company of Employee’s own free will.

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7.             **Successors**.  Any successor to the Company (whether director indirect and whether by purchase, lease, merger, consolidation, liquidationor otherwise) to all or substantially all of the Company’s business and/orassets shall assume the obligations under this Agreement and agree expressly toperform the obligations under this Agreement in the same manner and to the sameextent as the Company would be required to perform such obligations in theabsence of a succession.  The terms ofthis Agreement and all of Employee’s rights hereunder and thereunder shallinure to the benefit of, and be enforceable by, Employee’s personal or legalrepresentatives, executors, administrators, successors, heirs, distributees,devisees and legatees.

 

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

 

9.             **MiscellaneousProvisions**.

 

(a)           **No Duty toMitigate**.  Employeeshall not be required to mitigate the amount of any payment contemplated bythis Agreement (whether by seeking new employment or in any other manner), norshall any such payment be reduced by any earnings that Employee may receivefrom any other source.

 

(b)           **Waiver**.  No provision of this Agreement shall bemodified, waived or discharged unless the modification, waiver or discharge isagreed to in writing and signed by Employee and by an authorized officer of theCompany (other than Employee).  No waiverby either party of any breach of, or of compliance with, any condition orprovision of this Agreement by the other party shall be considered a waiver ofany other condition or provision or of the same condition or provision atanother time.

 

(c)           **WholeAgreement**.  Noagreements, representations or understandings (whether oral or written andwhether express or implied) which are not expressly set forth in this Agreementor the Employment Agreement have been made or entered into by either party withrespect to the subject matter hereof. This Agreement supersedes any agreement concerning similar subjectmatter dated prior to the date of this Agreement, except for the EmploymentAgreement, and by execution of this Agreement both parties agree that any suchpredecessor agreement, except for the Employment Agreement, shall be deemednull and void.

 

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

 

(e)           **Severability**.  If any term or provision of this Agreement orthe application thereof to any circumstance shall, in any jurisdiction and toany extent, be invalid or unenforceable, such term or provision shall beineffective as to such jurisdiction to the extent of such invalidity orunenforceability without invalidating or rendering unenforceable the remainingterms and provisions of this Agreement or the application of such terms andprovisions to circumstances other than those as to which it is held invalid orunenforceable, and a suitable and equitable term or provision shall besubstituted therefor to carry out, insofar as may be valid and enforceable, theintent and purpose of the invalid or unenforceable term or provision.

 

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

 

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action,in law or equity, arising from or relating to the enforcement or interpretationof 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, conductedby the American Arbitration Association (“AAA”) or its successors, underthe then applicable AAA rules by a single arbitrator.  Claims subject to this arbitration provisionwill (i) include, but not be limited to, Claims pursuant to any federal,state or local law or statute, including (without limitation) the AgeDiscrimination in Employment Act, as amended; Title VII of the Civil Rights Actof 1964, as amended; the Americans With Disabilities Act of 1990; the federalFair Labor Standards Act; and state anti-discrimination statutes; and Claimspursuant to any common law, tort law or contract law, including (withoutlimitation) breach of contract or other promise, discrimination, harassment,retaliation, wrongful discharge, fraud, misrepresentation, defamation, andemotional distress; and (ii) exclude Claims that by law are not subject toarbitration.  The arbitrator will:  (1) have the authority to compeladequate discovery for the resolution of all Claims and to award such relief aswould otherwise be permitted by law; and (2) issue a written arbitrationdecision including the arbitrator’s essential findings and conclusions and astatement of the award.  The Company willpay all of the arbitrator’s fees.  **Employee and the Company acknowledge that, by agreeing to thisarbitration procedure, both Employee and the Company waive the right to resolveany Claims through a trial by jury or judge or by administrative proceeding.**  Nothing in this Agreement is intended toprevent Employee or the Company from obtaining injunctive relief in court ifthe award to which such party might obtain in arbitration may be renderedineffectual without provisional relief. As provided in the AAA rules, any arbitration award may be enforced byany court of competent jurisdiction.

 

(g)           **Legal Feesand Expenses**.  The partiesshall each bear their own expenses, legal fees and other fees incurred inconnection with the execution of this Agreement.

 

(h)           **NoAssignment of Benefits**.  The rights of any person to payments orbenefits under this Agreement shall not be made subject to option orassignment, either by voluntary or involuntary assignment or by operation oflaw, including (without limitation) bankruptcy, garnishment, attachment orother creditor’s process, and any action in violation of this Section 9(h) shallbe void.

 

(i)            **Assignmentby Company**.  The Companymay assign its rights under this Agreement to an affiliate, and an affiliatemay assign its rights under this Agreement to another affiliate of the Companyor to the Company.  In the case of anysuch assignment, the term “Company” when used in a section of this Agreementshall mean the corporation that actually employs the Employee.

 

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

 

The partieshave 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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