<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Cambridge NeuroScience, Inc.
(Name of Registrant as Specified In Its Charter)
[ ]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
- --------------------------------------------------------------------------------
<PAGE> 2
[Cambridge NeuroScience Logo]
May 26, 1998
To Our Stockholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Stockholders' meeting on Wednesday, June 24, 1998, at 10
a.m. Eastern Standard Time, at One Kendall Square, Building 200, Second Floor,
Suite 2200, Cambridge, Massachusetts.
The notice of meeting and the proxy statement accompanying this letter
describe the specific business to be acted upon.
Along with the specific matters to be acted upon, I will report on the
progress of the Company and there will be an opportunity for questions of
general interest.
It is important that your shares be represented at the meeting. Regardless
of whether you plan to attend the meeting in person, please vote, sign, date and
promptly return the enclosed proxy in the envelope provided.
Sincerely,
/s/ Harry W. Wilcox, III
-------------------------------------
Harry W. Wilcox, III
President and Chief Executive Officer
<PAGE> 3
[Cambridge NeuroScience Logo]
CAMBRIDGE NEUROSCIENCE, INC.
ONE KENDALL SQUARE, BUILDING 700, CAMBRIDGE, MA 02139
(617) 225-0600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the annual meeting of the stockholders of
Cambridge NeuroScience, Inc. (the "Company"), a Delaware corporation, will be
held at One Kendall Square, Building 200, Second Floor, Suite 2200, Cambridge,
Massachusetts, at 10 a.m. Eastern Standard Time, on Wednesday, June 24, 1998,
for the following purposes:
1. To elect six directors of the Company.
2. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on May 19, 1998 are
entitled to notice of the meeting or to vote thereat. A complete list of the
stockholders of record entitled to vote at the meeting shall be open to
examination by any stockholder for any purpose germane to the meeting during
ordinary business hours for a period of ten days prior to the meeting at the
Company's offices at One Kendall Square, Building 700, Cambridge, Massachusetts.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY
WILL NOT BE USED.
By order of the Board of Directors,
William T. Whelan
Secretary
Dated: May 26, 1998
<PAGE> 4
[Cambridge NeuroScience Logo]
CAMBRIDGE NEUROSCIENCE, INC.
ONE KENDALL SQUARE, BUILDING 700, CAMBRIDGE, MA 02139
(617) 225-0600
PROXY STATEMENT
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Cambridge NeuroScience, Inc. (the "Company"), for use at the annual meeting
of stockholders to be held on Wednesday, June 24, 1998, and at all adjournments
thereof.
The authority granted by an executed proxy may be revoked at any time
before its effective exercise by filing with the Secretary of the Company a
written revocation or a duly executed proxy bearing a later date or by voting in
person at the meeting. Shares represented by executed and unrevoked proxies will
be voted and, where a choice has been specified with respect to any matter to be
acted upon, the shares will be voted in accordance with the specification so
made. If no specifications are made, the proxies intend to vote the shares
represented thereby to elect the Directors nominated by the Board of Directors.
The approximate date on which this proxy statement and a form of proxy will
first be sent or given to stockholders is May 26, 1998.
VOTING SECURITIES AND VOTES REQUIRED
On May 19, 1998, the Company had outstanding 17,922,330 shares of Common
Stock, which is its only outstanding class of voting stock. Stockholders of
record at the close of business on May 19, 1998 will be entitled to vote at the
meeting. With respect to all matters that will come before the meeting, each
stockholder may cast one vote for each share registered in his or her name on
the record date. The Company's charter does not provide for cumulative voting. A
majority of the shares of the Company's Common Stock outstanding and entitled to
vote and present or represented at the meeting in person or by proxy constitutes
a quorum for the transaction of business.
Pursuant to Delaware General Corporation Law and the Company's by-laws, the
affirmative vote of the holders of a plurality of the shares of the Company's
Common Stock properly cast at the meeting is necessary to elect the nominees for
election as directors. Votes withheld and broker non-votes will not be treated
as votes cast and will not affect the outcome of the election. A "broker
non-vote" occurs when a registered broker holding a customer's shares in the
name of the broker has not received voting instructions on a matter from the
customer, is barred by applicable rules from exercising discretionary authority
to vote on the matter and so indicates on the proxy.
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's outstanding Common Stock as of April 30,
1998 by (i) each person who is known by the Company to own beneficially more
than 5% of the Company's Common Stock, (ii) each of the Company's directors and
nominees for director, (iii) the Chief Executive Officer of the Company, (iv)
each of the other four most highly compensated executive officers and (v) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED(1)
-----------------------
BENEFICIAL OWNER SHARES PERCENT(2)
- ---------------- ------ ----------
<S> <C> <C>
Boehringer Ingelheim International GmbH..................... 2,487,624 13.9%
Postbox 200
D-55216 Ingelheim, Rhein
Germany
State of Wisconsin Investment Board......................... 1,745,000 9.7%
P.O. Box 7842
Madison, Wisconsin 53703
Aeneas Venture Corporation(3)............................... 1,192,033 6.7%
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Burkhard Blank(4)........................................... 2,487,624 13.9%
Elkan R. Gamzu(5)........................................... 497,148 2.7%
Robert N. McBurney(6)....................................... 270,638 1.5%
Harry W. Wilcox, III(7)..................................... 50,755 *
Joseph B. Martin(8)......................................... 50,125 *
Paul C. O'Brien(9).......................................... 47,625 *
Laima I. Mathews(10)........................................ 35,144 *
Ira A. Jackson(11).......................................... 22,625 *
Nancy S. Amer(12)........................................... 6,250 *
S. Joshua Lewis(13)......................................... -- *
All current executive officers and directors as a
group (10 persons)(14).................................... 3,467,934 18.7%
</TABLE>
- ---------------
* Less than one percent
(1) Except as otherwise indicated, each owner has sole voting and investment
power of the shares owned.
(2) Shares issuable upon the exercise of options described in the following
notes are treated as outstanding solely for purposes of calculating the
percentage ownership of such person or group.
(3) Aeneas Venture Corporation ("Aeneas") is a wholly owned subsidiary of the
President and Fellows of Harvard College, and is an investment affiliate of
Harvard Private Capital Group, Inc.
(4) All of the shares indicated as owned by Dr. Blank are owned directly by
Boehringer Ingelheim International GmbH ("BI") and are included because of
Dr. Blank's affiliation with BI. Dr. Blank is the head of international
project management for Boehringer Ingelheim GmbH, which is an operating
division of BI. Dr. Blank disclaims "beneficial ownership" of these shares
within the meaning of Rule 13d-3 under the Exchange Act.
2
<PAGE> 6
(5) Includes 280,310 shares which may be acquired within 60 days by Dr. Gamzu
pursuant to the exercise of stock options and 11,778 shares held in the
Cambridge NeuroScience, Inc. 401(k) Plan. Effective May 6, 1998, Dr. Gamzu
resigned as a director and President and Chief Executive Officer of the
Company. Dr. Gamzu will not stand for re-election to the Board of Directors
at the Annual Meeting. Pursuant to the terms of the 1991 Equity Incentive
Plan, all non- vested options outstanding on the date of Dr. Gamzu's
resignation were forfeited. All vested but unexercised options will
terminate if not exercised within 90 days after his resignation date.
(6) Includes 182,812 shares which may be acquired within 60 days by Dr.
McBurney pursuant to the exercise of stock options and 11,326 shares held
in the Cambridge NeuroScience, Inc. 401(k) Plan. Also includes 10,000
shares held in trust for Dr. McBurney's children.
(7) Includes 40,625 shares which may be acquired within 60 days by Mr. Wilcox
pursuant to the exercise of stock options and 4,979 shares held in the
Cambridge NeuroScience, Inc. 401(k) Plan.
(8) Includes 22,625 shares which may be acquired within 60 days by Dr. Martin
pursuant to the exercise of stock options.
(9) Includes 22,625 shares which may be acquired within 60 days by Mr. O'Brien
pursuant to the exercise of stock options.
(10) Includes 29,577 shares which may be acquired within 60 days by Mrs. Mathews
pursuant to the exercise of stock options and 5,567 shares held in the
Cambridge NeuroScience, Inc. 401(k) Plan.
(11) Consists of 22,625 shares which may be acquired within 60 days by Mr.
Jackson pursuant to the exercise of stock options.
(12) Consists of 6,250 shares which may be acquired within 60 days by Ms. Amer
pursuant to the exercise of stock options.
(13) Mr. Lewis, a director of the Company since April 1996, is Managing Director
of E.M. Warburg, Pincus & Co., LLC (EMW LLC). Until April 1998 Warburg
Pincus Capital Partners Liquidating Trust (WPLT) was a beneficial owner of
more than 5% of the Company's Common Stock. In April 1998, WPLT, an
affiliate of EMW LLC, distributed to its beneficiaries the shares of Common
Stock of the Company owned by it. The principal business of WPLT is to
manage the orderly liquidation of the assets formerly held by Warburg,
Pincus Capital Partners, L.P.(WPCP), a Delaware limited partnership that
was formerly engaged in making venture capital and related investments,
whose partnership agreement terminated on September 30, 1997. Prior to
termination of the partnership agreement, WPCP distributed an aggregate of
2,262,488 shares of the Company's common stock to WPLT. The trustees of
WPLT are Lionel I. Pincus, John L. Vogelstein and Stephen Distler. Each of
Messrs. Pincus, Vogelstein and Distler disclaims beneficial ownership of
any shares owned by WPLT. Mr. Pincus is Managing Partner of Warburg Pincus
& Co., a New York general partnership (WP) and Chairman of the Board, Chief
Executive Officer and Managing Partner EMW LLC. Mr. Vogelstein is a general
partner of WP and the Vice Chairman of the Board and member of EMW LLC; and
Mr. Distler is a general partner of WP and the Treasurer, a managing
director and a member of EMW LLC. Mr. Lewis will not stand for re-election
to the Board of Directors at the annual meeting and will resign from the
Board, effective June 24, 1998.
(14) See Notes (1), (2), (4), (5), (6), (7), (8), (9), (10), (11), (12) and (13)
above.
3
<PAGE> 7
ELECTION OF DIRECTORS
Directors are to be elected at the annual meeting to be held on June 24,
1998. The Board of Directors has fixed the number of directors at six for the
coming year. The Company's by-laws provide that the directors of the Company
will be elected at each annual meeting of the Company's stockholders to serve
until the next annual meeting of stockholders or until their successors are duly
elected and qualified. Pursuant to the Company's by-laws, the Board of Directors
also may from time to time after the annual meeting elect additional directors.
At each meeting of the Company's stockholders at which directors are to be
elected, the Company has agreed to nominate, recommend the election by the
Company's stockholders and use its best efforts to effect the election to the
Board of Directors of the Company of (i) one individual designated by WPCP and
WPM, Inc., an affiliate of WPCP, as long as collectively they beneficially own
at least 5% or more but less than 20% of the outstanding Common Stock of the
Company, (ii) one individual designated by Aeneas as long as it beneficially
owns 5% or more of the outstanding Common Stock of the Company and (iii) one
individual designated by BI as long as it beneficially owns 7% or more of the
outstanding Common Stock of the Company. WPCP and WPM, Inc. will have the right
to designate a second nominee for election to the Board of Directors in the
event that collectively they own more than 20% of the outstanding Common Stock
of the Company. Additionally, BI will have the right to designate a second
nominee for election to the Board of Directors in the event that BI owns more
than 20% of the outstanding Common Stock of the Company, provided that the two
nominees designated by BI shall not at any time represent more than 20% of the
total number of members of the Company's Board of Directors. As of April 30,
1998, WPCP and WPM, Inc. collectively no longer beneficially own 5% or more of
the outstanding Common Stock of the Company and have not designated a nominee
for director. Aeneas, which beneficially owns 6.7% of the Company's outstanding
Common Stock, has decided not to designate a nominee for election to the Board
of Directors. BI, which beneficially owns 13.9% of the Company's outstanding
Common Stock, has designated Burkhard Blank, a current director, as BI's nominee
for election to the Board.
The Board of Directors recommends that the nominees named below be elected
directors of the Company. All of the nominees for election are presently serving
as members of the Board of Directors and have consented to serve if elected. It
is intended that proxies in the accompanying form will be voted in accordance
with such recommendation.
The Board of Directors is not presently aware of any reason that would
prevent any nominee from serving as a director if elected. If any nominee should
become unavailable for election, the persons voting the accompanying proxy may
in their discretion vote for a substitute.
4
<PAGE> 8
The names of the nominees for election are shown below, together with
information furnished by each of them regarding their respective principal
occupation, business experience and certain other information.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING PAST
NAME (AGE) FIVE YEARS AND OTHER DIRECTORSHIPS
- ---------- ----------------------------------
<S> <C>
Paul C. O'Brien........................... Director since May 1992; Chairman of the Board of
(58) Directors since May 1998. Since January 1995, Mr.
O'Brien has been President and Chief Executive Officer
of The O'Brien Group Inc., a consulting company. From
1993 until December 1994, Mr. O'Brien was Chairman of
New England Telephone and Telegraph Company, a
wholly-owned subsidiary of NYNEX Corporation. Prior
thereto he served as President and Chief Executive
Officer of New England Telephone and Telegraph Company.
He is a director of BankBoston Corporation, Shiva
Corporation and First Pacific Networks Co.,
manufacturers of communications and network products,
and Renaissance Worldwide, Inc., an information
technology consulting company, and is Chairman of View
Tech, Inc. a telecommunications systems company. Mr.
O'Brien earned a B.S. degree in electrical engineering
from Manhattan College, an M.B.A. degree from New York
University and holds three honorary doctorates.
Nancy S. Amer............................. Director since September 1994. Ms. Amer is a General
(37) Partner of Crescent Gate, L.P., a middle-market buyout
fund. From December 1994 through December 1996, Ms. Amer
was a Managing Director of the Harvard Private Capital
Group, Inc., a subsidiary of Harvard Management Company,
Inc., which manages the Harvard University endowment.
Prior to joining Harvard, Ms. Amer was a senior
consultant with the Boston Consulting Group, Inc. Ms.
Amer earned B.A. and M.B.A. degrees from Harvard
University.
Burkhard Blank, M.D....................... Director since July 1995. Dr. Blank joined Boehringer
(43) Ingelheim GmbH, an operating division of BI, in 1986 and
has served as the head of international project
management for Boehringer Ingelheim GmbH since 1993.
From 1988 to 1993, Dr. Blank served as a project leader
for worldwide development of various programs at BI.
Ira A. Jackson............................ Director since May 1992. Mr. Jackson is an Executive
(49) Vice President of BankBoston, a commercial bank, where
he has served since 1987. Prior thereto, Mr. Jackson was
Commissioner of Revenue for the Commonwealth of
Massachusetts for a period of five years. Earlier, he
was Associate Dean of the John F. Kennedy School of
Government at Harvard University. Mr. Jackson received
an A.B. from Harvard University and an M.P.A. from the
Kennedy School of Government and attended the Advanced
Management Program at the Harvard Business School.
Joseph B. Martin, M.D., Ph.D.............. Director since February 1987. Dr. Martin has been Dean
(59) of Harvard Medical School since July 1997. Prior
thereto, Dr. Martin
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING PAST
NAME (AGE) FIVE YEARS AND OTHER DIRECTORSHIPS
- ---------- ----------------------------------
<S> <C>
was Chancellor of the University of California, San
Francisco since July 1993 and was Dean and Professor of
Neurology of the School of Medicine at the University of
California, San Francisco since 1989. From 1978 to 1989,
he was Chairman of the Neurology Department at
Massachusetts General Hospital and Professor of
Neurology at Harvard Medical School.
Harry W. Wilcox, III...................... Mr. Wilcox joined the Company as Senior Vice President,
(44) Finance and Business Development and Chief Financial
Officer in December 1995 and was named President and
Chief Executive Officer in May 1998. Mr. Wilcox was also
appointed to the Board of Directors in May 1998, to fill
the position vacated by the resignation of Elkan R.
Gamzu. Prior to joining Cambridge NeuroScience, Mr.
Wilcox served as Vice President, Finance and Chief
Financial Officer of Cellcor, Inc., a biotechnology
company, since 1990. While at Cellcor, Mr. Wilcox was
also named Treasurer and Senior Vice President of
Business Development. From 1988 to 1990, he was a
founder and general partner and Chief Financial Officer
of Highland Capital Partners, L.P., a venture capital
firm. From 1983 to 1987, Mr. Wilcox was Controller, Vice
President of Finance and Chief Financial Officer at
Charles River Ventures, Inc. a venture capital firm. Mr.
Wilcox earned an M.B.A. degree from Boston University
and a B.A. degree in Finance from the University of
Arizona. Mr. Wilcox is a Certified Public Accountant.
</TABLE>
The Board of Directors held 4 meetings during the fiscal year ended
December 31, 1997. Each director, except Ira A. Jackson, attended at least 75%
of the aggregate of all meetings of the Board and all committees of the Board on
which he or she served that were held during the period for which he or she
served as a director.
The Company has established an Audit Committee and a Compensation and
Benefits Committee of the Board of Directors but does not have a Nominating
Committee. The Compensation and Benefits Committee held two meetings in the
fiscal year ended December 31, 1997. The current members of the Compensation and
Benefits Committee are Messrs. O'Brien (Chairman) and Lewis and Ms. Amer. Its
function is to consider and recommend action to the Board on compensation
matters. In addition, it administers the Company's 1991 Equity Incentive Plan
(the "Equity Plan"), 1992 Director Stock Option Plan (the "Directors' Plan") and
1993 Employee Stock Purchase Plan (the "Purchase Plan"). The Audit Committee,
presently composed of Dr. Blank, Messrs. Jackson (Chairman) and Lewis and Ms.
Amer, held two meetings in the last fiscal year. The primary function of the
Audit Committee is to review the Company's audited financial statements so that
it may assist the Board of Directors in the discharge of its duties and
responsibilities by assuring that the financial information that will be
provided to the stockholders and others is accurate.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The Compensation and Benefit Committee Report on Executive Compensation and
tables set forth below provide information about the compensation of the
executive officers of the Company.
COMPENSATION AND BENEFIT COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board of Directors (the
"Committee") has furnished the following report on executive compensation:
Compensation Philosophy
The Company has developed and implemented compensation policies, plans and
programs that seek to enhance the viability of the Company thereby increasing
stockholder value, by closely aligning the financial interests of the Company's
executive officers with those of its stockholders. In support of these goals,
annual base salaries, annual incentives and long-term incentives are fixed at
competitive levels to attract and retain executive officers and other key
employees of outstanding ability and to motivate them to perform to the fullest
of their abilities. The incentive programs are variable and closely tied to
Company and individual performance in a manner that encourages a strong focus of
building the business into one that has strong stockholder value.
Base Salary Administration
The salary plan for each named executive officer is reviewed individually
on an annual basis at their anniversary date. The Human Resources Director and
CEO review and recommend a base salary level to the Committee for each executive
officer based on current competitive practices, relying on industry standards
and practices, internal comparisons and individual performance judgments as to
past and expected future contributions of the individual executive officers. The
industry standards used include both national and New England-based published
biotechnology surveys as well as focused survey data initiated by the Company.
Comparisons are made to companies that are similar in size, stage of development
and, in some instances, in the same geographic area as the Company.
Incentive Compensation: Annual Incentives
Annual incentives are payable to each executive officer upon the attainment
of predetermined corporate objectives. These objectives are approved at the
beginning of the year by the Committee and comprise product, program, financial,
business and personal objectives. At the end of the year, the Committee reviews
the attainment of the overall plan and objectives, each named individual's
contribution to this attainment as well as each executive's ongoing contribution
to the Company's development and determines the appropriate bonus payment. At
full achievement of objectives, the CEO is targeted to receive 30% of his annual
base salary, the Senior Vice President, Research is targeted to receive 25% and
all other executive officers are targeted to receive 20%. The amounts actually
paid may be more or less than the targeted bonus based on over or under
achievement of objectives.
As a result of the suspension of the Phase III clinical trials of CERESTAT
in stroke and TBI and the significant decrease in market price of the Company's
Common stock in the second half of 1997, the Committee felt that it was not
appropriate to award bonuses to the management team.
Incentive Compensation: Long-Term Incentives
The Company has established the 1991 Equity Incentive Plan (the "Equity
Plan") which serves as the long-term incentive program for executive officers as
well as all employees of the Company. It is the Company's philosophy that all
employees of the Company should be stockholders thereby sharing in the long-
term success of the Company. Upon employment, the Company grants stock options
to regular, full-time
7
<PAGE> 11
employees. After two years of employment, each regular, full-time employee is
eligible to receive annual stock option grants. In determining the size of stock
option awards, the Committee considers competitive market data and Company
performance as well as individual performance. The Committee has developed a
guideline for the size of both the on-hire and annual awards that is based upon
the compensation level of each position within the Company.
Under the Equity Plan, options granted at the date of employment vest 50%
after two years and 6.25% per quarter thereafter, thereby becoming fully vested
after four completed years of employment. After two years of continuous
employment, all employees and executive officers, including the CEO, are
eligible for additional grants of stock options. Annual grants vest at a rate of
6.25% per quarter and are fully vested four years from the grant date. This
vesting schedule, together with the 10-year life of the options, is consistent
with the idea of providing a reward to all employees and executive officers for
remaining with the Company during the vesting periods and contributing to the
long-term growth and viability of the Company, and increasing value for all
stockholders. In 1997, the size of these grants was based upon industry surveys,
individual employee performance and anticipated ongoing contribution to the
Company's development.
Annual grants made to the named executive officers in 1997 are summarized
in the table entitled "Option Grants in Last Fiscal Year."
The Committee believes that the executive officer team will receive
appropriate rewards under this program of corporate incentives but only if they
achieve the performance goals established for them and the Company and if they
succeed in building value for the Company's stockholders.
Chief Executive Compensation
The CEO's overall compensation package, which is reviewed and determined by
the Committee, is intended to be competitive with industry standards and
motivate the CEO to achieve the Company's annual and longer-term objectives.
Annual incentive compensation reflects the Committee's assessment of performance
against pre-established objectives. For 1997, as discussed above, the CEO did
not receive an annual incentive award. In 1997, the CEO was awarded a stock
option grant that was based on a review of competitive data and is in line with
internal comparisons. The goal of this award is to motivate leadership for
long-term Company success and to provide significant reward upon achievement of
Company objectives and enhancement of stockholder value. The Committee continues
to believe that, at this point in the Company's development, it remains
appropriate that the CEO's compensation package be increasingly weighted to
stock options.
Compensation Deductibility
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), imposes a limit on tax deductions for annual compensation in excess of
one million dollars paid by a corporation to its chief executive officer and the
other four most highly compensated officers of a corporation. This provision
excludes certain forms of "performance based compensation" from the compensation
taken into account for the purposes of that limit. The Company has established
individual limits on the number of options that may be granted under the Equity
Plan to permit the options to qualify for the exclusion from the limitation on
deductibility. The Committee will continue to assess the impact of Section
162(m) on its compensation practices and determine what further action, if any,
is appropriate.
Compensation and Benefits Committee
Paul C. O'Brien, Chairman
Nancy S. Amer
S. Joshua Lewis
8
<PAGE> 12
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph set forth below compares the Company's cumulative total
stockholder return with the cumulative total return of the Nasdaq Stock Market
(U.S.) Index ("Nasdaq Market Index") and a peer group index ("Peer Group Index
A") comprised of the following neuroscience companies, each on an annual basis:
Cocensys, Inc.; Neurex Corporation; Neurocrine Biosciences, Inc.; Neurogen
Corporation; and Sibia Neurosciences, Inc. The peer group index included in the
stock performance graph presented in the Company's 1997 Proxy Statement also
included Cephalon, Inc. and Regeneron Pharmaceuticals, Inc. and did not include
Neurocrine Biosciences, Inc. and Sibia Neurosciences, Inc. The Company believes
that the businesses of Cephalon and Regeneron are no longer comparable to that
of Cambridge NeuroScience and, therefore, has removed them from the peer group
index. Cephalon is a substantially larger company than Cambridge NeuroScience
with marketed products and product candidates at later stages of development. As
a result of an agreement entered into in 1997, Regeneron is effectively a
captive subsidiary of Proctor & Gamble Company. Neurocrine and Sibia are
biotechnology companies comparable in size and at similar stages of product
development to Cambridge NeuroScience. In addition to Peer Group Index A,
defined above, the graph set forth below also includes, for comparative
purposes, a peer group index ("Peer Group Index B") comprised of the companies
included in the peer group index in the Company's 1997 Proxy Statement:
Cephalon, Inc.; Cocensys Inc.; Neurex Corporation; Neurogen Corporation; and
Regeneron Pharmaceuticals, Inc.
The comparative returns assume an investment of $100 in the Common Stock of
the Company, the stock comprising the Nasdaq Market Index, and the stock
comprising Peer Group Index A and Peer Group Index B on December 31, 1992.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/30/95 12/29/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Cambridge NeuroScience, Inc.............. 100.0 100.0 54.8 116.1 153.2 25.4
Nasdaq Market Index...................... 100.0 114.8 112.2 158.7 195.2 239.5
Peer Group Index A....................... 100.0 58.4 47.2 172.4 176.4 133.3
Peer Group Index B....................... 100.0 107.3 45.9 201.3 155.2 99.3
</TABLE>
9
<PAGE> 13
The following table sets forth certain compensation information for the
Chief Executive Officer of the Company and each of the four other most highly
compensated executive officers whose salary and bonus for 1997 exceeded $100,000
(collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) (#)(3) ($)(4)
--------------------------- ---- ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Elkan R. Gamzu(5)..................... 1997 $262,500 $ -- 135,000 $12,044
President and 1996 262,500 59,063 50,000 11,653
Chief Executive Officer 1995 250,000 63,750 72,500 11,029
William F. Holt(6).................... 1997 138,286 -- 1,250 3,443
Vice President, Drug 1996 127,429 15,291 7,500 2,693
Discovery Operations 1995 126,818 12,443 10,000 120
Laima I. Mathews...................... 1997 119,206 -- 1,250 6,774
Vice President, Drug 1996 108,284 13,400 6,000 5,558
Development 1995 106,239 11,236 9,000 6,494
Robert N. McBurney.................... 1997 224,700 -- 15,000 10,694
Senior Vice President, 1996 210,000 39,375 30,000 10,579
Research and 1995 200,000 42,500 50,000 10,899
Chief Scientific Officer
Harry W. Wilcox, III(7)............... 1997 189,578 -- 30,000 12,116
Senior Vice President of 1996 175,000 26,250 -- 11,187
Finance and Business 1995 7,292 -- 50,000 --
Development and Chief Financial
Officer
</TABLE>
- ---------------
(1) Includes compensation deferred by the Company's named executive officers
during fiscal years 1997, 1996 and 1995 pursuant to the Cambridge
NeuroScience, Inc. 401(k) Plan, adopted in 1988.
(2) Bonuses were earned in the year indicated and are generally paid in the
subsequent year.
(3) Consists of options granted under the Equity Plan to acquire shares of the
Company's Common Stock.
(4) The amounts shown in this column for the fiscal year 1997 are derived from
the following figures for Drs. Gamzu, Holt and McBurney and Mr. Wilcox,
respectively: $2,400, $227, $1,050 and $2,476 for Company paid term life
insurance premiums (Mrs. Mathews did not receive this benefit in 1997); $144
each for Company paid group life insurance premiums; and, $9,500, $3,072,
$9,500, $9,496 and $6,630 for the Company match of contributions to the
Cambridge NeuroScience, Inc. 401(k) Plan. The amounts shown in this column
for the fiscal year 1996 include the following amounts for Drs. Gamzu, Holt
and McBurney, Mr. Wilcox and Mrs. Mathews, respectively: $9,500, $2,549,
$9,500, $9,500 and $5,414 for the Company match of contributions to the
Cambridge NeuroScience, Inc. 401(k) Plan and $144 each for Company paid
group life insurance premiums. Also included in the 1996 amounts are the
following for Drs. Gamzu and McBurney and Mr. Wilcox, respectively: $2,009,
$935 and $1,543 for Company paid term life insurance premiums. The amounts
shown in this column for the fiscal year 1995 include the following amounts
for Drs. Gamzu and McBurney and Mrs. Mathews, respectively: $9,240, $9,240
and $6,374 for the Company match of contributions to the Cambridge
NeuroScience, Inc.
10
<PAGE> 14
401(k) Plan (Dr. Holt and Mr. Wilcox did not participate in the 401(k) Plan
in 1995) and $120 each for Company paid group life insurance premiums. Also
included in 1995 amounts are $1,669 and $1,539 for Company paid term life
insurance premiums for Drs. Gamzu and McBurney, respectively. Dr. Holt and
Mrs. Mathews became executive officers of the Company in 1997 and Mr. Wilcox
joined the Company in December 1995.
(5) Dr. Gamzu resigned from the Company on May 6, 1998. Pursuant to the terms of
the 1991 Equity Incentive Plan, all non-vested options outstanding on the
date of Dr. Gamzu's resignation were forfeited. All vested but unexercised
options will terminate if not exercised within 90 days after his resignation
date.
(6) Dr. Holt left the Company on March 9, 1998. Pursuant to the terms of the
1991 Equity Incentive Plan, all non-vested options outstanding on the date
of termination of employment with the Company were forfeited. All vested but
unexercised options will be canceled if not exercised within 90 days after
his termination date.
(7) Effective May 6, 1998, Mr. Wilcox was named President and Chief Executive
Officer of the Company.
The following table provides information regarding the stock options
granted during 1997 to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OR OPTION TERM(1)
GRANTED FISCAL BASE PRICE EXPIRATION -----------------------
NAME (#) YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ---------- ------------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Elkan R. Gamzu(2)............ 135,000 49.8% $12.25 1/27/07 $1,040,035 $2,635,652
William F. Holt(3)........... 1,250 .5% 12.25 1/27/07 9,630 24,404
Laima I. Mathews............. 1,250 .5% 12.25 1/27/07 9,630 24,404
Robert N. McBurney........... 15,000 5.5% 12.25 1/27/07 115,559 292,850
Harry W. Wilcox, III(4)...... 30,000 11.1% 12.25 1/27/07 231,119 585,700
</TABLE>
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term and are not
intended to be a forecast of possible future appreciation, if any, in the
price of the Company's Common Stock. These gains are based on assumed rates
of stock price appreciation of 5% and 10% compounded annually from the date
the respective options were granted.
(2) See Note (5) to the Summary Compensation Table, above.
(3) See Note (6) to the Summary Compensation Table, above.
(4) See Note (7) to the Summary Compensation Table, above.
11
<PAGE> 15
The following table provides information regarding the stock options
exercised during 1997 by the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Elkan R. Gamzu (2).................... -- -- 244,530 182,970 $ -- $ --
William F. Holt (3)................... -- -- 44,295 11,955 -- --
Laima I. Mathews...................... -- -- 27,546 8,704 -- --
Robert N. McBurney.................... -- -- 164,687 60,313 -- --
Harry W. Wilcox, III (4).............. -- -- 30,625 49,375 -- --
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market on December 31, 1997 of $1.969.
(2) See Note (5) to the Summary Compensation Table, above.
(3) See Note (6) to the Summary Compensation Table, above.
(4) See Note (7) to the Summary Compensation Table, above.
EMPLOYMENT AGREEMENTS
Pursuant to the terms of agreements between Dr. Elkan R. Gamzu and the
Company, the Company has agreed to pay Dr. Gamzu a severance payment equal to
his annual base salary, payable over 12 months, and to continue to provide
employment benefits to Dr. Gamzu for a period of 12 months following
termination. See "Compensatory Arrangements" below.
COMPENSATORY ARRANGEMENT
The Company has adopted a compensatory arrangement pursuant to which
certain executive officers and other members of management will be compensated
in the event of the successful completion of a sale, merger or liquidation of
the Company. The individuals covered by this arrangement are Drs. Gregory B.
Butler, Graham Durant, Elkan R. Gamzu, David Gwynne, William F. Holt and Robert
N. McBurney and Mr. Harry W. Wilcox and Mrs. Laima I. Mathews. Compensation to
be paid to these employees includes a " success bonus" based on a percentage of
the dollar value of the transaction, beyond a stated minimum threshold, entered
into by the Company. Except as otherwise determined by the Board of Directors,
in the event that any of these individuals voluntarily terminates his or her
employment with the Company prior to the successful completion of such a
transaction, no bonus will be paid to that individual. Additionally, in the
event that the Company terminates the employment of these individuals, he or she
will receive severance payments ranging from 25% to 100% of such individual's
base salary and the continuation for a prescribed period of all employee
benefits currently provided by the Company. As of March 9, 1998, Drs. Holt and
Butler were no longer employed by the Company. Dr. Gamzu resigned as President
and Chief Executive Officer and as Director of the Company, effective May 6,
1998. Pursuant to these arrangements, Drs. Holt, Butler and Gamzu remain
eligible to receive the success bonus described above.
12
<PAGE> 16
DIRECTOR COMPENSATION
Effective June 1992, the Company agreed to compensate outside directors for
attendance at meetings of the Board of Directors and committees thereof at a
rate of $12,000 per year, paid quarterly. Dr. Martin and Messrs. Jackson and
O'Brien and Ms. Amer are currently compensated pursuant to this arrangement.
SECURITIES EXCHANGE ACT REPORTING
The Company's executive officers and directors are required under Section
16(a) of the Exchange Act to file reports of ownership of the Company's
securities and changes in ownership with the Securities and Exchange Commission.
Copies of these reports must also be furnished to the Company.
Based solely on a review of reports furnished to the Company and written
representation that no other reports were required, the Company believes that
during 1997 the executive officers and directors of the Company complied with
all applicable Section 16(a) filing requirements, except that Drs. Gamzu and
McBurney, Mr. Wilcox and Ross S. Gibson, a former officer of the Company,
reported on March 16, 1998, the receipt of option grants from the Company, and
Dr. McBurney reported the gift of Cambridge NeuroScience stock held by him to a
trust for the benefit of his children, which reports were due on February 13,
1998. On March 25, 1998, Ms. Amer reported the receipt of an option grant from
the Company, which report was due on February 13, 1998. Mr. Gibson voluntarily
terminated his employment with the Company in June 1997.
INFORMATION CONCERNING AUDITORS
The firm of Ernst & Young LLP, independent auditors, examined the Company's
financial statements for the fiscal year ended December 31, 1997. The Board of
Directors has appointed Ernst & Young LLP to serve as the Company's auditors for
its fiscal year ending December 31, 1998. A representative of Ernst & Young LLP
is expected to attend the stockholders' meeting where he will have the
opportunity to make a statement if he so desires and will be available to
respond to appropriate questions.
DEADLINE FOR STOCKHOLDER PROPOSALS
If any stockholder of the Company intends to present a proposal at the 1999
annual meeting of stockholders and desires it to be considered for inclusion in
the Company's proxy statement and form of proxy for that meeting, such proposal
must be received by the Company at One Kendall Square, Building 700, Cambridge,
MA 02139, Attention: Harry W. Wilcox, III, no later than December 21, 1998.
EXPENSES OF SOLICITATION
The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others of forwarding
solicitation material to beneficial owners of stock. In addition to the use of
mails, proxies may be solicited by executive officers and employees of the
Company by personal interview, by telephone, or by telegraph, the cost of which
will be nominal. The Company may request persons holding stock in their names or
in the names of their nominees to obtain proxies from, and send proxy material
to, their principals, and will reimburse such persons for the expense in so
doing. The Company may engage a professional organization to assist in the
solicitation of proxies for the stockholders' meeting, the cost of which is not
anticipated to exceed $3,000.
13
<PAGE> 17
MISCELLANEOUS
The Board of Directors does not know of any business which will come before
the meeting except the matters described in the notice. If other business is
properly presented for consideration at the meeting, it is intended that the
proxies will be voted by the persons named therein in accordance with their
judgment on such matters.
The prompt return of your proxy will be appreciated. Therefore, whether or
not you expect to attend the meeting, please sign the proxy and return it in the
enclosed envelope.
By order of the Board of Directors,
WILLIAM T. WHELAN
Secretary
Dated: May 26, 1998
14
<PAGE> 18
PROXY
CAMBRIDGE NEUROSCIENCE, INC.
ANNUAL MEETING OF STOCKHOLDERS - JUNE 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Cambridge Neuroscience, Inc. (the "Company")
hereby appoints Harry W. Wilcox, III and William T. Whelan and each of them
acting singly, the attorneys and proxies of the undersigned, with full power
of substitution, to vote on behalf of the undersigned all shares of common
stock of the Company that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held on June 24, 1998 and at all adjournments thereof, hereby revoking any
proxy heretofore given with respect to such shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL OF THE NOMINEES IN PROPOSAL 1. IN THEIR DISCRETION, THE PROXIES
ARE ALSO AUTHORIZED TO VOTE UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
PLEASE COMPLETE AND SIGN ON REVERSE SIDE.
--------------
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
-------------
[POSTAL BAR CODE]
------------------------------------------------------
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 4670 SOUTH HACKENSACK, NJ
------------------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
ACCOUNT MAINTENANCE DEPARTMENT
PO BOX 3316
SOUTH HACKENSACK NJ 07606-9870
<PAGE> 19
<TABLE>
<S> <C>
Please mark [X]
your vote as
indicated in
this example
1. Proposal to elect Directors. Nominees: Nancy S. Amer, Burkhard Blank, Ira A. Jackson, Joseph B. Martin, Paul C. O'Brien
and Harry W. Wilcox, III
FOR all nominees WITHHELD (INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's
(except as for all name in the space provided below.)
specified nominees ___________________________________________________________________________________________
at right)
[ ] [ ] PLEASE SIGN AND MAIL THIS PROXY TODAY
Date: __________________________________________________________
_________________________________________________________________
Signature
Date: ___________________________________________________________
_________________________________________________________________
Signature (if held jointly)
Please sign exactly as name appears on stock certificate. When
shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If
a partnership, please sign in partnership name by authorized
person.
- -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
[ ] MULTIPLE COPIES OF STOCKHOLDER REPORTS ARE BEING RECEIVED AT THIS ADDRESS. PLEASE DISCONTINUE THESE MAILINGS TO THIS ACCOUNT
(NOTE: AT LEAST ONE STOCKHOLDER REPORT MUST BE MAILED).
[ ] PLEASE CHANGE MY ADDRESS.
__________________________________________________________________________________
CUSIP NO:
001-045-13242610
__________________________________________________________________________________
NEW ADDRESS (PLEASE PRINT OR TYPE)
__________________________________________________________________________________
__________________________________________________________________________________
ZIP
CODE
__________________________________________________________________________________
SIGNATURE
__________________________________________________________________________________
Name & Address as it appears in our records
</TABLE>
