<PAGE> 1
THORATEC LABORATORIES CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 12, 2000
TO THE SHAREHOLDERS OF THORATEC LABORATORIES CORPORATION
NOTICE IS HEREBY GIVEN, that an Annual Meeting of Shareholders of Thoratec
Laboratories Corporation, a California corporation ("Thoratec" or our
"Company"), will be held on Friday, May 12, 2000 at 9:30 a.m., Pacific time, at
our Company's headquarters at 6035 Stoneridge Drive, Pleasanton, California
94588 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 6, 2000 are
entitled to notice of and to vote at the meeting and any adjournments thereof.
All shareholders are cordially invited to attend the meeting in person. Any
shareholder attending the meeting may vote in person even if such shareholder
previously signed and returned a Proxy.
FOR THE BOARD OF DIRECTORS
D. Keith Grossman
Chief Executive Officer and President
Pleasanton, California
April 11, 2000
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
- --------------------------------------------------------------------------------
<PAGE> 2
THORATEC LABORATORIES CORPORATION
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of Thoratec Laboratories Corporation ("Thoratec" or our "Company") for
use at our Company's Annual Meeting of Shareholders (the "Annual Meeting") to be
held Friday, May 12, 2000 at 9:30 a.m., Pacific time, or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at our
headquarters which is located at 6035 Stoneridge Drive, Pleasanton, California
94588. The telephone number at that address is (925) 847-8600.
These proxy solicitation materials were mailed on or about April 11, 2000
to all shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on April 6, 2000 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, 20,630,385 shares of our Company's common stock (our "Common
Stock") were issued, outstanding and entitled to vote at the Annual Meeting.
REVOCABILITY OF PROXIES
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of our
Company a written notice of revocation or a duly executed Proxy bearing a later
date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Every shareholder voting for the election of directors may exercise
cumulative voting rights and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
shareholder's shares are entitled, or distribute such shareholder's votes on the
same principle among as many candidates as the shareholder may select, provided
that votes cannot be cast for more than seven candidates. However, no
shareholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate votes. On all other matters each share is entitled to one
vote on each proposal or item that comes before the Annual Meeting.
We intend to include abstentions and broker non-votes as present or
represented for purposes of establishing a quorum for the transaction of
business. However, abstentions are counted as votes against a proposal for
purposes of determining whether or not a proposal has been approved, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
Solicitation of proxies may be made by directors, officers and other
employees of our Company by personal interview, telephone, facsimile or other
method. No additional compensation will be paid for any such services. Costs of
solicitation, including preparation, assembly, printing and mailing of this
proxy statement, the proxy and any other information furnished to the
shareholders, will be borne by us. We may reimburse the reasonable charges and
expenses of brokerage houses or other nominees or fiduciaries for forwarding
proxy materials to, and obtaining authority to execute proxies from, beneficial
owners for whose account they hold shares of Common Stock.
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<PAGE> 3
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
Seven directors are to be elected at the Annual Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
seven nominees named below. All of the nominees named below are presently
directors of our Company and there is currently one vacancy on the Board. In
March 2000, Mr. Christy Bell retired from the Board. In the event that any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the Board to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner in accordance with cumulative voting
as will ensure the election of as many of the nominees listed below as possible.
In such event, the specific nominees for whom such votes will be cumulated will
be determined by the proxy holders. The term of office for each person elected
as a director will continue until the next Annual Meeting of Shareholders or
until his successor has been elected and qualified. It is not expected that any
nominee will be unable or will decline to serve as a director.
The name of and certain other information regarding each nominee is set
forth in the table below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION WITH THE COMPANY SINCE
--------------- --- ------------------------- --------
<S> <C> <C> <C>
J. Donald Hill(1)...................... 63 Director and Chairman of the Board 1976
D. Keith Grossman...................... 39 Director, President and Chief Executive 1996
Officer
Howard E. Chase(2)..................... 63 Director 1986
J. Daniel Cole(2)...................... 53 Director 1997
William M. Hitchcock(2)................ 60 Director 1996
George W. Holbrook, Jr.(1)............. 68 Director 1995
Daniel M. Mulvena(1)................... 51 Director 1997
</TABLE>
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(1) Member of Compensation and Option Committee
(2) Member of Audit Committee
There is no family relationship between any of the directors or executive
officers of the Company.
D. KEITH GROSSMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR, joined
our Company as President and Chief Executive Officer in January 1996. He was
elected to the Board of Directors in February 1996. Prior to joining us, Mr.
Grossman was a Division President of Major Pharmaceuticals, Inc., from June 1992
to September 1995, at which time it was sold. From July 1988 to June 1992, Mr.
Grossman served as the Vice President of Sales and Marketing for Calcitek, Inc.,
a manufacturer of implantable medical devices, and division of Sulzermedica
(formerly Intermedics, Inc.). Prior to 1988, Mr. Grossman held various other
sales and marketing management positions within the McGaw Laboratories Division
of American Hospital Supply Corporation.
HOWARD E. CHASE became a director of our Company in November 1986. Mr.
Chase has been President and CEO of Carret Holdings, Inc. (formerly Matrix
Global Investments, Inc.) since June 1999. Mr. Chase served as President and CEO
of Trident Rowan Group, Inc. ("TRGI") from September 1995 to March 1998 and
Chairman of the Board of TRGI from March 1998 to December 1999. From 1984 to
August 1995, Mr. Chase was a partner in the law firm of Morrison Cohen Singer &
Weinstein, LLP in New York City. He acted as an advisor and as a special counsel
to our Company from 1979 to 1995. Mr. Chase also serves as a member of the board
of directors of Trident Rowan Group, Inc. and Moto Guzzi Corporation.
J. DANIEL COLE became a director of our Company in June 1997. Mr. Cole has
been a general partner of the Spray Venture Fund of Boston since March 1997. Mr.
Cole was President and Chief Operating Officer of SciMed Life Systems
Corporation from March 1993 to March 1995, and Senior Vice President and Group
2
<PAGE> 4
President of Boston Scientific Corporation's vascular business from March 1995
to March 1997. He has also held a number of senior executive positions at Baxter
Healthcare Corporation, including President of its Edwards Less Invasive Surgery
Division and its Critical Care Division. Mr. Cole also serves as a member of the
board of directors of SurVivaLink.
J. DONALD HILL, M.D. has been a director of our Company since its inception
and is one of our significant shareholders. In January 1995, Dr. Hill became
Chairman of the Board of Directors. Dr. Hill is the director of the heart
transplant program at California Pacific Medical Center in San Francisco where
he has been a practicing cardiovascular surgeon since 1966.
WILLIAM M. HITCHCOCK became a director of our Company in September 1996. In
December 1996, Mr. Hitchcock became President and director of Avalon Financial,
Inc. From May 1992 to December 1996, Mr. Hitchcock was President of Plains
Resources International Inc., a wholly owned subsidiary of Plains Resources Inc.
Mr. Hitchcock also serves as a member of the board of directors of Plains
Resources Inc., Oshman's Sporting Goods, Inc., and Maxx Petroleum, Ltd.
GEORGE W. HOLBROOK, JR. became a director of our Company in June 1995.
Since 1984 Mr. Holbrook has been the Managing Partner of Bradley Resources
Company, a private investment partnership. Mr. Holbrook is also a director of
Merrill Lynch Institutional Fund, Inc., and several associated funds.
DANIEL M. MULVENA became a director of our Company in May 1997. Mr. Mulvena
is the founder and owner of Commodore Associates, a consulting company. Mr.
Mulvena was Group Vice President of the Cardiac/Cardiology Division and a member
of the operating committee for Boston Scientific Corporation from February 1992
to May 1995. Prior to that, he was the President and Chief Executive Officer and
Chairman of Lithox Systems, Inc. Prior to that, Mr. Mulvena held a number of
executive positions, including President of the Implants Division and President
of the Cardiosurgery Division, at C.R. Bard, Inc. Mr. Mulvena also serves as a
member of the board of directors of Echocath, Inc., Magna-Lab Inc., Zoll Medical
Corporation and Cambridge Heart, Inc.
BOARD MEETINGS AND COMMITTEES
The Board held a total of four meetings during 1999. No director attended
fewer than 75 percent of the aggregate of all meetings of the Board and of the
committees upon which such director served.
During 1999 and through March 2000, the Audit Committee consisted of
Messrs. Bell, Chase and Hitchcock, with Mr. Chase serving as Chairman. Mr. Bell
retired from the Board in March 2000 and Mr. Cole replaced him on the audit
committee. The principal functions of the Audit Committee are to recommend
engagement of our Company's independent auditors, to consult with our Company's
auditors concerning the scope of the audit and to review with them the results
of their examination, to review and approve any material accounting policy
changes affecting our Company's operating results and to review our Company's
financial control procedures and personnel. The Audit Committee held one meeting
during 1999.
The Compensation and Option Committee currently consists of Messrs.
Holbrook and Mulvena, and Dr. Hill, with Mr. Mulvena serving as Chairman. The
Compensation and Option Committee reviews and recommends to the Board
compensation and benefits for our executive officers and management. The
Compensation and Option Committee held three meetings during 1999.
The Board does not have a nominating committee.
BOARD COMPENSATION
Directors receive reimbursement for travel and other expenses directly
related to their activities as directors. Outside directors are paid $2,500 per
meeting held in person and $500 per quarter for committee meetings. In addition,
with prior approval of the Chairman, consulting fees of $1,500 per day for the
first full day and $1,000 per day thereafter may be paid. Outside directors are
eligible to participate in our 1996 Nonemployee Directors Stock Option Plan.
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<PAGE> 5
A total of 350,000 shares of our Common Stock have been reserved for
issuance under the Directors Option Plan. The Directors Option Plan provides for
the automatic granting of nonqualified stock options to directors of our Company
who are not employees of our Company or any parent or subsidiary of our Company
and who have not been an employee of our Company or any parent or subsidiary of
our Company in the previous 12 months ("Eligible Outside Directors"). Each
person who is newly elected or appointed as an Eligible Outside Director on or
after the meeting of shareholders in 1999 will be granted options to purchase a
total of 15,000 shares of Common Stock in equal quarterly installments on the
effective date of such initial election or appointment (the "Initial Grants").
Each year, each Eligible Outside Director (including the existing outside
directors) generally will be granted options to purchase a total of 7,500 shares
of Common Stock in equal quarterly installments beginning on the date of the
first meeting of the Board of Directors following the annual shareholders
meeting (the "Annual Grants"). In any event, both the Initial Grants and the
Annual Grants will be made no later than August 31, November 30, February 28, or
May 31 of the relevant year. As of March 22, 2000, options to purchase 149,165
shares have been granted, of which 15,625 have been exercised. We currently have
six nonemployee directors who are eligible to participate in the Directors
Option Plan, all of whom have been nominated for election at the Annual Meeting.
The exercise price of the options in all cases is equal to the fair market value
of Common Stock on the grant date. Each option granted after May 1999 pursuant
to the Directors Option Plan expires five years after the date of grant or
earlier in the event of the termination of the director's service on the Board.
Each option granted after May 1999 under the Directors Option Plan is
exercisable immediately after the date of grant with our Company retaining the
right to repurchase any stock acquired upon exercise. Such right of repurchase
shall expire at the rate determined by our Company. In the event of acquisition
of our Company by a merger, consolidation, sale of all or substantially all our
Company's assets or acquisition of our Company's shares, such right of
repurchase shall lapse with respect to twice the number of shares still subject
to the right of repurchase. The Board may waive the directors fees in any given
year and have the exercise price of options granted under the Directors Option
Plan reduced by the amount of the fees so waived.
For 1999 Dr. Hill and Messrs. Bell, Chase, Cole, Hitchcock, Holbrook and
Mulvena received compensation of $11,500, $10,500, $10,500, $7,500, $10,500,
$8,500, and $7,500, respectively. Each nonemployee director was granted options
pursuant to the 1996 Directors Stock Option Plan to purchase 1,875 shares of
Common Stock each on May 14, 1999, August 13, 1999, and November 18, 1999 with
an exercise price of $8.81 per share, $9.00 per share, and $6.13 per share,
respectively.
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of March 10, 2000 (i) by each of our directors,
(ii) by each Named Executive Officer, (iii) by all directors and executive
officers as a group, and (iv) by each person who is known by us to own
beneficially more than 5% of our Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED(2)
------------------- --------------------- ---------------------
<S> <C> <C>
Gambro, Inc. (formerly COBE Laboratories, Inc).............. 3,708,077 18.0%
Peter R. Kellogg............................................ 2,328,450 11.3
State of Wisconsin Investment Board......................... 1,549,800 7.5
J. Donald Hill(3)........................................... 1,421,953 6.9
Sulzer Medica USA Inc....................................... 1,074,074 5.2
George W. Holbrook, Jr.(4).................................. 461,392 2.2
Bradley Resources Company(4)................................ 433,059 2.1
James R. McGoogan(4)........................................ 433,059 2.1
William M. Hitchcock(5)..................................... 382,073 1.9
D. Keith Grossman(6)........................................ 254,833 1.2
Howard E. Chase(7).......................................... 110,555 *
David J. Farrar(8).......................................... 103,314 *
Donald A. Middlebrook(9).................................... 89,125 *
Cheryl D. Hess(10).......................................... 74,506 *
Thomas E. Burnett, Jr.(11).................................. 73,125 *
J. Daniel Cole(12).......................................... 70,000 *
Daniel M. Mulvena(13)....................................... 30,000 *
Directors and Executive Officers as a Group (12
persons)(14).............................................. 3,139,001 14.6%
</TABLE>
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<PAGE> 6
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* Less than one percent
(1) The address of the persons set forth above is the address of our Company
appearing elsewhere in this Proxy Statement.
(2) Applicable percentage ownership for each shareholder is based on 20,623,052
shares of Common Stock outstanding as of March 10, 2000, together with
applicable options for such shareholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission, and
includes voting and investment power with respect to the shares. Beneficial
ownership also includes shares of stock subject to options and warrants
exercisable or convertible within 60 days of March 10, 2000. Shares of
Common Stock subject to outstanding options are deemed outstanding for
computing the percentage of ownership of the person holding such options,
but are not deemed outstanding for computing the percentage ownership of
any other person. Except pursuant to applicable community property laws or
as indicated in the footnotes to this table, to our knowledge, each
shareholder identified in the table possesses sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by such shareholder.
(3) Includes 110,555 shares issuable upon exercise of options exercisable
within 60 days of March 10, 2000.
(4) Bradley Resources Company is an investment partnership which owns 433,059
shares. George W. Holbrook, Jr., a director of our Company, is a general
partner of Bradley Resources Company and is deemed to share beneficial
ownership of such shares with Mr. James R. McGoogan, a general partner of
Bradley Resources Company. Includes, in Mr. Holbrook's number only, 28,333
shares issuable upon exercise of options within 60 days of March 10, 2000.
(5) Includes 28,333 shares issuable upon exercise of options exercisable within
60 days of March 10, 2000.
(6) Includes 245,833 shares issuable upon exercise of options exercisable
within 60 days of March 10, 2000.
(7) Includes 110,555 shares issuable upon exercise of options exercisable
within 60 days of March 10, 2000.
(8) Includes 78,958 shares issuable upon exercise of options exercisable within
60 days of March 10, 2000.
(9) Includes 88,125 shares issuable upon exercise of options exercisable within
60 days of March 10, 2000.
(10) Includes 17,708 shares issuable upon exercise of options exercisable within
60 days of March 10, 2000.
(11) Includes 69,125 shares issuable upon exercise of options exercisable within
60 days of March 10, 2000.
(12) Includes 30,000 shares issuable upon exercise of options exercisable within
60 days of March 10, 2000.
(13) Includes 30,000 shares issuable upon exercise of options exercisable within
60 days of March 10, 2000.
(14) Includes 890,650 shares issuable upon exercise of options exercisable
within 60 days of March 10, 2000.
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<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation received for services rendered to our Company during 1997, 1998 and
1999 by the Chief Executive Officer of our Company and each of the four
additional most highly compensated executive officers (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER COMPENSATION
COMPENSATION -------------------------
------------ LIFE INSURANCE
ANNUAL COMPENSATION SECURITIES PREMIUMS
------------------------------------- UNDERLYING PAID BY THE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) OPTIONS(#) COMPANY(5) OTHER
--------------------------- ---- -------- -------- -------- ------------ -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
D. Keith Grossman(2)............ 1999 $214,362 $107,569 $ -- 120,000 $ 617 $ 2,400
Chief Executive Officer, 1998 192,750 131,070 -- 100,000 216 2,400
President and Director 1997 183,997 41,125 -- 333,333 216 2,375
Thomas E. Burnett, Jr.(3)....... 1999 158,318 57,614 -- 70,000 451 1,204
Senior Vice President, 1998 139,778 83,167 -- 52,500 216 861
Chief Operating Officer 1997 131,298 30,188 -- 40,000 216 767
David J. Farrar(3).............. 1999 152,598 58,674 -- 60,000 439 2,400
Vice President -- Research 1998 136,856 73,287 -- 52,500 216 2,400
and Development 1997 130,649 28,000 -- 40,000 216 2,290
Cheryl D. Hess(3)............... 1999 156,588 57,108 -- 60,000 451 2,400
Chief Financial Officer, Vice 1998 139,778 76,930 -- 52,500 216 2,400
President -- Finance and
Secretary 1997 131,298 33,688 -- 40,000 216 2,375
Donald A. Middlebrook(4)........ 1999 152,473 43,437 -- 60,000 439 2,400
Vice President -- Regulatory 1998 137,808 66,417 -- 52,500 216 2,400
Affairs/Quality Assurance 1997 131,298 32,375 -- 40,000 216 68,462
</TABLE>
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(1) In accordance with the rules of the Securities and Exchange Commission,
other annual compensation in the form of perquisites and other personal
benefits has been omitted where the aggregate amount of such perquisites and
other personal benefits constituted less than the lesser of $50,000 or 10%
of the total annual salary and bonus for the Named Executive Officer for the
year.
(2) Not included in the 1997 Securities Underlying Options number are 140,000
options issued to Mr. Grossman in 1997 and canceled later in the year. Other
compensation in 1997, 1998, and 1999 represents employer contributions to a
401(k) retirement plan.
(3) Other compensation in 1997, 1998, and 1999 represents employer contributions
to a 401(k) retirement plan.
(4) Other compensation in 1997 represents $56,087 for reimbursed relocation
expenses, $10,000 for a signing bonus and $2,375 for employer contribution
to a 401(k) retirement plan. Other compensation in 1998 and 1999 represents
employer contributions to a 401(k) retirement plan.
(5) Amount represents premiums paid by our Company for term life insurance for
the benefit of the Named Executive Officer.
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<PAGE> 8
OPTION GRANTS
The following table provides information concerning grants of options to
purchase our stock made to each of the Named Executive Officers during 1999. No
stock appreciation rights were granted to these individuals during 1999.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZED
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------
NAME GRANTED IN 1999 ($/SH) DATE 5% 10%
---- ---------- ------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
D. Keith Grossman............. 120,000 11.3% $8.250 05/18/09 $623,000 $1,578,000
Thomas E. Burnett, Jr......... 60,000 5.6 8.250 05/18/09 311,000 789,000
10,000 .9 6.250 11/22/09 39,000 100,000
David J. Farrar............... 60,000 5.6 8.250 05/18/09 311,000 789,000
Cheryl D. Hess................ 60,000 5.6 8.250 05/18/09 311,000 789,000
Donald A. Middlebrook......... 60,000 5.6 8.250 05/18/09 311,000 789,000
</TABLE>
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(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of the future Common Stock price.
OPTION EXERCISES AND HOLDINGS
The following table sets forth the certain information regarding the value
of exercised options and unexercised stock options held by each of the Named
Executive Officers at 1999 year-end.
1999 OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR END(2) FISCAL YEAR END(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. Keith Grossman........ -- -- 233,333 320,000 $1,078,644 $1,040,938
Thomas E. Burnett, Jr.... -- -- 78,125 144,375 135,547 356,641
David J. Farrar.......... 9,134 $50,629 68,958 119,375 377,394 321,641
Cheryl D. Hess........... 10,000 45,000 23,125 119,375 91,797 321,641
Donald A. Middlebrook.... -- -- 78,125 134,375 135,547 321,641
</TABLE>
- ---------------
(1) Value realized is based on the fair market value of our stock on the date of
exercise (the closing sales price reported on the Nasdaq National Market)
minus the exercise price, and does not necessarily indicate that the
optionee sold such stock.
(2) Options vest over periods of four years from the date of the grant.
(3) Represents the difference between the option exercise price and the closing
price of our stock as reported on the Nasdaq National Market at 1999
year-end.
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<PAGE> 9
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
During 1999, management compensation issues were reviewed by the
Compensation and Option Committee which consisted of Messrs. Holbrook, Mulvena
and Dr. Hill. The function of the Compensation and Option Committee is to review
and recommend management compensation to the Board. The Compensation and Option
Committee met three times in 1999.
We believe that our ability to achieve the objectives of obtaining
regulatory approval for and commercializing our circulatory support and graft
products, and becoming profitable, is dependent largely upon our ability to
recruit and retain qualified executives with substantive experience in the
development, regulatory approval, manufacture, marketing and sale of new medical
devices. We are competing for experienced executives within the San Francisco
Bay Area, where over 100 biotechnology/biomedical/pharmaceutical companies are
located.
We have a policy designed to control the base salaries of our executives
while providing sufficient incentives to attract and retain qualified personnel.
In accordance with this policy, we strive to set executive base salaries by
considering relative contribution of the position to achievement of our
Company's goals and objectives, "market value" as defined by salaries of
executives within the Bay Area with comparable experience in similar positions,
and job-related responsibilities with respect to size of budget, number of
subordinates and scope of activities. In general, we strive to set base salaries
of new executives at market, which is defined as the average base salary of
incumbents in comparable positions, and use our 1993, 1996 and 1997 Stock Option
Plans to facilitate recruiting and to retain qualified executives by providing
long-term incentives. Typically, new executives are granted stock options as
part of their initial employment package.
During 1993, the Internal Revenue Code of 1986 was amended to include a
provision that denies a deduction to publicly held corporations for compensation
paid to "covered employees" (defined as the chief executive officer and the next
four most highly compensated officers as of the end of the taxable year) to the
extent that compensation paid to any "covered employee" exceeds $1 million in
any taxable year of the corporation beginning after 1993. Certain
"performance-based" compensation qualified for an exemption from the limits on
deductions. It is our policy to attempt to qualify compensation paid to our top
executives for deductibility in order to maximize our income tax deductions, to
the extent that so qualifying the compensation is consistent with our
fundamental compensation policies. Based upon the Internal Revenue Service's
proposed regulations and compensation paid to our "covered employees" for the
1999 tax year, all compensation paid by our Company in 1999 to such covered
employees was deductible to our Company.
Stock Options. We have determined that stock options are an important
incentive for attracting and retaining qualified personnel, including
executive-level personnel.
Corporate Performance Criteria. Management presents to us a set of
corporate goals for a succeeding period, generally ranging from 12 to 18 months,
as part of the annual plan and budget process. These goals establish benchmarks
for assessing overall corporate performance. Given the dynamic nature of the new
medical device development process, progress toward the achievement of corporate
goals is reviewed with us periodically together with a description of any change
in circumstances that management believes may warrant an update to or revisions
of these goals. The principal corporate goals for 1999 were to achieve revenue
and net income targets, complete the second phase of the Company's relocation
into new corporate headquarters in Pleasanton, successfully launch a new product
in Europe, and complete several clinical trials and regulatory submissions.
Periodic Salary Adjustments. Generally, executive salaries are reviewed
annually, and salary adjustments may be awarded on the basis of increased
responsibilities of individual executives over a period of time or the
outstanding performance of individual executives as exhibited by consistently
high standards in the execution of established duties, as described by the Chief
Executive Officer to the Board. Company performance as a whole is a major
consideration in our decision to award any salary increases and, to a lesser
extent, we also consider general economic conditions and trends. The January
2000 review date was moved forward to November 1999 in response to market value
evaluations performed by us during the year. The base salaries of our Company
executives were increased by eight to twelve percent in November 1999, based on
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<PAGE> 10
performance and execution of duties. In addition to the November increase Mr.
Burnett received a promotional increase of 10.8% in December 1999.
Chief Executive Officer. Generally, the nonemployee members of the Board
meet with the Chief Executive Officer to discuss the performance of the other
executive officers and of our Company as a whole. The nonemployee members of the
Board then meet in the absence of the Chief Executive Officer to discuss the
performance of the Chief Executive Officer. Based on his leadership and
achievements of key strategic and regulatory objectives for the year, including
the successful completion of our Company's relocation to Pleasanton, Mr.
Grossman's base salary was increased twelve percent in November 1999. In
addition, based on achievement of certain bonus-related objectives such as the
corporate goals mentioned above, Mr. Grossman was awarded a bonus of $107,569
for the 1999 year.
In January 2000, we entered into a four-year employment agreement with Mr.
Grossman. This employment agreement provides for, among other provisions, a
minimum base salary, an annual bonus based upon performance, and a severance
package.
Summary. We believe that we have established a program for compensation of
our executives which is fair and which aligns the financial incentives for
executives with the interests of our shareholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, no executive officer of our Company served on the board of
directors or compensation committee of another company that had an executive
officer serve on our Company's Board of Directors or our Compensation and Option
Committee.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our directors and executive officers, and persons who
own more than ten percent of a registered class of our Company's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or 5 with the Securities and Exchange Commission and the National
Association of Securities Dealers. Such officers, directors and ten percent
shareholders are also required by Securities and Exchange Commission rules to
furnish our Company with copies of all Section 16(a) forms that they file.
Based solely on our review of copies of such reports received or written
representations from certain reporting persons, we believe that, during 1999,
there has been no failure by any of our officers, directors or ten percent
shareholders to file on a timely basis any reports required by Section 16(a).
9
<PAGE> 11
STOCK PRICE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that we include in this
proxy statement a line-graph representation comparing five-year, cumulative
shareholder returns for our Common Stock with a broad-based market index and
either a nationally recognized industry standard or an index of peer companies
selected by us.
The following line graph illustrates a five-year comparison of the
cumulative total shareholder return on our Common Stock against the cumulative
total return of The Nasdaq Stock Market (U.S.) Index and the Peer Group Index,
assuming $100 invested in our Common Stock and the two indexes on December 31,
1994.
In this Proxy Statement we compare the return on our Common Stock to the
Nasdaq Stock Market Index (U.S. Companies only) and the Peer Group Index. Our
Company is included in the Nasdaq Stock Market Index (U.S. Companies only) and
is similar in size and stage of commercialization as the other companies in the
Peer Group.
The Peer Group Index consists of the following 15 Nasdaq companies:
Abiomed, Inc., Advanced Neuromodulation Systems, Inc. (formerly Quest Medical,
Inc.), Angeion Corporation, Arrow International, Inc., Atrion Corporation,
Bio-Vascular, Inc., Cardiotech International, Inc., Datascope Corp., Eclipse
Surgical Technologies, Inc., Fusion Medical Technologies, Inc., Gish Biomedical,
Inc., Heartport, Inc., Innerdyne, Inc., Possis Medical, Inc., and Thermo
Cardiosystems Inc. General Surgical Innovations was acquired by US Surgical, a
division of Tyco International Limited, and CardioThoracic Systems, Inc. was
acquired by Guidant Corporation. Both of these companies have been removed from
the Peer Group as their successor companies are not of similar size with our
Company.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG THORATEC LABORATORIES CORPORATION
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE PEER GROUP INDEX
<TABLE>
<CAPTION>
THORATEC LABORATORIES NASDAQ STOCK MARKET -
CORPORATION PEER GROUP US
--------------------- ---------- ---------------------
<S> <C> <C> <C>
12/94 100 100 100
12/95 229 211 141
12/96 145 147 174
12/97 101 142 213
12/98 109 88 300
12/99 149 103 542
</TABLE>
- ---------------
* $100 Invested on December 31, 1994 in stock or index including reinvestment of
dividends. Fiscal year ending December 31.
10
<PAGE> 12
INDEPENDENT AUDITORS
The Board has selected Deloitte & Touche LLP as independent auditors to
audit our financial statements for the 2000 fiscal year. Deloitte & Touche LLP
has been engaged as our auditors since our inception in 1976. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting and will
have an opportunity to make a statement if they desire to do so. The
representatives of Deloitte & Touche LLP also will be available to respond to
questions raised during the meeting.
SHAREHOLDER PROPOSAL
Proposals of our shareholders which are intended to be presented at our
2001 meeting of shareholders must be received by the Secretary of our Company no
later than December 15, 2000 in order to be included in the proxy soliciting
material relating to that meeting.
OTHER MATTERS
We know of no other matters to be submitted at the Annual Meeting. If any
other matters properly come before the Annual Meeting, it is the intention of
the persons named in the enclosed proxy to vote the shares they represent as the
Board may recommend.
THE BOARD OF DIRECTORS
Dated: April 11, 2000
11
<PAGE> 13
THORATEC LABORATORIES CORPORATION
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 12, 2000
The undersigned, revoking all prior proxies, hereby appoint(s) D. Keith
Grossman and Cheryl D. Hess, and each of them, each with the power of
substitution and revocation, to represent the undersigned, with all powers
which the undersigned would possess if personally present, and to vote as set
forth below all shares of stock of THORATEC LABORATORIES CORPORATION (the
"Company") which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Company to be held at the
Company's headquarters at 6035 Stoneridge Drive, Pleasanton, California 94588,
on Friday, May 12, 2000 at 9:30 a.m., and at any postponements or adjournments
of that meeting, and in their direction to vote upon any other business that
may properly come before the meeting.
SEE REVERSE
SIDE
<PAGE> 14
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C>
FOR TO ELECT AS DIRECTORS:
all nominees WITHHOLD Howard E. Chase, J. Daniel Cole.
listed at right (except authority to vote D. Keith Grossman, J. Donald Hill,
as indicated below) (as to all nominees) William M. Hitchcock, George W. Holbrook, Jr.,
[ ] [ ] and Daniel M. Mulvena
</TABLE>
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S
NAME ON THE LINE BELOW.
- --------------------------------------------
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE
IS SPECIFIED, WILL BE VOTED FOR EACH OF THE PROPOSALS
SPECIFIED HEREIN. THIS PROXY MAY BE REVOKED BY THE
UNDERSIGNED BY ANY OF THE MEANS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT AT ANY TIME PRIOR TO THE
TIME IT IS VOTED.
_______________ Shares of Common Stock
SIGNATURE(S) DATED
----------------------------------- -------------------
Printed name of Shareholder
----------------------------------------------
Title (if Shareholder is not an individual)
------------------------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE STOCK RECORDS OF THE COMPANY,
IF ACTING AS AN ATTORNEY, EXECUTOR, TRUSTEE, OR IN OTHER REPRESENTATIVE
CAPACITY, SIGN NAME AND TITLE, IF SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD
SIGN.
