Document:

EXHIBIT 10.5

 

FORM OF CHANGE OF CONTROL AND SEVERANCE AGREEMENT

 

This Change of Control and Severance
Agreement (the “Agreement”) is dated as of                                     ,
20      , by and between                                 
(“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.            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.

 

C.            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.

 

D.            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.  In the event
that 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 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.

 

(b)           Termination Not In Connection with or Following a
Change of Control.  In the
event that 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

 

2

 

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 of the option shares 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
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.

 

3

 

(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 Chief Financial Officer; (ii) 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 principal work location for the Company outside of
Salt Lake City, Utah.  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 

 

4

 

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 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

 

5

 

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.

 

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
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

 

6

 

to
the date of this Agreement and by execution of this Agreement both parties
agree that any such predecessor 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 Utah 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 therefore 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 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 Salt Lake City, Utah, 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.

 

7

 

(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.

 

	
   

  	
  WORLD
  HEART CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature
  of Employee:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address of Employee:

  	
   

  
				

 

8EXHIBIT
10.6

 

WORLD HEART CORPORATION

2006 EQUITY INCENTIVE PLAN

 

Adopted November 10, 2006

Approved By Shareholders September 17, 2009

Termination Date: November 10, 2016

(formerly, known as World Heart Corporation

Employee Stock Option Plan)

 

II.            PURPOSES.

 

(1)           The purpose of the Plan is
to amend and restate the World Heart Corporation Employee Stock Option Plan and
is to provide a means by which Employees, Directors and Consultants may be
given an opportunity to benefit from increases in value of the Common Stock
through the granting of the following types of awards: (i) Incentive Stock
Options; (ii) Nonstatutory Stock Options; (iii) Stock Appreciation
Rights, (iv) Restricted Stock Awards; (v) Restricted Stock Units
Awards; (vi) Performance Shares and (vii) Other Share-Based Awards.

 

(2)           The Company, by
means of the Plan, seeks to retain the services of persons who are now
Employees, Directors or Consultants, to secure and retain the services of new
Employees, Directors and Consultants and to provide incentives for such persons
to exert maximum efforts for the success of the Company and its Affiliates.

 

(3)           The Company, by means of the
Plan, amends and restates the World Heart Corporation Employee Stock Option
Plan. Nothing under the Plan will amend the terms and conditions of any options
granted prior to November 10, 2006 under the World Heart Corporation
Employee Stock Option Plan, a copy of which is included as part of the Plan in
Schedule A hereto.

 

III.          DEFINITIONS.

 

(1)           “Affiliate” means any parent corporation
or subsidiary corporation, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f) respectively, of the
Code.

 

(2)           “Board” means the Board of
Directors of the Company.

 

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

 

(4)           “Code” means the Internal Revenue
Code of 1986, as amended.

 

(5)           “Committee” means a Committee appointed
by the Board in accordance with Section 3(c) of the Plan.

 

(6)           “Common Stock” means the common shares of
the Company.

 

(7)           “Company” means World Heart
Corporation, a Canadian corporation.

 

(8)           “Consultant” means any natural person,
including an advisor, engaged by the Company or an Affiliate to render
consulting or advisory services, which involved spending a significant amount
of time and attention on the affairs of the Company, and who is compensated for
such services pursuant to a written contract with the Company or an Affiliate,
provided that the term “Consultant” shall not include Directors who are paid
only a director’s fee by the Company or who are not compensated by the Company
for their services as Directors.

 

 

(9)           “Continuous Service” means that the Participant’s
employment or service with the Company or an Affiliate of the Company, whether
in the capacity of an Employee, a Director or a Consultant, is not interrupted
or terminated. The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders employment or service to the Company or an Affiliate or the Company or
a change in the entity for which the Participant renders such employment or
service, provided that there is no interruption or termination of the
Participant’s Continuous Service. The Board or the Chief Executive Officer of
the Company, in that party’s sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by the Board or the Chief Executive Officer of the Company, including
sick leave, military leave, or any other personal leave.

 

(10)         “Corporate Transaction” means 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 in its 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 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.

 

(11)         “Covered Employee” means the chief executive
officer and the four (4) other highest compensated officers of the Company
for whom total compensation is required to be reported to shareholders under
the Exchange Act, as determined for purposes of Section 162(m) of the
Code.

 

(12)         “Director” means a member of the
Board.

 

(13)         “Disability” means the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person’s position with the Company or an
Affiliate of the Company because of the sickness or injury of the person.

 

(14)         “Employee” means any person, including
Officers and Directors, employed by the Company or any Affiliate of the
Company. Neither service as a Director nor payment of a director’s fee by the
Company shall be sufficient to constitute “employment” by the Company.

 

(15)         “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

(16)         “Fair Market Value” means, as of any date, the
value of the Common Stock of the Company determined as follows:

 

A.            If the Common Stock is
listed on any established stock exchange, traded on the Nasdaq Global Market or
the Nasdaq Capital Market, or quoted on the OTC Bulletin Board, the Fair Market
Value of a share of Common Stock shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such exchange,
market or board (or the exchange or market with the greatest volume of trading
in Common Stock) on the trading day prior to the day of determination, as
reported in the Wall Street Journal or such other source as the Board deems
reliable;

 

B.            In the absence of such
markets for the Common Stock, the Fair Market Value shall be determined in good
faith by the Board.

 

(17)         “Full Value Award” means a Stock Award that
does not provide for full payment in cash or property by the Participant.

 

(18)         “Incentive Stock Option” means an
Option intended to qualify as an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder.

 

 

(19)         “Non-Employee Director” means a
Director who either (i) is not currently an employee or officer of the
Company or its parent or a subsidiary, does not receive compensation, either
directly or indirectly, from the Company or its parent or a subsidiary, for
services rendered as a consultant or in any capacity other than as a Director
(except for an amount as to which disclosure would not be required under
Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation S-K”)), does not possess an interest in any
other transaction for which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a “non-employee
director” for purposes of Rule 16b-3.

 

(20)         “Nonstatutory Stock Option” means an
Option not intended to qualify as an Incentive Stock Option.

 

(21)         “Option” means a stock option
granted pursuant to the Plan.

 

(22)         “Option Agreement” means a written agreement
between the Company and a Participant evidencing the terms and conditions of an
individual Option grant. Each Option Agreement shall be subject to the terms
and conditions of the Plan.

 

(23)         “Other Share-Based Award” means an Award
granted pursuant to Section 7(d).

 

(24)         “Other Share-Based Award Agreement” means the
agreement between the Corporation and the recipient of an Other Share-Based
Award which contains the terms and conditions pertaining to the Other Share-Based
Award.

 

(25)         “Outside Director” means a Director who either
(i) is not a current employee of the Company or an “affiliated corporation”
(within the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the taxable year, has not been an
officer of the Company or an “affiliated corporation”, and does not receive
remuneration from the Company or an “affiliated corporation,” either directly
or indirectly, in any capacity other than as a Director or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of
the Code.

 

(26)         “Participant” means a person to whom a
Stock Award is granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Stock Award.

 

(27)         “Performance Share” means a Stock Award
denominated in shares of Common Stock equivalents granted pursuant to Section 7(c) that
may be earned in whole or in part based upon attainment of performance
objectives established by the Board pursuant to Section 7(c).

 

(28)         “Performance Share Agreement” means a
written agreement between the Company and a holder of Performance Shares
evidencing the terms and conditions of an individual Performance Share award.
Each Performance Share Agreement shall be subject to the terms and conditions
of the Plan.

 

(29)         “Plan” means this World Heart
Corporation 2006 Equity Incentive Plan.

 

(30)         “Restricted Stock Award” means shares
of Common Stock granted pursuant to the terms and conditions of Section 7(a).

 

(31)         “Restricted Stock Award Agreement” means a
written agreement between the Company and a holder of Restricted Stock
evidencing the terms and conditions of an individual Restricted Stock Award.
Each Restricted Stock Award Agreement shall be subject to the terms and
conditions of the Plan.

 

(32)         “Restricted Stock Unit Award” means a Stock
Award denominated in shares of Common Stock equivalents granted pursuant to the
terms and conditions of Section 7(b) in which the Participant has the
right to receive a specified number of shares of Common Stock over a specified
period of time.

 

(33)         “Restricted Stock Unit Award Agreement” means a
written agreement between the Company and a holder of a Restricted Stock Unit
Award evidencing the terms and conditions of an individual Restricted Stock
Unit Award. Each Restricted Stock Unit Award Agreement shall be subject to the
terms and conditions of the Plan.

 

 

(34)         “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3, as in
effect from time to time.

 

(35)         “Securities Act” means the Securities Act of
1933, as amended.

 

(36)         “Stock Appreciation Right” means a right,
granted pursuant to Section 6, to receive an amount equal to the value of
a specified number of Shares which will be payable in Shares or cash as
established by the Board.

 

(37)         “Stock Appreciation Right Agreement” means the
agreement between the Corporation and the recipient of the Stock Appreciation
Right which contains the terms and conditions pertaining to the Stock
Appreciation Right.

 

(38)         “Stock Award” means any right granted
under the Plan, including any Option or Restricted Stock Award.

 

(39)         “Stock Award Agreement” means a
written agreement between the Company and a holder of a Stock Award evidencing
the terms and conditions of an individual Stock Award. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.

 

(40)         “Subsidiary” means, with respect to the
Company, (i) any corporation of which more than fifty percent (50%) of the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether, at the
time, stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned by the Company, and (ii) any
partnership in which the Company has a direct or indirect interest (whether in
the form of voting or participation in profits or capital contribution) of more
than fifty percent (50%).

 

(41)         “Tax Act” means the Income Tax Act
(Canada).

 

(42)         “Ten Percent Shareholder” means a person
who owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any of its Affiliates.

 

IV.          ADMINISTRATION.

 

(1)   Administration
by Board.  The Board shall
administer the Plan unless and until the Board delegates administration to a
Committee, as provided in Section 3(c).

 

(2)   Powers
of Board.  The Board shall
have the power, subject to, and within the limitations of, the express
provisions of the Plan:

 

A.            To determine from time to
time which of the persons eligible under the Plan shall be granted Stock
Awards; when and how each Stock Award shall be granted; what type or
combination of types of Stock Award shall be granted; the provisions of each
Stock Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive Common Stock pursuant to a Stock
Award; and the number of shares of Common Stock with respect to which a Stock
Award shall be granted to each such person.

 

B.            To construe and interpret
the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.

 

C.            To amend the Plan or a Stock
Award as provided in Section 13.

 

D.            To terminate or suspend the
Plan as provided in Section 14.

 

E.            Generally, to exercise such
powers and to perform such acts as the Board deems necessary or expedient to
promote the best interests of the Company and that are not in conflict with the
provisions of the Plan.

 

 

(3)           Delegation
to Committee.

 

A.  General.  The Board may delegate administration of the
Plan to a Committee or Committees of one (1) or more members of the Board,
and the term “Committee” shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a Committee,
the Committee shall have, in connection with the administration of the Plan,
the powers theretofore possessed by the Board, including the power to delegate
to a subcommittee any of the administrative powers the Committee is authorized
to exercise (and references in this Plan to the Board shall thereafter be to
the Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board.

 

The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.

 

B.  Section 162(m) and Rule 16b-3
Compliance.  In the discretion
of the Board, the Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
In addition, the Board or the Committee may delegate to a committee of one or
more members of the Board the authority to grant Stock Awards to eligible
persons who are either (a) not then Covered Employees and are not expected
to be Covered Employees at the time of recognition of income resulting from
such Stock Award, (b) not persons with respect to whom the Company wishes
to comply with Section 162(m) of the Code, or (c) not then
subject to Section 16 of the Exchange Act.

 

(4)   Effect
of Board’s Decision.  All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

 

V.            SHARES SUBJECT TO THE PLAN.

 

(1)   Share
Reserve.  Subject to the
provisions of Section 12(a) relating to adjustments upon changes in
stock and subject to Section 4(c) below, the stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate 2,166,667 shares of
Common Stock. If any Stock Award granted under the Plan shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Stock Award shall revert
to and again become available for issuance under the Plan.

 

(2)   Source
of Shares.  The stock subject
to the Plan may be unissued shares or reacquired shares, bought on the market
or otherwise.

 

VI.          ELIGIBILITY.

 

(1)   Eligibility
for Specific Stock Awards. 
Incentive Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options may be granted to Employees, Directors and
Consultants.

 

(2)   Ten
Percent Shareholders.  A Ten
Percent Shareholder shall not be granted an Incentive Stock Option unless the
exercise price of such Option is at least one hundred ten percent (110%) of the
Fair Market Value of the Common Stock on the date of grant and the Option is
not exercisable after the expiration of five (5) years from the date of
grant.

 

(3)   Section 162(m) Limitation
on Annual Grants.  Subject to
the provisions of Section 12(a) relating to Capitalization
Adjustments, no Employee shall be eligible to be granted Stock Awards covering
more than 3,000,000 shares of Common Stock during any calendar year.

 

(4)   Consultants.  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”) is not available to
register either the offer or the sale of the Company’s securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, because the Consultant is not a natural person, or
because of any other rule governing the use of Form S-8.

 

VII.         OPTION AND STOCK
APPRECIATION RIGHT PROVISIONS.

 

Each Option or Stock
Appreciation Right shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options and Stock Appreciation Rights need not be identical, but each Option
and Stock Appreciation Right shall include (through incorporation of provisions
hereof by reference in the Option or Stock Appreciation Right Agreement) the
substance of each of the following provisions:

 

 

(1)   Term.  Subject to the provisions of Section 5(b) regarding
Ten Percent Shareholders, no Option or Stock Appreciation Right shall be
exercisable after the expiration of ten years from the date it was granted.

 

(2)   Exercise
Price.  Subject to the
provisions of Section 5(b) regarding Ten Percent Shareholders, the
exercise price of each Option or Stock Appreciation Right shall be not less
than one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Option or Stock Appreciation Right on the date of grant.
Notwithstanding the foregoing, an Option or Stock Appreciation Right may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option or Stock Appreciation Right is granted pursuant to an
assumption or substitution for another option or stock appreciation right in a
manner satisfying the provisions of Section 424(a) of the Code.

 

(3)   Consideration.  The purchase price of Common Stock acquired
pursuant to an Option or Stock Appreciation Right shall be paid, to the extent
permitted by applicable statutes and regulations, either (i) in cash at
the time of exercise or (ii) at the discretion of the Board at the time of
the grant (or subsequently in the case of a Nonstatutory Stock Option or Stock
Appreciation Right) (l) by delivery to the Company of other Common Stock, (2) according
to a deferred payment or other similar arrangement with the Participant, (3) by
a “net exercise” of the Option or Stock Appreciation Right (as further
described below) (4) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds or (5) in any other
form of legal consideration that may be acceptable to the Board. Unless
otherwise specifically provided in the Option or Stock Appreciation Right, the
purchase price of Common Stock acquired pursuant to an Option or Stock
Appreciation Right that is paid by delivery to the Company of other Common
Stock acquired, directly or indirectly from the Company, shall be paid only by
shares of the Common Stock that have been held for more than six (6) months
(or such longer or shorter period of the time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock’s “par value,” as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.

 

In the case of any deferred
payment arrangement, interest shall be compounded at least annually and shall
be charged at the minimum rate of interest necessary to avoid (l) the
treatment as interest, under any applicable provisions of the Code or the Tax
Act, of any amounts other than amounts stated to be interest under the deferred
payment arrangement and (2) the treatment of an Option as a variable award
for financial accounting purposes.

 

In the case of a “net
exercise” of an Option or Stock Appreciation Right, the Company will not
require a payment of the exercise price from the Participant but will reduce
the number of shares of Common Stock issued upon the exercise by the largest
number of whole shares that has a Fair Market Value that does not exceed the
aggregate exercise price. With respect to any remaining balance of the
aggregate exercise price, the Company shall accept a cash payment from the
Participant. The shares of Common Stock so used to pay the exercise price under
a “net exercise” will be considered to have resulted from the exercise of the
Option or Stock Appreciation Right, and accordingly, the Option or Stock Appreciation
Right will not again be exercisable with respect to such shares, the shares
actually delivered to the Participant, and any shares withheld for purposes of
tax withholding.

 

(4)   Transferability
of an Incentive Stock Option. 
An Incentive Stock Option shall not be transferable except by will or by
the laws of descent and distribution and shall be exercisable during the
lifetime of the Participant only by the Participant. Notwithstanding the
foregoing, the Participant may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event
of the death of the Participant, shall thereafter be entitled to exercise the
Option.

 

(5)   Transferability
of a Nonstatutory Stock Option or Stock Appreciation Right.  A Nonstatutory Stock Option or Stock
Appreciation Right shall be transferable to the extent provided in the Option
or Stock Appreciation Right Agreement. If the agreement does not provide for
transferability, then the Nonstatutory Stock Option or Stock Appreciation Right
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. Notwithstanding the foregoing, the Participant may, by
delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Participant, shall thereafter be entitled to exercise the Option or Stock
Appreciation Right.

 

(6)   Vesting.  The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable
in periodic installments (which may, but need not, be equal).

 

 

The Option or Stock
Appreciation Right may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options or Stock Appreciation Rights may vary.

 

(7)   Termination
of the Participant’s Continuous Service without Cause.  In the event a Participant’s Continuous
Service terminates without Cause (other than upon the Participant’s death or
Disability), the Participant may exercise his or her Option or Stock
Appreciation Right (to the extent that the Participant was entitled to exercise
such Option or Stock Appreciation Right at the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3) months
after the termination of the Participant’s Continuous Service (or such longer
or shorter period specified in the Option or Stock Appreciation Right
Agreement, which period shall not be less than thirty (30) days), or (ii) the
expiration of the term of the Option or Stock Appreciation Right as set forth
in the agreement. If, at the date of termination, the Participant is not
entitled to exercise his or her entire Option or Stock Appreciation Right, the
shares covered by the unexercisable portion of the Option or Stock Appreciation
Right shall revert to and again become available for issuance under the Plan.
If, after termination, the Participant does not exercise his or her Option or
Stock Appreciation Right within the time specified in the agreement, the Option
or Stock Appreciation Right shall terminate, and the shares covered by such
Option or Stock Appreciation Right shall revert to and again become available
for issuance under the Plan.

 

(8)   Termination
of the Participant’s Continuous Service with Cause.  In the event a Participant’s Continuous
Service terminates with Cause (other than upon the Participant’s death or
Disability), the shares covered by the Option or Stock Appreciation Right shall
revert to and again become available for issuance under the Plan and the
Participant shall have no further opportunity to exercise any vested or
unvested portion of the Option or Stock Appreciation Right.

 

(9)   Disability
of Participant.  In the event
a Participant’s Continuous Service terminates as a result of the Participant’s
Disability, the Participant may exercise his or her Option or Stock
Appreciation Right (to the extent that the Participant was entitled to exercise
such Option or Stock Appreciation Right at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve
(12) months following such termination (or such longer or shorter period
specified in the Option or Stock Appreciation Right Agreement, which period
shall not be less than six (6) months), or (ii) the expiration of the
term of the Option or Stock Appreciation Right as set forth in the agreement.
If, at the date of termination, the Participant is not entitled to exercise his
or her entire Option or Stock Appreciation Right, the shares covered by the
unexercisable portion of the Option or Stock Appreciation Right shall revert to
and again become available for issuance under the Plan. If, after termination,
the Participant does not exercise his or her Option or Stock Appreciation Right
within the time specified herein, the Option or Stock Appreciation Right shall
terminate, and the shares covered by such Option or Stock Appreciation Right
shall revert to and again become available for issuance under the Plan.

 

(10)   Death
of Participant.  In the event
of the death of a Participant during, or within a period specified in the
Option or Stock Appreciation Right Agreement after the termination of, the
Participant’s Continuous Service, the Option or Stock Appreciation Right may be
exercised (to the extent the Participant was entitled to exercise such Option
or Stock Appreciation Right at the date of death) by the Participant’s estate,
by a person who acquired the right to exercise the Option or Stock Appreciation
Right by bequest or inheritance or by a person designated to exercise the
Option or Stock Appreciation Right upon the Participant’s death pursuant to
Sections 6(d) and 6(e), but only within the period ending on the
earlier of (i) the date twelve (12) months following the date of
death (or such longer or shorter period specified in the Option or Stock
Appreciation Right Agreement, which period shall not be less than six (6) months),
or (ii) the expiration of the term of such Option or Stock Appreciation
Right as set forth in the agreement. If, at the time of death, the Participant
was not entitled to exercise his or her entire Option or Stock Appreciation
Right, the shares covered by the unexercisable portion of the Option or Stock
Appreciation Right shall revert to and again become available for issuance
under the Plan. If, after death, the Option or Stock Appreciation Right is not
exercised within the time specified herein, the Option or Stock Appreciation
Right shall terminate, and the shares covered by such Option or Stock
Appreciation Right shall revert to and again become available for issuance
under the Plan.

 

VIII.       PROVISIONS
OF OTHER STOCK AWARDS.

 

(1)   Restricted
Stock Awards.  Each Restricted
Stock Award Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The terms and conditions of the
Restricted Stock Award Agreement may change from time to time, and the terms
and conditions of separate Restricted Stock Award Agreements need not be
identical, but each Restricted Stock Award Agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

 

(i)   Consideration.  At the time of grant of a Restricted Stock
Award, the Board will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to the 

 

 

Restricted Stock Award. To
the extent required by applicable law, the consideration to be paid by the
Participant for each share of Common Stock subject to a Restricted Stock Award
will not be less that the par value of a share of Common Stock. Such
consideration may be paid in any form permitted under applicable law.

 

(ii)   Vesting.  Shares of Common Stock acquired pursuant to
the Restricted Stock Award shall be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board. The Board may condition the vesting of the shares acquired pursuant
to the Restricted Stock Award upon the attainment of specified performance objectives
established by the Board pursuant to Section 8 or such other factors as
the Board may determine in its sole discretion, including time-based vesting;
provided, however, that if the vesting schedule is a time-based vesting
schedule, such shares shall vest not faster than one-third per year over three
years and if the vesting schedule is a performance-based vesting schedule, such
shares shall vest not earlier than the first anniversary of the date of grant.

 

(iii)   Termination
of Participant’s Continuous Service. 
In the event that a Participant’s Continuous Service terminates, the
Company may repurchase or otherwise reacquire any or all of the shares of
Common Stock held by the Participant that have not vested as of the date of
termination under the terms of the Restricted Stock Award Agreement. The
Company will not exercise its repurchase option until at least six (6) months
(or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes) have elapsed following the purchase
of the restricted stock unless otherwise provided in the Restricted Stock Award
Agreement.

 

(iv)   Transferability.  Rights to acquire shares of Common Stock
pursuant to the Restricted Stock Award shall be transferable by the Participant
only upon such terms and conditions as are set forth in the Restricted Stock
Award Agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded pursuant to the Restricted Stock Award remains subject to
the terms of the Restricted Stock Award Agreement.

 

(2)   Restricted
Stock Unit Awards.  Each
Restricted Stock Unit Award Agreement shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate. The terms and
conditions of Restricted Stock Unit Award Agreements may change from time to
time, and the terms and conditions of separate Restricted Stock Unit Award
Agreements need not be identical, but each Restricted Stock Unit Award
Agreement shall include (through incorporation of the provisions hereof by
reference in the agreement or otherwise) the substance of each of the following
provisions:

 

(i)   Consideration.  At the time of grant of a Restricted Stock
Unit Award, the Board will determine the consideration, if any, to be paid by
the Participant upon delivery of each share of Common Stock subject to the
Restricted Stock Unit Award. To the extent required by applicable law, the
consideration to be paid by the Participant for each share of Common Stock
subject to a Restricted Stock Unit Award will not be less that the par value of
a share of Common Stock. Such consideration may be paid in any form permitted
under applicable law.

 

(ii)   Vesting.  At the time of grant of a Restricted Stock
Unit Award, the Board shall impose such restrictions or conditions to the
vesting of the Restricted Stock Unit Award as it, in its absolute discretion,
deems appropriate. The Board may condition the vesting of the Restricted Stock
Unit Award upon the attainment of specified performance objectives established
by the Board pursuant to Section 8 or such other factors as the Board may
determine in its sole discretion, including time-based vesting; provided,
however, that if the vesting schedule is a time-based vesting schedule, such
Stock Award shall vest not faster than one-third per year over three years and
if the vesting schedule is a performance-based vesting schedule, such Stock
Award shall vest not earlier than the first anniversary of the date of grant.

 

(iii)   Payment.  A Restricted Stock Unit Award will be
denominated in shares of Common Stock equivalents. A Restricted Stock Unit
Award will be settled by the delivery of shares of Common Stock.

 

(iv)   Dividend
Equivalents.  Dividend
equivalents may be credited in respect of shares of Common Stock equivalents
covered by a Restricted Stock Unit Award, as determined by the Board and
contained in the Restricted Stock Unit Award Agreement. At the discretion of
the Board, such dividend equivalents may be converted into additional shares of
Common Stock equivalents covered by the Restricted Stock Unit Award by dividing
(1) the aggregate amount or value of the dividends paid with respect to
that number of shares of Common Stock equivalents covered by the Restricted
Stock Unit Award then credited by (2) the Fair Market Value per share of
Common Stock on the payment date for such dividend, or in such other manner as
determined by the Board. Any additional share equivalents covered by the
Restricted Stock Unit Award credited by reason of such dividend equivalents will
be subject to all the terms and conditions of the underlying Restricted Stock
Unit Award Agreement to which they relate.

 

 

(v)   Termination
of Participant’s Continuous Service. 
Except as otherwise provided in the applicable Restricted Stock Unit
Award Agreement, such portion of the Restricted Stock Unit Award that has not
vested will be forfeited upon the Participant’s termination of Continuous
Service for any reason.

 

(vi)   Transferability.  Restricted Stock Units shall be transferable
by the Participant only upon such terms and conditions as are set forth in the
Restricted Stock Unit Agreement, as the Board shall determine in its
discretion.

 

(3)   Performance
Shares.  Each Performance
Share Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The terms and conditions of
Performance Share Agreements may change from time to time, and the terms and
conditions of separate Performance Share Agreements need not be identical;
provided, however, that each Performance Share Agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(i)   Consideration.  At the time of grant of Performance Shares, the
Board will determine the consideration, if any, to be paid by the Participant
upon delivery of each share of Common Stock subject to the Performance Shares.
To the extent required by applicable law, the consideration to be paid by the
Participant for each share of Common Stock subject to a Performance Shares will
not be less that the par value of a share of Common Stock. Such consideration
may be paid in any form permitted under applicable law.

 

(ii)   Vesting.  At the time of grant of Performance Shares,
the Board shall impose such restrictions or conditions to the vesting of the
Performance Shares as it, in its discretion, deems appropriate. The Board may
condition the grant of Performance Shares upon the attainment of specified
performance objectives established by the Board pursuant to Section 8 or
such other factors as the Board may determine in its sole discretion; provided,
however, that such Performance Shares shall vest not earlier than the first
anniversary of the date of grant.

 

(iii)   Payment.  Performance Shares will be denominated
in shares of Common Stock Equivalents. Performance Shares will be settled by
the delivery of shares of Common Stock.

 

(iv)   Dividend
Equivalents.  Dividend
equivalents may be credited in respect of shares of Common Stock equivalents
covered by Performance Shares, as determined by the Board and contained in the
Performance Share Agreement. At the discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock equivalents
covered by the Performance Shares by dividing (1) the aggregate amount or
value of the dividends paid with respect to that number of shares of Common
Stock equivalents covered by the Performance Shares then credited by (2) the
Fair Market Value per share of Common Stock on the payment date for such
dividend, or in such other manner as determined by the Board. Any additional
share equivalents covered by the Performance Shares credited by reason of such
dividend equivalents will be subject to all the terms and conditions of the
underlying Performance Share Agreement to which they relate.

 

(v)   Termination
of Participant’s Continuous Service. 
Except as otherwise provided in the applicable Performance Share
Agreement, such portion of the Performance Shares that have not vested will be
forfeited upon the Participant’s termination of Continuous Service for any
reason.

 

(vi)   Transferability.  Performance Shares shall be transferable by
the Participant only upon such terms and conditions as are set forth in the
Performance Share Agreement, as the Board shall determine in its discretion.

 

(4)   Other
Share-Based Awards.  Awards of
Shares and other Awards that are valued in whole or in part by reference to, or
are otherwise based on, Shares (“Other Share-Based Awards”), may be granted
either alone or in addition to or in conjunction with other Awards under this
Plan. Each Other Share-Based Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. The
terms and conditions of Other Share-Based Award Agreements may change from time
to time, and the terms and conditions of separate Other Share-Based Award
Agreements need not be identical; provided, however, that each Other Share-Based
Award Agreement shall include (through incorporation of the provisions hereof
by reference in the agreement or otherwise) the substance of each of the
following provisions:

 

(i)   Termination
of Participant’s Continuous Service. 
Except as otherwise provided in the applicable Other Share-Based Award
Agreement, such portion of the Other Share-Based Award that have not vested
will be forfeited upon the Participant’s termination of Continuous Service for
any reason.

 

 

(ii)   Transferability.  Other Share-Based Awards shall be
transferable by the Participant only upon such terms and conditions as are set
forth in the Other Share-Based Award Agreement, as the Board shall determine in
its discretion.

 

(5)   Deferral
of Award Payment.  The Board
may establish one or more programs under the Plan to permit selected
Participants to elect to defer receipt of consideration upon exercise of a
Stock Award, the satisfaction of performance objectives, or other events which,
absent such an election, would entitle such Participants to payment or receipt
of Common Stock or other consideration under a Stock Award. The Board may
establish the election procedures of such deferrals, the mechanisms for payment
of Common Stock or other consideration subject to deferral (including accrual
of interest or other earnings, if any, on amounts with respect thereto) and
such other terms, conditions, rules and procedures that the Board deems
advisable and in compliance with Section 409A of the Code and in
compliance with the Tax Act.

 

IX.          PERFORMANCE OBJECTIVES.

 

The Board shall determine
the terms and conditions of Stock Awards at the date of grant or thereafter;
provided that performance objectives, if any, related to Stock Awards granted
to Covered Employees shall be established by the Board not later than the
latest date permissible under Section 162(m) of the Code. To the
extent that such Stock Awards are paid to Covered Employees the performance
objectives to be used, if any, shall be expressed in terms of one or more of
the following: return on total shareholder equity; net income; stock price; net
earnings; related return ratios cash flow; earnings before interest, taxes,
depreciation, and amortization; revenues; return on total capital; profit
before taxation; product development milestones; clinical trial milestones.

 

X.            COVENANTS OF THE COMPANY.

 

(1)           During the terms of the
Stock Awards, the Company shall keep available at all times the number of
shares of Common Stock required to satisfy such Stock Awards.

 

(2)           The Company
shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to issue and sell
shares under Stock Awards; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Stock Award
or any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell stock upon
exercise of such Stock Awards unless and until such authority is obtained.

 

XI.          USE OF PROCEEDS FROM STOCK.

 

Proceeds from the sale of
stock pursuant to Stock Awards shall constitute general funds of the Company.

 

XII.        MISCELLANEOUS.

 

(1)   Acceleration
of Exercisability and Vesting. 
The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding the provisions
in the Stock Award stating the time at which it may first be exercised or the
time during which it will vest.

 

(2)   Shareholder
Rights.  Neither the recipient
of a Stock Award nor any person to whom a Stock Award is transferred in
accordance with the Plan shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to
such Stock Award unless and until such person has satisfied all requirements
for exercise of the Stock Award pursuant to its terms.

 

(3)   No
Employment or Other Service Rights. 
Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any recipient or other holder of Stock
Awards any right to continue in the employ of the Company or any Affiliate or
to continue serving as a Consultant or a Director, or shall affect the right of
the Company or any Affiliate to terminate the employment of any Employee with
or without notice and with or without cause, or the right to terminate the
relationship of any Consultant pursuant to the terms of such Consultant’s
agreement with the Company or any Affiliate or service as a Director pursuant
to the Company’s Bylaws and the provisions of the corporate law of the state in
which the Company is incorporated.

 

 

(4)   Incentive
Stock Option $100,000 Limitation. 
To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Participant during any calendar year
under all plans of the Company and its Affiliates exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.

 

(5)   Investment
Assurances.  The Company may
require any person to whom a Stock Award is granted, or any person to whom a
Stock Award is transferred in accordance with the Plan, as a condition of
exercising or acquiring stock under any Stock Award, (1) to give written
assurances satisfactory to the Company as to such person’s knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Stock Award for such person’s own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or
acquisition of stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities Act, or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the stock.

 

(6)   Withholding
Obligations.  To the extent
provided by the terms of a Stock Award Agreement, the Participant may satisfy
any federal, state or local tax withholding obligation relating to the exercise
or acquisition of Common Stock under a Stock Award by any of the following
means (in addition to the Company’s right to withhold from any compensation
paid to such Participant by the Company) or by a combination of such means: (1) tendering
a cash payment; (2) authorizing the Company to withhold shares of Common
Stock from the shares of the Common Stock otherwise issuable to the Participant
as a result of the exercise or acquisition of Common Stock under the Stock
Award, provided that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law; or (3) delivering
to the Company owned and unencumbered shares of the Common Stock of the
Company.

 

XIII.       ADJUSTMENTS
UPON CHANGES IN STOCK.

 

(1)   Capitalization
Adjustments.  If any change is
made in the stock subject to the Plan, or subject to any Stock Award, without
the receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities
subject to the Plan pursuant to Section 4(a), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a “transaction not involving the receipt of
consideration by the Company”.)

 

(2)   Dissolution
or Liquidation.  In the event
of a dissolution or liquidation of the Company, then all outstanding Stock
Awards shall terminate immediately prior to such event.

 

(3)   Asset
Sale, Merger, Consolidation or Reverse Merger.  In the event of (i) a sale, lease or
other disposition of all or substantially all of the assets of the Company, (ii) a
merger or consolidation in which the Company is not the surviving corporation
or (iii) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property, whether
in the form of securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar stock awards (including an award to acquire the
same consideration paid to the shareholders in the transaction described in
this Section 11(c) for those outstanding under the Plan). In the
event any surviving corporation or acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards held by Participants whose Continuous
Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Award shall terminate if not exercised
(if applicable) prior to such event.

 

 

XIV.       AMENDMENT OF THE PLAN AND STOCK
AWARDS.

 

(1)           The Board at any time, and
from time to time, may amend the Plan. However, except as provided in Section 12(a) relating
to adjustments upon changes in stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary for the Plan to satisfy the requirements of Section 422 of
the Code.

 

(2)           The Board may in its sole
discretion submit any other amendment to the Plan for shareholder approval.

 

(3)           It is expressly contemplated
that the Board may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible Participants with the maximum benefits provided
or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the
Plan and/or Incentive Stock Options granted under it into compliance therewith.

 

(4)           Rights under any Stock Award
granted before amendment of the Plan shall not be impaired by any amendment of
the Plan unless (i) the Company requests the consent of the person to whom
the Stock Award was granted and (ii) such person consents in writing.

 

(5)           The Board at any time, and
from time to time, may amend the terms of any one or more Stock Awards;
provided, however, that the rights under any Stock Award shall not be impaired
by any such amendment unless (i) the Company requests the consent of the
person to whom the Stock Award was granted and (ii) such person consents
in writing.

 

XV.         TERMINATION OR SUSPENSION OF
THE PLAN.

 

(1)           The Board may suspend or
terminate the Plan at any time. Unless sooner terminated, the Plan shall
terminate ten (10) years from the date the Plan is adopted by the Board or
approved by the shareholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated. Notwithstanding the foregoing, all Incentive Stock Options shall be
granted, if at all, no later than the last day preceding the tenth (10th)
anniversary of the earlier of (i) the date on which the latest increase in
the maximum number of shares issuable under the Plan was approved by the
shareholders of the Company or (ii) the date such amendment was adopted by
the Board.

 

(2)           Rights and obligations under
any Stock Award granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan, except with the consent of the person to
whom the Stock Award was granted.

 

XVI.       EFFECTIVE DATE OF PLAN.

 

The Plan shall become
effective as determined by the Board, but no Stock Award shall be exercised,
unless and until the Plan has been approved by the shareholders of the Company,
which approval shall be within twelve (12) months before or after the date
the Plan was adopted by the Board.

 

XVII.     CHOICE OF
LAW.

 

The law of the State of
California shall govern all questions concerning the construction, validity and
interpretation of this Plan, without regard to such state’s conflict of laws
rules.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}]]