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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THORATEC CORPORATION
------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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THORATEC CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 24, 2001
TO THE SHAREHOLDERS OF THORATEC CORPORATION
NOTICE IS HEREBY GIVEN, that an Annual Meeting of Shareholders of Thoratec
Corporation, a California corporation with its principal executive offices at
6035 Stoneridge Drive, Pleasanton, California 94588 ("Thoratec" or our
"Company"), will be held on Friday, August 24, 2001 at 9:30 a.m., Eastern
Daylight Time, at the Marriott Long Wharf Hotel located at 296 State Street,
Boston, Massachusetts 02109, telephone number (617) 227-0800, 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 July 18, 2001 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
July 24, 2001
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.
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THORATEC CORPORATION
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of Thoratec Corporation ("Thoratec" or our "Company") for use at our
Company's Annual Meeting of Shareholders (the "Annual Meeting") to be held
Friday, August 24, 2001 at 9:30 a.m., Eastern Daylight 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 the Marriott Long Wharf Hotel located at 296 State Street,
Boston, Massachusetts 02109. The telephone number at that address is (617)
227-0800.
These proxy solicitation materials were mailed on or about July 24, 2001,
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 July 18, 2001 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, 54,682,873 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 eight 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.
The Company intends 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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PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
Eight directors are to be elected at the Annual Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
eight nominees named below. All of the nominees named below are presently
directors of our Company. As long as Thermo Electron Corporation beneficially
owns at least 10% of the voting power of all Thoratec voting securities
outstanding, we are required to take all necessary action to cause a nominee of
Thermo Electron to be elected to Thoratec's Board. Thermo Electron has
designated its Chief Financial Officer, Theo Melas-Kyriazi, to serve as its
initial representative and Mr. Melas-Kyriazi has been nominated to serve on
Thoratec's 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.
DIRECTOR
NAME OF NOMINEE AGE POSITION WITH THE COMPANY SINCE
--------------- --- ------------------------- --------
J. Donald Hill(1).................... 64 Director and Chairman of the Board 1976
D. Keith Grossman.................... 41 Director, President and Chief Executive 1996
Officer
Howard E. Chase(2)................... 64 Director 1986
J. Daniel Cole(2).................... 54 Director 1997
William M. Hitchcock(2).............. 61 Director 1996
George W. Holbrook, Jr.(1)........... 70 Director 1995
Daniel M. Mulvena(1)................. 53 Director 1997
Theo Melas-Kyriazi................... 41 Director 2001
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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
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member of the board of directors of Trident Rowan Group, Inc. and Centerpoint
Corporation (formerly 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
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 numerous private companies.
J. DONALD HILL, M.D. has been a director of our Company since our
inception. In January 1995, Dr. Hill became Chairman of the Board of Directors.
Dr. Hill is the director of the Heart Failure, Transplant, Artificial Heart and
Circulatory Support 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., Maxx Petroleum, Ltd. and Luna Imaging, Inc.
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 and
trustee of Merrill Lynch Institutional Fund, Inc., and several associated funds,
in addition to being a director of Autogenics, Ltd., Radiomed Corporation,
Soilzone, and Radius Medical Technologies, Inc.
THEO MELAS-KYRIAZI became a director of our Company in February 2001. He
has been the Chief Financial Officer of Thermo Electron Corporation since
January 1, 1999. He joined Thermo Electron in 1986 as Assistant Treasurer, and
became Treasurer in 1988. He was named President and Chief Executive Officer of
ThermoSpectra Corporation in 1994, a position he held until becoming Vice
President of Corporate Strategy of Thermo Electron in 1998.
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 seven meetings during 2000. 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.
Audit Committee: The Audit Committee consists of Messrs. Chase, Cole and
Hitchcock, with Mr. Chase serving as Chairman, all of whom are independent from
our Company based on National Association of Securities Dealers' (NASD) listing
standards. The Audit Committee acts pursuant to a written charter adopted by the
Board, which is included in this proxy statement as Appendix A. 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 four meetings during 2000.
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Compensation and Option Committee: 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 four meetings during
2000.
The Board does not have a standing nominating committee.
BOARD COMPENSATION
Until February 2001, directors received reimbursement for travel and other
expenses directly related to their activities as directors. Outside directors
were 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 have
been paid.
After February 2001, all directors will receive a $15,000 annual retainer
that will be paid quarterly on a calendar basis. They will also receive $1,000
for each quarter where there is a board meeting attended by the director, and
$500 for each quarter where a committee meeting is attended by the committee
member. If the committee meeting exceeds four hours, the Chairman may also grant
an additional fee. The Chairman of the Board will receive $1,000 per quarter in
which there is a board meeting that he attends, and each committee chairman will
receive $500 per quarter in which there is a committee meeting that he attends.
Outside directors are eligible to participate in our 1996 Nonemployee Directors
Stock Option Plan.
A total of 350,000 shares of our Common Stock have been authorized 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 an option to purchase
15,000 shares of Common Stock in quarterly installments on the effective date of
such initial election or appointment (the "Initial Grant"). Each eligible
Outside Director (including the existing outside directors) generally will be
granted an option to purchase 7,500 shares of Common Stock in quarterly
installments beginning on the date of the first meeting of the Board of
Directors following the annual shareholders meeting (the "Annual Grant"). In any
event, both the Initial Grant and the Annual Grant will be made no later than
August 31, November 30, February 28, or May 31 of the relevant year. As of June
30, 2001, options to purchase 184,582 shares were outstanding. We currently have
six nonemployee directors who are eligible to participate in the Directors
Option Plan. 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. 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.
During 2000, Dr. Hill and Messrs. Chase, Cole, Hitchcock, Holbrook and
Mulvena received compensation of $11,000, $12,000, $11,000, $12,000, $11,500,
and $12,000, respectively. Each nonemployee director was granted options to
purchase 1,875 shares of Common Stock each on March 3, 2000, May 12, 2000,
August 25, 2000, and November 17, 2000 with an exercise price of $19.88 per
share, $11.63 per share, $16.50 and $13.13 per share, respectively. Mr. Christy
Bell, a former director who retired from the Board in May 2000, received
compensation of $3,000 and options to purchase 1,875 shares of Common Stock on
March 3, 2000, and retired shortly thereafter.
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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 June 30, 2001(i) by each of our directors,
(ii) by each Named Executive Officer (as defined in the "Executive Compensation"
Section below), (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.
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED(2)
------------------- --------------------- ---------------------
Thermo Electron Corporation(3)......................... 18,352,828 33.6%
Peter R. Kellogg....................................... 3,580,600 6.6
Gambro (formerly COBE Laboratories, Inc.).............. 3,133,077 5.7
J. Donald Hill(4)...................................... 1,387,995 2.5
D. Keith Grossman(5)................................... 652,833 1.2
George W. Holbrook, Jr.(6)............................. 470,767 *
Bradley Resources Company(6)........................... 433,059 *
James R. McGoogan(6)................................... 433,059 *
William M. Hitchcock(7)................................ 414,748 *
Thomas E. Burnett, Jr.(8).............................. 272,500 *
David J. Farrar(9)..................................... 242,189 *
Donald A. Middlebrook(10).............................. 238,500 *
Cheryl D. Hess(11)..................................... 230,381 *
J. Daniel Cole(12)..................................... 79,375 *
Howard E. Chase(13).................................... 70,360 *
Daniel M. Mulvena(14).................................. 39,375 *
Theo Melas-Kyriazi(15)................................. 19,660 *
Directors and Executive Officers as a Group
(12 persons)(16)..................................... 4,118,683 7.5
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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 54,609,734
shares of Common Stock outstanding as of June 30, 2001, 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 June 30, 2001. 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 39,869 shares issuable upon conversion of convertible debentures,
34,902 shares subject to options to acquire such shares granted by Thermo
Electron pursuant to its director and employee stock option plans and
2,731,779 shares subject to a Shareholder Agreement between our Company and
Thermo Electron. The Shareholder Agreement was entered into in connection
with our merger with Thermo Cardiosystems Inc. and obligates Thermo
Electron to cause such shares to be voted in the manner directed by our
management at any meeting and with respect to any consent of our
shareholders.
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(4) Includes 106,597 shares issuable upon exercise of options exercisable
within 60 days of June 30, 2001.
(5) Includes 643,833 shares issuable upon exercise of options exercisable
within 60 days of June 30, 2001.
(6) 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. Included, in Mr. Holbrook's number only, are
37,708 shares issuable upon exercise of options exercisable within 60 days
of June 30, 2001.
(7) Includes 37,708 shares issuable upon exercise of options exercisable within
60 days of June 30, 2001.
(8) Includes 263,500 shares issuable upon exercise of options exercisable
within 60 days of June 30, 2001.
(9) Includes 217,833 shares issuable upon exercise of options exercisable
within 60 days of June 30, 2001.
(10) Includes 237,500 shares issuable upon exercise of options exercisable
within 60 days of June 30, 2001.
(11) Includes 173,583 shares issuable upon exercise of options exercisable
within 60 days of June 30, 2001.
(12) Includes 39,375 shares issuable upon exercise of options exercisable within
60 days of June 30, 2001.
(13) Includes 66,027 shares issuable upon exercise of options exercisable within
60 days of June 30, 2001.
(14) Includes 39,375 shares issuable upon exercise of options exercisable within
60 days of June 30, 2001.
(15) Includes 16,700 shares issuable upon exercise of options exercisable within
60 days of June 30, 2001.
(16) Includes 1,879,739 shares issuable upon exercise of options exercisable
within 60 days of June 30, 2001.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation received for services rendered to our Company during 1998, 1999 and
2000 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
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(3) OTHER
--------------------------- ---- -------- -------- -------- ------------ -------------- ------
D. Keith Grossman(2)............. 2000 $239,904 $224,798 $ -- 90,000 $568 $5,100
Chief Executive Officer, 1999 214,362 107,569 -- 120,000 617 2,400
President and Director 1998 192,750 131,070 -- 100,000 216 2,400
Thomas E. Burnett, Jr.(2)........ 2000 188,750 141,528 -- 60,000 426 5,100
Senior Vice President, 1999 158,318 57,614 -- 70,000 451 1,204
Chief Operating Officer 1998 139,778 83,167 -- 52,500 216 861
David J. Farrar(2)(4)............ 2000 168,300 98,649 -- 47,000 403 5,100
Vice President -- Research 1999 152,598 58,674 -- 60,000 439 2,400
and Development 1998 136,856 73,287 -- 52,500 216 2,400
Cheryl D. Hess(2)................ 2000 170,250 106,299 -- 46,500 407 5,100
Vice President, Chief Financial 1999 156,588 57,108 -- 60,000 451 2,400
Officer and Secretary 1998 139,778 76,930 -- 52,500 216 2,400
Donald A. Middlebrook(2)(4)...... 2000 165,445 89,694 -- 45,000 396 5,100
Vice President -- Regulatory 1999 152,473 43,437 -- 60,000 439 2,400
Affairs/Quality Assurance 1998 137,808 66,417 -- 52,500 216 2,400
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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 $50,000 or 10%
of the total annual salary and bonus for the Named Executive Officer for the
fiscal year.
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(2) Other compensation in 1998, 1999, and 2000 represents employer contributions
to a 401(k) retirement plan.
(3) Amount represents premiums we paid for term life insurance for the benefit
of the Named Executive Officer.
(4) In accordance with the rules of the Securities and Exchange Commission,
although this person was not an executive officer at the end of fiscal 2000,
this person is included as one of the Named Executive Officers because he
was an executive officer for some portion of fiscal year 2000 and would have
been one of the Named Executive Officers but for the fact that he was not an
executive officer at the end of fiscal year 2000.
OPTION GRANTS
The following table provides information concerning grants of options to
purchase our stock made to each of the Named Executive Officers during 2000. No
stock appreciation rights were granted to these individuals during 2000.
2000 OPTION GRANTS
INDIVIDUAL GRANTS POTENTIAL REALIZED
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED IN 2000 ($/SH) DATE 5% 10%
---- ---------- ------------- -------- ---------- --------- -----------
D. Keith Grossman............... 90,000 9.8% $10.563 04/24/10 $598,000 $1,515,000
Thomas E. Burnett, Jr........... 60,000 6.5 10.563 04/24/10 399,000 1,010,000
David J. Farrar................. 45,000 4.9 10.563 04/24/10 299,000 758,000
2,000 .2 15.125 07/31/10 19,000 48,000
Cheryl D. Hess.................. 45,000 4.9 10.563 04/24/10 299,000 758,000
1,500 .2 15.125 07/31/10 14,000 36,000
Donald A. Middlebrook........... 45,000 4.9 10.563 04/24/10 299,000 758,000
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(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of the future price of our Common Stock.
OPTION EXERCISES AND HOLDINGS
The following table sets forth the certain information regarding the value
of exercised options and unexercised stock options held by each of the Named
Executive Officers as of December 30, 2000.
2000 OPTION EXERCISES AND YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END(2) AT FISCAL YEAR END(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
D. Keith Grossman........ -- $ -- 373,333 270,000 $1,957,956 $892,623
Thomas E. Burnett,
Jr. ................... 19,000 158,385 129,750 133,750 309,241 367,031
David J. Farrar.......... -- -- 120,333 115,000 630,461 323,655
Cheryl D. Hess........... 15,417 157,321 58,583 115,000 205,409 323,655
Donald A. Middlebrook.... -- -- 142,500 115,000 403,823 323,655
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(1) Value realized is based on the fair market value of our stock on the date of
exercise (the previous day's 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 two to 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 December 30,
2000.
REPORT OF THE COMPENSATION AND OPTION COMMITTEE OF THE BOARD OF DIRECTORS
During 2000, 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 four times in 2000.
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
2000 tax year, all compensation paid by our Company in 2000 to such covered
employees was deductible to us.
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 2000 were to achieve revenue
and net income targets, successfully re-launch a product in Europe, and complete
several clinical trials and regulatory submissions.
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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 base
salaries of our Company executives were increased between three and four percent
effective the first day of July 2000, based on performance and execution of
duties.
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, Mr.
Grossman's base salary was increased four percent effective the first day of
July 2000. In addition, based on achievement of certain bonus-related objectives
such as the corporate goals mentioned above, Mr. Grossman was awarded a bonus of
$224,798 for the 2000 fiscal year.
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.
Submitted by:
The Compensation and Option Committee
George W. Holbrook, Jr.
Daniel M. Mulvena
J. Donald Hill
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, none of our executive officers served on the board of
directors or compensation committee of another company that had an executive
officer serve on our 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 there have 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) during the 2000 fiscal
year.
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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,
1995.
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 14 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., Possis Medical, Inc., and Thermo Cardiosystems Inc.
Innerdyne, Inc. was acquired by Tyco International Limited and has been removed
from the Peer Group, as their successor company is not of a similar size with
our Company.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG THORATEC CORPORATION
THE NASDAQ MARKET (U.S.) INDEX
AND A PEER GROUP
[PERFORMANCE GRAPH]
--------------------------------------------------------------------------------
12/95 12/96 12/97 12/98 12/99 12/00
--------------------------------------------------------------------------------
Thoratec
Corporation 100.00 63.33 44.17 47.50 65.00 73.33
--------------------------------------------------------------------------------
Peer Group 100.00 68.98 66.91 41.35 47.60 47.33
--------------------------------------------------------------------------------
NASDAQ Stock Market
(U.S.) 100.00 123.04 150.69 212.51 394.94 237.68
--------------------------------------------------------------------------------
- ---------------
* $ 100 Invested on December 31, 1995 in stock or index including reinvestment
of dividends. Fiscal year ending December 31.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Deloitte & Touche LLP as the independent accounting
firm to audit our financial statements for the 2001 fiscal year. Representatives
of Deloitte & Touche LLP are not expected to be present at the Annual Meeting.
Deloitte & Touche LLP has been the independent accounting firm that audits
the financial statements of our Company since our inception. In accordance with
standing policy, Deloitte & Touche LLP periodically changes the personnel who
work on our audit. In addition to performing the audit of our Company's
consolidated financial statements, Deloitte & Touche LLP provided various other
services during 2000. The aggregate fees billed for 2000 for each of the
following categories of services are set forth below:
($000)
Audit Fees.................................................. $ 92
Financial Information System Design and Implementation...... --
All Other Fees.............................................. 1,953
------
Total....................................................... $2,045
======
Deloitte & Touche LLP did not provide any services related to financial
information systems design and implementation during 2000. "All Other Fees"
includes (i) evaluating the effects of various accounting issues and changes in
professional standards; and (ii) acquisitions and due diligence reviews and
integration services. The Audit Committee reviews summaries of the services
provided by Deloitte & Touche LLP and the related fees and has considered
whether the provision of non-audit services is compatible with maintaining the
independence of Deloitte & Touche LLP.
AUDIT COMMITTEE REPORT
In accordance with the Audit Committee Charter, the Audit Committee has
reviewed and discussed the audited financial statements of our Company for the
fiscal year ended December 30, 2000 with our Company's management. The Audit
Committee has discussed with Deloitte & Touche LLP, our independent accounting
firm, the matters required to be discussed by Statement on Auditing Standards
No. 61, as amended by Statement of Auditing Standards No. 90, which relates to
the independent auditors' requirement to communicate to the Audit Committee
certain matters related to the conduct of an audit. The Audit Committee has also
received and reviewed the written disclosures and the letter from Deloitte &
Touche LLP, required by the Independence Standards Board Standard No. 1, which
relates to the accountants' independence from the Company and its related
entities, and has discussed with Deloitte & Touche LLP their independence from
the Company, and concluded that the nonaudit services performed by Deloitte &
Touche LLP are compatible with maintaining their independence. Based on the
Audit Committee's review and discussions noted above, the Audit Committee
recommended to the Board of Directors our Company's audited financial statements
for the fiscal year ended December 30, 2000, be included in the Company's Annual
Report on Form 10-K for filing with the Securities and Exchange Commission.
Submitted by:
The Audit Committee
Howard E. Chase
J. Daniel Cole
William M. Hitchcock
SHAREHOLDER PROPOSALS
Proposals of our shareholders which are intended to be presented at our
2002 meeting of shareholders must be received by the Secretary of our Company no
later than December 15, 2001 in order to be included in the proxy soliciting
material relating to that meeting.
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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: July 24, 2001
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APPENDIX A
AUDIT COMMITTEE CHARTER
ADOPTED BY THE BOARD OF DIRECTORS OF THORATEC CORPORATION
PURPOSES:
The purposes of the Audit Committee are to:
Monitor the integrity of the financial statements of the Company.
Oversee the independence of the Company's independent auditor.
Recommend to the Board of Directors the selection of the independent
auditor, evaluate the independent auditor and, where appropriate, recommend
the replacement of the independent auditor; it being understood that the
independent auditor is ultimately accountable to the Board of Directors and
the Audit Committee, and that the Board of Directors and the Audit
Committee have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditor (or to
propose the independent auditor for shareholder approval).
COMPOSITION:
The Audit Committee shall be composed of three or more directors, as
determined by the Board of Directors, each of whom shall meet the independence
and financial literacy requirements of NASDAQ, and at least one of whom shall
have past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
Unless a chair is designated by the Board of Directors, the committee
members may appoint their own chair by majority vote.
RESPONSIBILITIES:
Recommend to the Board of Directors the selection of the independent
auditor, which shall ultimately be accountable to the Audit Committee and the
Board of Directors.
Evaluate the written disclosures and the letter that the independent
auditor submits to the Audit Committee regarding the auditor's independence in
accordance with Independence Standards Board Standard No. 1, discuss such
reports with the auditor and, if so determined by the Audit Committee in
response to such reports, recommend that the Board of Directors take appropriate
action to oversee the independence of the independent auditor.
Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61, as it may be modified or
supplemented.
Meet with management and the independent auditor to review and discuss the
annual financial statements and the report of the independent auditor thereon
and, to the extent the independent auditor or management brings any such matters
to the attention of the Audit Committee, to discuss significant issues
encountered in the course of the audit work, including restrictions on the scope
of activities, access to required information or the adequacy of internal
controls.
Review the management letter delivered by the independent auditor in
connection with the audit.
Following such reviews and discussions, if so determined by the Audit
Committee, recommend to the Board of Directors that the annual financial
statements be included in the Company's annual report.
A-1
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Meet quarterly with management and the independent auditor to review and
discuss the quarterly financial statements; provided that this responsibility
may be delegated to the chairman of the Audit Committee.
Meet at least once each year in separate executive sessions with management
and the independent auditor to discuss matters that the committee or either of
these groups believes could significantly affect the financial statements and
should be discussed privately.
Have such meetings with management as the Audit Committee deems appropriate
to discuss significant financial risk exposures facing the Company, and steps
management has taken to monitor and control such exposures.
Review significant changes to the Company's accounting principles and
practices proposed by the independent auditor or management.
Evaluate the performance of the independent auditor and, if so determined
by the Audit Committee, recommend to the Board of Directors replacement of the
independent auditor.
At the request of Company counsel, review with Company counsel legal and
regulatory matters that may have a significant impact on the Company's financial
statements, compliance policies or programs.
Conduct or authorize such inquiries into matters within the committee's
scope of responsibility as the committee deems appropriate. The committee shall
be empowered to retain independent counsel and other professionals to assist in
the conduct of any such inquiries.
Provide minutes of Audit Committee meetings to the Board of Directors, and
report to the Board of Directors on any significant matters arising from the
committee's work.
At least annually, review and reassess this charter and, if appropriate,
recommend proposed changes to the Board of Directors.
Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
It is not the responsibility of the Audit Committee to plan or conduct
audits, or to determine whether the Company's financial statements are complete
and accurate or in accordance with generally accepted accounting principles. It
is not the responsibility of the Audit Committee to conduct inquiries, to
resolve disagreements, if any, between management and the independent auditor,
or to assure compliance with laws, regulations or Company compliance policies or
programs.
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THORATEC CORPORATION
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 24, 2001
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 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 Marriott Long Wharf Hotel at 296 State Street,
Boston, Massachusetts, 02109, on Friday, August 24, 2001 at 9:30 a.m. Eastern
Daylight Time, and at any postponements or adjournments of that meeting, and in
their discretion to vote upon any other business that may properly come before
the meeting.
18
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
FOR
all nominees WITHHOLD
listed at right (except authority to vote
as indicated below) (as to all nominees)
1. ELECTION OF
DIRECTORS [ ] [ ]
TO ELECT AS DIRECTORS:
Howard E. Chase, J. Daniel Cole,
D. Keith Grossman, J. Donald Hill,
William M. Hitchcock, George W. Holbrook, Jr.,
Theo Melas-Kyriazi, and Daniel M. Mulvena
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, IN 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.