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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 LABORATORIES CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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 was calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THORATEC LABORATORIES CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 1998
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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 the
"Company"), will be held on Monday, May 18, 1998 at 9:30 a.m., Pacific time, at
the 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 7, 1998, 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 17, 1998
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 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 the "Company") for
use at the Company's Annual Meeting of Shareholders (the "Annual Meeting") to be
held Monday, May 18, 1998 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 the
Company's headquarters, 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 17, 1998
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 7, 1998 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, 20,319,328 shares of the Company's common stock (the "Common
Stock") were issued, outstanding and entitled to vote at the 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 the
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 the 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 the Company. The Company 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 the Company. 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) 61 Director and Chairman of the 1976
Board
D. Keith Grossman 38 Director, President and Chief 1996
Executive Officer
Christy W. Bell(2) 75 Director 1988
Howard E. Chase(2) 61 Director 1986
J. Daniel Cole 51 Director 1997
William M. Hitchcock(2) 58 Director 1996
George W. Holbrook, Jr.(1) 66 Director 1995
Daniel M. Mulvena(1) 49 Director 1997
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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.
J. Donald Hill, M.D. has been a director of the Company since its inception
in March 1976 and is a significant shareholder of the Company. In January 1995,
Dr. Hill became Chairman of the Board of Directors. Dr. Hill is Chairman of the
Department of Cardiac Surgery at California Pacific Medical Center in San
Francisco where he has been a practicing cardiovascular surgeon since 1966.
D. Keith Grossman joined the Company as President and Chief Executive
Officer in January 1996. He was elected to the Board of Directors in February
1996. Prior to joining Thoratec, 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.
Christy W. Bell became a director of the Company in April 1988 and is a
significant shareholder of the Company. Mr. Bell is President and CEO of
Electro-Petroleum Inc. ("EPI"), Electro-Pyrolysis Inc., and Arc Technologies
Inc. and a managing member of Temblor Petroleum, Co. LLC. Prior to joining EPI,
Mr. Bell had been Chairman and Chief Executive Officer of Chem Clear, located in
Wayne, Pennsylvania, until February 1988, when the company was sold. Mr. Bell
serves as a member of the Board of Clean Harbors, Inc.
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Howard E. Chase became a director of the Company in November 1986. 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 since March 1998.
From 1984 to August 1995 Mr. Chase was a partner in the law firm of Morrison
Cohen Singer & Weinstein in New York City. He acted as an advisor and as special
counsel to the Company from 1979 to 1995.
J. Daniel Cole became a director of the Company in July 1997. Mr. Cole is a
general partner of the Spray Venture Fund of Boston. Mr. Cole was President and
Chief Operating Officer of SciMed Life Systems Corporation from April 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 Cambridge Heart, Inc. and SurVivaLink.
William M. Hitchcock became a director of the Company in September 1996. In
December 1994 Mr. Hitchcock became President and director of Avalon Financial,
Inc. From May 1992 to December 1995, 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. and Oshman's Sporting Goods, Inc.
George W. Holbrook, Jr. became a director of the Company in July 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 and several associated funds.
Daniel M. Mulvena became a director of the 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, and prior thereto 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. and Magna-Lab Inc.
BOARD MEETINGS AND COMMITTEES
The Board held a total of 10 meetings during the fiscal year ended January
3, 1998. Messrs. Chase and Cole each attended fewer than 75 percent of the
aggregate of all meetings of the Board and of the committees upon which such
director served.
During fiscal year 1997, the Audit Committee consisted of Messrs. Bell and
Chase, and Dr. Hill. The Audit Committee currently consists of Messrs. Bell,
Chase, and Hitchcock, with Mr. Chase serving as Chairman. The principal
functions of the Audit Committee are to recommend engagement of the Company's
independent auditors, to consult with the 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 the
Company's operating results and to review the Company's financial control
procedures and personnel. The Audit Committee held one meeting during fiscal
year 1997.
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 the Company's executive officers and management.
The Compensation and Option Committee held five meetings during fiscal year
1997.
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
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meetings. Beginning in 1996, outside directors are eligible to participate in
the Company's 1996 Nonemployee Directors Stock Option Plan ("Directors Option
Plan").
A total of 150,000 shares of the Company's 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 the
Company who are not employees of the Company or any parent or subsidiary of the
Company and who have not been an employee of the Company or any parent or
subsidiary of the 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 1997 will be granted
an option to purchase 10,000 shares of Common Stock on the effective date of
such initial election or appointment and thereafter, each Eligible Outside
Director (including the existing outside directors) generally will be granted an
option to purchase 5,000 shares of Common Stock on the date of the first meeting
of the Board of Directors following the annual shareholders meeting (the "Annual
Grant"). In any event, the Annual Grant will be made no later than June 15 of
any year. Options to purchase 61,665 shares have been granted, none of which has
as yet been exercised. The Company currently has seven 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 pursuant to the Directors Option Plan expires ten
years and two days after the date of grant or earlier in the event of the
termination of the director's service on the Board. Each option granted under
the Directors Option Plan is exercisable in full six months after the date of
grant. The Company has the right to repurchase at the exercise price with
respect to shares purchased upon exercise of options which expires with respect
to one-eighth of the number of shares covered by such option six months after
the date such option is granted and one-sixteenth of the number of shares
covered by such option at the end of each three-month period thereafter. In the
event of acquisition of the Company by a merger, consolidation, sale of all or
substantially all of the Company's assets or acquisition of the 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.
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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 the Company's Common Stock as of March 18, 1998 (i) by each of the
Company's 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 the Company to own beneficially more than 5% of the Company's Common
Stock.
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED(2)
------------------- --------------------- ---------------------
COBE Laboratories, Inc................... 3,708,077 18.3%
1185 Oak Street
Lakewood, CO 80215
State of Wisconsin Investment Board...... 1,549,800 7.6
P.O. Box 7842
Madison, WI 53702
J. Donald Hill(3)........................ 1,401,953 6.9
George W. Holbrook, Jr.(4)............... 1,289,555 6.4
Bradley Resources Company(4)............. 1,281,222 6.3
P.O. Box 1938
Palm City, FL 34990-6938
James McGoogan(4)........................ 1,281,222 6.3
Bradley Resources Company
P.O. Box 1938
Palm City, FL 34990-6938
Chancellor LGT Capital................... 1,185,000 5.8
1166 Avenue of the Americas
New York, NY 10036
Intermedics, Inc......................... 1,074,074 5.3
4000 Technology Drive
Angleton, TX 77515
Christy W. Bell(5)....................... 722,377 3.5
William M. Hitchcock(6).................. 362,073 1.8
Howard E. Chase(7)....................... 91,555 *
D. Keith Grossman(8)..................... 88,333 *
Cheryl D. Hess........................... 60,804 *
David J. Farrar(9)....................... 54,522 *
J. Daniel Cole(10)....................... 50,000 *
Donald A. Middlebrook(11)................ 16,000 *
Thomas E. Burnett, Jr.(12)............... 15,000 *
Daniel M. Mulvena(13).................... 10,000 *
Directors and Executive Officers as a
Group
(13 persons)(14)....................... 4,162,172 20.1%
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* Less than one percent
(1) Except as set forth herein, the address of the persons set forth above is
the address of the Company appearing elsewhere in this proxy statement.
(2) Applicable percentage ownership for each shareholder is based on 20,295,301
shares of Common Stock outstanding as of March 18, 1998, 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 18, 1998. Shares of
Common Stock subject to outstanding options are deemed outstanding for
computing
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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 the Company's 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 90,555 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(4) Bradley Resources Company is an investment partnership which owns 1,281,222
shares. George W. Holbrook, Jr., a director of the Company, is a general
partner of Bradley Resources Company and is deemed to share beneficial
ownership of such shares with Mr. James McGoogan, a general partner of
Bradley Resources Company. Includes, in Mr. Holbrook's number only, 8,333
shares issuable upon exercise of options within 60 days of March 18, 1998.
(5) Includes 91,889 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(6) Includes 8,333 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(7) Includes 90,555 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(8) Includes 83,333 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(9) Includes 39,300 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(10) Includes 10,000 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(11) Includes 15,000 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(12) Includes 15,000 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(13) Includes 10,000 shares issuable upon exercise of options exercisable within
60 days of March 18, 1998.
(14) Includes 462,298 shares issuable upon exercise of options exercisable
within 60 days of March 18, 1998.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation received for services rendered to the Company during 1995, 1996 and
1997 fiscal years by the Chief Executive Officer of the Company and each of the
four additional most highly compensated executive officers (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION(1) SECURITIES
--------------------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS(#)
--------------------------- ---- -------- ------- -------- ------------
D. Keith Grossman(2) 1997 $183,997 $41,125 $ 2,375 333,333
Chief Executive Officer, 1996 147,884 69,375 101,548 333,333
President and Director
Thomas E. Burnett, Jr.(3) 1997 131,298 30,188 767 40,000
Vice President -- Sales 1996 48,077 27,281 49,878 60,000
and Marketing
David J. Farrar(4) 1997 130,649 28,000 2,290 40,000
Vice President -- Research 1996 109,924 24,571 -- --
and Development 1995 86,404 -- -- --
Cheryl D. Hess(4) 1997 131,298 33,688 2,375 40,000
Chief Financial Officer, 1996 111,923 36,375 -- --
Vice President, Finance and 1995 90,904 -- -- --
Secretary
Donald A. Middlebrook(5) 1997 131,298 32,375 68,462 40,000
Vice President -- Regulatory 1996 39,423 15,000 52,052 60,000
Affairs/Quality Assurance
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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.
(2) All 333,333 options issued to Mr. Grossman in 1996 were cancelled as part of
the issuance of 333,333 options in 1997. Not included in the 1997 number are
140,000 options issued to him in 1997 and cancelled later in the year. See
also Ten-Year Option/SAR Repricing table below. Other compensation in 1996
represents relocation expense and in 1997 represents employer contribution
to a 401(k) retirement plan.
(3) Mr. Burnett joined the Company in August 1996, at which time his annual base
salary was $125,000. Other compensation represents a $40,000 signing bonus
and $9,878 for relocation expenses and in 1997 represents employer
contribution to a 401(k) retirement plan.
(4) Other compensation in 1997 represents employer contribution to a 401(k)
retirement plan.
(5) Mr. Middlebrook joined the Company in September 1996, at which time his
annual base salary was $125,000. Other compensation in 1996 represents a
$10,000 signing bonus and $42,052 for relocation expenses. Other
compensation in 1997 represents a $10,000 signing bonus, $56,087 for
relocation expenses, and $2,375 employer contribution to a 401(k) retirement
plan.
OPTION GRANTS
The following table provides information concerning grants of options to
purchase the Company's Common Stock made to each of the Named Executive Officers
during the year ended January 3,1998. No stock appreciation rights were granted
to these individuals during such fiscal year.
OPTION GRANTS IN 1997
POTENTIAL REALIZED
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED IN 1997 ($/SH) DATE 5% 10%
---- ---------- ------------- -------- ---------- ---------- ----------
D. Keith Grossman(2)........... 333,333 41.3% $5.000 11/14/07 $1,048,000 $2,656,000
Thomas E. Burnett, Jr.......... 40,000 5.0 5.375 5/20/07 135,000 343,000
David J. Farrar................ 40,000 5.0 5.375 5/20/07 135,000 343,000
Cheryl D. Hess................. 40,000 5.0 5.375 5/20/07 135,000 343,000
Donald A. Middlebrook.......... 40,000 5.0 5.375 5/20/07 135,000 343,000
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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 the Company's
estimate or projection of the future Common Stock price.
(2) Excluded from the table are options granted to Mr. Grossman of 100,000
shares exerciseable at $9.50 on March 12, 1997 and 40,000 shares
exerciseable at $5.375 on May 20, 1997, which were all cancelled in November
1997 as part of the grant of the options shown. See also Ten-Year Option/SAR
Repricings table below.
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OPTION EXERCISES AND HOLDINGS
The following table sets forth the certain information regarding the value
of exercised options and unexercised stock options held by each of the Named
Executive Officers as of January 3,1998.
1997 OPTION EXERCISES AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR END(2) FISCAL YEAR END(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
D. Keith Grossman......... -- -- 83,333 250,000 $114,583 $343,750
Thomas E. Burnett, Jr..... -- -- 15,000 85,000 -- 40,000
David J. Farrar........... 10,000 $ 55,610 39,300 51,756 176,482 83,506
Cheryl D. Hess............ 129,091 722,799 -- 50,000 -- 81,250
Donald A. Middlebrook..... -- -- 15,000 85,000 -- 40,000
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(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise (the closing sales price reported on the
Nasdaq National Market or other market on which the Company's Common Stock
traded on such date) 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 the Company's Common Stock as reported on the Nasdaq National
Market at fiscal year end.
REPORT ON REPRICING OF OPTIONS/SARS
TEN-YEAR OPTION/SAR REPRICINGS
The following table contains information about adjustments made by the
Company in the last ten fiscal years to the exercise prices of outstanding
options held by executive officers. All adjustments were done by cancellation of
the original options and the grant of a new option with exercise prices equal to
fair market value of the Common Stock on the date of grant.
NUMBER OF LENGTH OF
SECURITIES EXERCISE PRICE ORIGINAL OPTION
UNDERLYING MARKET PRICE OF AT TERM REMAINING
OPTIONS/SARS STOCK AT TIME OF TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
---- -------- ------------ ---------------- -------------- --------- ---------------
D. Keith Grossman 11/14/97 333,333 $5.00 $15.00 $5.00 8 years
David Farrar 4/03/91 833 .75 21.00 .75 1 year
Cheryl Hess 4/03/91 7,040 .75 13.88 .75 2 years
Cheryl Hess 4/03/91 1,126 .75 14.81 .75 3 years
Cheryl Hess 4/03/91 5,049 .75 16.50 .75 3 years
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
During fiscal 1997, management compensation issues were reviewed by the
Compensation and Option Committee which consisted of Messrs. Holbrook and
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 five times in 1997.
The Company believes that its ability to achieve the objectives of
obtaining regulatory approval for and commercializing its circulatory support
and graft products, and becoming profitable, is dependent largely upon
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the ability to recruit and retain qualified executives with substantive
experience in the development, regulatory approval, manufacture, marketing and
sale of new medical devices. The Company is competing for experienced executives
within the San Francisco Bay Area, where over 100
biotechnology/biomedical/pharmaceutical companies are located.
The Board has a policy designed to control the base salaries of its
executives while providing sufficient incentives to attract and retain qualified
personnel. In accordance with this policy, the Company strives to set executive
base salaries by considering relative contribution of the position to
achievement of the 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, the Company strives
to set base salaries of new executives at market, which is defined as the
average base salary of incumbents in comparable positions, and uses its 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 the Company's policy to attempt to qualify compensation paid
to its top executives for deductibility in order to maximize the Company's
income tax deductions, to the extent that so qualifying the compensation is not
inconsistent with the Company's fundamental compensation policies. Based upon
the Internal Revenue Service's proposed regulations and compensation paid to the
Company's "covered employees" for the 1997 tax year, all compensation paid by
the Company in 1997 to such covered employees was deductible to the Company.
Stock Options. The Company has determined that stock options are an
important incentive for attracting and retaining qualified personnel, including
executive-level personnel.
Corporate Performance Criteria. Management presents to the Board 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 the Board 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 1997 were the build
out and move into new corporate headquarters, continued growth of sales and
marketing organization, several regulatory approvals and the closing of a
significant round of public equity financing.
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 the Board's decision to award any salary increases and, to a
lesser extent, the Board also considers general economic conditions and trends.
In July 1997, the base salaries of the Company executives was increased by 5%.
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 the 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 strong leadership and
achievements of strategic and regulatory objectives for the year, including move
of corporate headquarters and the closing of a public
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equity financing, Mr. Grossman was given a 6% increase in July of 1997 and was
awarded a bonus of $41,125 for the fiscal year.
During 1997, the Compensation and Option Committee authorized the
cancellation and regrant at lower exercise prices of options to purchase 333,333
shares previously granted to Mr. Grossman. In connection with the regrant, the
vesting schedule of the unvested portion of the option was extended. Also, in
connection with the regrant, Mr. Grossman agreed to the cancellation of options
to purchase an additional 140,000 shares issued to him earlier in the year.
Following the original grant of the option to him, the market price of the
Company's Common Stock had declined significantly so that the exercise price of
the option was significantly higher than the market price of the underlying
share. The Committee did not believe that the decline in the market price in the
Company's Common Stock reflected any decline in the Company's performance. The
Committee decided to regrant the options at a lower exercise price because it
believed that the disparity between the market value of the Common Stock and the
high exercise price of the option eliminated the incentive that the option was
designed to provide.
Summary. The Board believes that it has established a program for
compensation of the Company's executives which is fair and which aligns the
financial incentives for executives with the interests of the Company's
shareholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, no executive officer of the Company served on the board of
directors or compensation committee of another company that had an executive
officer serve on the Company's Board of Directors or its 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 the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the 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 the Company with copies of all Section 16(a) forms that they
file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that,
during the fiscal year ended January 3, 1998, there has been no failure by any
of its officers, directors or ten percent shareholders to file on a timely basis
any reports required by Section 16(a).
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STOCK PRICE PERFORMANCE GRAPH
The following line graph illustrates a five-year comparison of the
cumulative total shareholder return on the Common Stock against the cumulative
total return of The Nasdaq Stock Market-U.S. Index and the Hambrecht & Quist
Health Care Index, assuming $100 invested in the Common Stock and the two
indexes on December 31, 1992.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THORATEC LABORATORIES CORPORATION, THE NASDAQ STOCK MARKET (U.S.)
INDEX AND THE HAMBRECHT & QUIST HEALTHCARE INDEX
THORATEC
MEASUREMENT PERIOD LABORATORIES NASDAQ STOCK HAMBRECHT &
(FISCAL YEAR COVERED) CORPORATION MARKET US QUIST HEALTH CARE
DEC-92 100 100 100
DEC-93 181 115 78
DEC-94 219 112 78
DEC-95 500 159 132
DEC-96 317 195 136
DEC-97 221 240 158
* $100 invested on December 31, 1992 in stock or index including reinvestment of
dividends.
Fiscal year ending December 31.
INDEPENDENT AUDITORS
The Board has selected Deloitte & Touche LLP as independent auditors to
audit the financial statements of the Company for the 1998 fiscal year. Deloitte
& Touche LLP has been engaged as the Company's auditors since the Company's
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 shareholders of the Company which are intended to be presented
at the Company's 1999 meeting of shareholders must be received by the Secretary
of the Company no later than December 18, 1998, in order to be included in the
proxy soliciting material relating to that meeting.
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OTHER MATTERS
The Company knows 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 17, 1998
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THORATEC LABORATORIES CORPORATION
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders to be Held on May 18, 1998
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 Monday, May 18, 1998 at 9:30 a.m., 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.
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SEE REVERSE
SIDE
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16
PLEASE MARK YOUR
[X] 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 [ ] [ ] TO ELECT AS DIRECTORS
DIRECTORS Christy W. Bell, Howard E. Chase,
J. Daniel Cole, D. Keith Grossman,
TO WITHHOLD AUTHORITY TO VOTE FOR ANY J. Donald Hill, William M. Hitchcock,
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S George W. Holbrook, Jr., and Daniel M. Mulvena
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.