**Exhibit 10.2**

 

**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 Alex Martin (“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 another companymay from time to time consider the possibility of acquiring the Company or thata change in control may otherwise occur, with or without the approval of theCompany’s Board of Directors. The Board of Directors recognizes that suchconsideration 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 thepossibility, threat or occurrence of a Change of Control (as defined below) ofthe Company.

 

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

 

C.            The Board of Directors furtherbelieves that it is imperative to provide Employee with certain benefits upontermination of Employee’s employment, in connection with a Change of Controland otherwise, which benefits are intended to provide Employee with financialsecurity and provide sufficient income and encouragement to Employee to remainwith the Company, notwithstanding the possibility of a Change of Control.

 

D.            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 mutual promises, covenants andagreements contained herein, and in consideration of the continuing employmentof Employee by the Company, the parties hereto agree as follows:

 

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

 

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involuntary termination by theCompany without Cause (as defined below) or Employee’s resignation for GoodReason (as defined below); or (ii) the date that all obligations of theparties hereunder have been satisfied.  Atermination of the terms of this Agreement pursuant to the preceding sentenceshall be effective for all purposes, except that such termination shall notaffect the payment or provision of compensation or benefits on account of atermination of employment occurring prior to the termination of the terms ofthis Agreement.  The rights and dutiescreated by this Section 1 may not be modified in any way except by awritten agreement executed by an officer of the Company upon direction from theBoard of Directors.

 

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

 

(a)           **Termination InConnection with or Following a Change of Control**.  In the event that Employee’s employment isterminated as a result of an involuntary termination other than for Cause (andother than as a result of death or disability as disability is defined forpurposes of the Company’s long-term disability policies) or if Employee resignsfor 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 willbe entitled to receive severance benefits as follows: (i) a lump sumseverance payment equal to twelve (12) months of the base salary which Employeewas receiving immediately prior to the Change of Control plus 100% of Employee’starget 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 effectivedate of the termination, (ii) continuation of the health insurancebenefits provided to Employee for Employee and Employee’s eligible dependentsimmediately prior to the Change of Control at Company expense pursuant to theterms of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended(“COBRA”) or other applicable law until the earlier of the date twelve(12) months after the effective date of the termination or the date upon whichEmployee is no longer eligible for such COBRA or other benefits underapplicable law, and (iii) each stock option to purchase the Company’scommon shares (“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 100% of the then unvested options and shares.  In addition, Employee will receive payment(s) forall accrued and unpaid salary, bonuses and PTO as of the date of Employee’stermination of employment.

 

(b)           **Termination Not InConnection with or Following a Change of Control**.  In the event that Employee’s employment isterminated as a result of an involuntary termination other than for Cause (andother than as a result of death or disability as disability is defined forpurposes of the Company’s long-term disability policies) or if Employee resignsfor Good Reason at any time other than as of, immediately prior to, or withintwelve (12) months following, the effective date of a Change of Control, thenEmployee will be entitled to receive severance benefits as follows: (i) severancepayments during the period from the date of Employee’s termination until thedate twelve (12) 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

 

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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 twelve(12) months after the effective date of the termination or the date upon whichEmployee is no longer eligible for such COBRA or other benefits underapplicable law, and (iii) if Employee holds any outstanding options thathave not reached the option’s one-year cliff vesting requirement, the Companywill waive the one-year cliff vesting requirement of each such option andEmployee will be credited with vesting on the Employee’s termination date equalto 1/48th of the option shares multiplied by each fullmonth of Employee’s employment since the vesting commencement date of theoption.  In addition, Employee willreceive payment(s) for all accrued and unpaid salary, bonuses and PTO asof 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 Causeor Voluntary Resignation other than for Good Reason**.  If Employee’s employment is terminated forCause at any time or if Employee voluntarily resigns from the Company at anytime for any reason other than Good Reason, then Employee shall not be entitledto receive payment of any severance benefits under this Agreement.  Employee will receive payment(s) for allaccrued and unpaid salary and PTO as of the date of Employee’s termination ofemployment and Employee’s benefits will be continued under the Company’s thenexisting benefit plans and policies in accordance with such plans and policiesin effect on the date of termination and in accordance with applicable law.

 

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.

 

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(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 anycontract between the Company, an affiliate of the Company or any successor tothe Company 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)           **GoodReason**.  “Good Reason”for Employee’s resignation of Employee’s employment will exist following theoccurrence of any of the following without Employee’s consent:  (i) a material diminution of Employee’sauthority or responsibilities as President and Chief Executive Officer; (ii) 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 principal work locationfor the Company outside of Salt Lake City, Utah.  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 4999of the Code.  The Company and Employeeshall furnish to the Accountants such information and documents as theAccountants may reasonably request in order to make a determination under thisparagraph.  The Company shall bear allcosts the Accountants 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 

 

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followingorder: (1) reduction of cash payments; (2) reduction of accelerationof vesting of options and shares; and (3) reduction of other benefits paidto Employee. If the acceleration of vesting of options and shares is to bereduced, such acceleration of vesting shall be cancelled in the reverse orderof the highest price option grant or highest purchase price per share down tothe lowest priced option grant or lowest purchase price per share.

 

5.             **Limitations andConditions on Benefits**

 

## (a)           **Income and Employment Taxes**.  Employee agrees thatEmployee shall be responsible for any applicable taxes of any nature (includingany penalties or interest that may apply to such taxes) that the Companyreasonably determines apply to any payment made hereunder, that Employee’sreceipt of any benefit hereunder is conditioned on Employee’s satisfaction ofany applicable withholding or similar obligations that apply to such benefit,and that any cash payment owed hereunder will be reduced to satisfy any suchwithholding or similar 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  “separationof service” within the meaning of Section 409A of the Code and theDepartment of Treasury regulations and other guidance promulgated thereunder (a“Separation from Service”). Notwithstanding any provision to the contrary in this Agreement, ifEmployee is deemed by the Company at the time of Employee’s Separation fromService to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) ofthe Code, to the extent delayed commencement of any portion of the benefits towhich Employee 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 of Benefits**.  The Company’s obligation to make the paymentsand provide the benefits hereunder shall be conditioned upon (i) Employee’sexecution and delivery to the Company of a release of all claims that Employeethen may have, in standard form and content, within fifty (50) days followingEmployee’s Separation from

 

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## Service and (ii) such release shall not have been revoked byEmployee within any period permitted under applicable law.

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## 6.             **Conflicts. **Employee represents that Employee’s performance of all the terms ofthis Agreement will not breach any other agreement to which Employee is aparty.  Employee has not, and will notduring the term of this Agreement, enter into any oral or written agreement inconflict with any of the provisions of this Agreement.  Employee further represents that Employee isentering into or has entered into an employment relationship with the Companyof 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.

 

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

 

9.             **MiscellaneousProvisions**.

 

(a)           **No Duty to Mitigate**.  Employee shall not be required to mitigatethe amount of any payment contemplated by this Agreement (whether by seekingnew employment or in any other manner), nor shall any such payment be reducedby any earnings that Employee may receive from 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).   Nowaiver by either party of any breach of, or of compliance with, any conditionor provision of this Agreement by the other party shall be considered a waiverof any other condition or provision or of the same condition or provision atanother time.

 

(c)           **WholeAgreement**.  No agreements,representations or understandings (whether oral or written and whether expressor implied) which are not expressly set forth in this Agreement have been madeor entered into by either party with respect to the subject matter hereof.  This Agreement supersedes any agreementconcerning similar subject matter dated prior

 

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tothe date of this Agreement and by execution of this Agreement both partiesagree that any such predecessor agreement shall be deemed null and void.

 

(d)           **Choiceof Law**.  The validity,interpretation, construction and performance of this Agreement shall begoverned by the laws of the State of Utah without reference to conflict of lawsprovisions.

 

(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 action, in law or equity, arisingfrom or relating to the enforcement or interpretation of this Agreement or thetermination of Employee’s employment (collectively, “Claims”), will beresolved to the fullest extent permitted by law exclusively by final, binding,and confidential arbitration in Salt Lake City, Utah, conducted by the AmericanArbitration Association (“AAA”) or its successors, under the thenapplicable 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)           **LegalFees and Expenses**.  Theparties shall each bear their own expenses, legal fees and other fees incurredin connection with the execution of this Agreement.

 

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(h)           **NoAssignment of Benefits**. The rights of any person to payments or benefits under this Agreementshall not be made subject to option or assignment, either by voluntary orinvoluntary assignment or by operation of law, including (without limitation)bankruptcy, garnishment, attachment or other creditor’s process, and any actionin violation of this Section 9(h) shall be 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.

 
|   | WORLD  HEART CORPORATION |
|--------|--------------------------|
|   |                     |
|   |                     |
|   | By:                      | /s/  Michael Sumner Estes |
|   |                     |   |
|   | Title:                   |  Chairman, Board of Directors |
|   |                     |   |
|   | Address:                 |  1173 Brown Avenue, Lafayette, CA 94549 |
|   |                     |   |
|   |                     |
|   | ALEX  MARTIN             |
|   |                     |
|   |                     |
|   | Signature:               | /s/  Alex Martin |
|   | Address:                 | 4750 Wiley Post Way,  Suite #120, Salt Lake City, UT |
|   | 84116                    |
|        |                          |  |  |  |  |  |

 

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