<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 [ ]
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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:
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<PAGE> 2
[Cambridg NeuroScience, Inc. Logo]
April 29, 1999
To Our Stockholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Stockholders' meeting on Thursday June 3, 1999, at 10 a.m.
Eastern Standard Time, at the offices of our legal counsel, Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, 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 Neuro 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 the offices of the Company's legal counsel, Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts, at 10 a.m.
Eastern Standard Time, on Thursday, June 3, 1999, 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 April 15, 1999 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: April 29, 1999
<PAGE> 4
[Cambridge Neuro 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 Thursday, June 3, 1999, 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 April 29, 1999.
VOTING SECURITIES AND VOTES REQUIRED
On April 15, 1999, the Company had outstanding 18,099,785 shares of Common
Stock, $.001 par value per share ("Common Stock"), which is its only outstanding
class of voting stock. Stockholders of record at the close of business on April
15, 1999 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. No appraisal rights exist for any action proposed to be
taken at the annual meeting.
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 March 31,
1999 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) those individuals who have served as Chief
Executive Officer of the Company during the fiscal year ended December 31, 1998,
(iv) each of the other four most highly compensated executive officers and (v)
all current 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 13.7%
Postbox 200
D-55216 Ingelheim, Rhein
Germany
State of Wisconsin Investment Board......................... 1,745,000 9.6%
P.O. Box 7842
Madison, Wisconsin 53703
Aeneas Venture Corporatio(3)................................ 1,106,033 6.1%
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Burkhard Blank(4)........................................... 2,487,624 13.7%
Robert N. McBurney(5)....................................... 309,086 1.7%
Elkan R. Gamzu(6)........................................... 216,971 1.2%
Harry W. Wilcox, III(7)..................................... 157,859 *
David I. Gwynne(8).......................................... 75,241 *
Laima I. Mathews(9)......................................... 58,106 *
Joseph B. Martin(10)........................................ 51,625 *
Paul C. O'Brien (11)........................................ 49,125 *
Ira A. Jackson (12)......................................... 24,125 *
Nancy S. Amer(13)........................................... 10,000 *
All current executive officers and directors as a group (10)
persons)(14).............................................. 3,262,392 17.5%
</TABLE>
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* 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. On March 31, 1999, the
Company had outstanding 18,099,785 shares of Common Stock.
(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
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<PAGE> 6
division of BI. Dr. Blank disclaims "beneficial ownership" of these shares
within the meaning of Rule 13d-3 under the Exchange Act.
(5) Includes 213,436 shares which may be acquired within 60 days of the date
hereof by Dr. McBurney pursuant to the exercise of stock options and 19,150
shares held in the Cambridge NeuroScience, Inc. 401(k) Plan. Also includes
10,000 shares held in trust for Dr. McBurney's children.
(6) Includes 17,971 shares held in the Cambridge NeuroScience, Inc. 401(k)
Plan. Effective May 6, 1998, Dr. Gamzu resigned as President and Chief
Executive Officer of the Company and as a director of the Company.
(7) Includes 126,250 shares which may be acquired within 60 days of the date
hereof by Mr. Wilcox pursuant to the exercise of stock options and 14,337
shares held in the Cambridge NeuroScience, Inc. 401(k) Plan.
(8) Consists of 58,734 shares which may be acquired within 60 days of the date
hereof by Dr. Gwynne pursuant to the exercise of stock options and 16,507
shares held in the Cambridge NeuroScience, Inc. 401(k) Plan.
(9) Consists of 45,953 shares which may be acquired within 60 days of the date
hereof by Mrs. Mathews pursuant to the exercise of stock options and 12,153
shares held in the Cambridge NeuroScience, Inc. 401(k) Plan.
(10) Includes 24,125 shares which may be acquired within 60 days of the date
hereof by Dr. Martin pursuant to the exercise of stock options.
(11) Includes 24,125 shares which may be acquired within 60 days of the date
hereof by Mr. O'Brien pursuant to the exercise of stock options.
(12) Consists of 24,125 shares which may be acquired within 60 days of the date
hereof by Mr. Jackson pursuant to the exercise of stock options.
(13) Consists of 10,000 shares which may be acquired within 60 days of the date
hereof by Ms. Amer pursuant to the exercise of stock options.
(14) See Notes (1), (2), (4), (5), (6), (7), (8), (9), (10), (11), (12) and (13)
above. Includes 39,601 shares held by another executive officer, including
14,139 shares which may be acquired within 60 days of the date hereof by
the executive officer pursuant to the exercise of stock options and 8,319
shares held in the Cambridge NeuroScience, Inc. 401(k) Plan.
ELECTION OF DIRECTORS
Directors are to be elected at the annual meeting to be held on June 3,
1999. 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 and 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 one individual designated by Aeneas as long
as it beneficially owns 5% or more of the outstanding Common Stock of the
Company. Aeneas, which beneficially
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<PAGE> 7
owns 6.1% of the Company's outstanding Common Stock, has decided not to
designate a nominee for election to the Board of Directors. Pursuant to the
collaboration and licensing agreements between the Company and BI, BI had the
right to designate one individual as a nominee to the Company's Board of
Directors as long as it beneficially owned 7% or more of the outstanding Common
Stock of the Company and a second nominee in the event that BI owned more than
20% of the outstanding Common Stock of the Company, provided that the two
nominees designated by BI did not at any time represent more than 20% of the
total number of members of the Company's Board of Directors. In November 1998,
the Company and BI terminated the collaboration and licensing agreements.
Pursuant to the termination, BI's right to designate a nominee to the Company's
Board of Directors expired on March 31, 1999. Dr. Blank, who had previously been
the designee of BI, has agreed to stand for re-election to the Company's Board
of Directors.
The Board of Directors unanimously 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.
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
(59) 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 Renaissance Worldwide, Inc., an
information technology consulting company, and is
Chairman of View Tech, Inc., a video and
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. Since December 1996, Ms.
(38) Amer has been a General Partner of Crescent Gate, L.P.,
a middle-market buyout fund. From 1990 through 1994, Ms.
Amer was a Vice President of Harvard Private Capital
Group, Inc., a subsidiary of Harvard Management Company,
Inc., which manages the Harvard University endowment.
From December 1994 through December 1996, Ms. Amer was a
Managing Director of Harvard Private Capital Group, Inc.
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.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING PAST
NAME (AGE) FIVE YEARS AND OTHER DIRECTORSHIPS
- ---------- ----------------------------------
<S> <C>
Burkhard Blank, M.D. ..................... Director since July 1995. Dr. Blank joined Boehringer
(44) 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
(50) 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
(60) of Harvard Medical School since July 1997. Prior
thereto, Dr. Martin 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...................... Director since May 1998. Mr. Wilcox joined the Company
(45) as Senior Vice President, Finance and Business
Development and Chief Financial Officer in December 1995
and was named President and Chief Executive Officer in
May 1998. Prior to joining the Company, 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
a B.A. degree in Finance from the University of Arizona
and an M.B.A. degree from Boston University. Mr. Wilcox
is a Certified Public Accountant.
</TABLE>
The Board of Directors held seven meetings during the fiscal year ended
December 31, 1998. Each director, with the exception of Dr. Martin, attended at
least 75% of the aggregate of all meetings of the Board of Directors and all
committees of the Board of Directors 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, 1998. The current members of the Compensation and
Benefits Committee are Mr. O'Brien (Chairman) and Ms. Amer. Its function is to
consider and
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<PAGE> 9
recommend action to the Board of Directors 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") as well as an annual incentive plan, to the
extent that such a plan is established for a given year. The Audit Committee,
presently composed of Dr. Blank, Mr. Jackson (Chairman) 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.
EXECUTIVE COMPENSATION
The Compensation and Benefits Committee report on Executive Compensation
and tables set forth below provide information about the compensation of the
executive officers of the Company.
COMPENSATION AND BENEFITS 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 the beginning of the calendar year. The Chief Executive
Officer ("CEO") reviews and recommends 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. The Company believes that it is appropriate that
the compensation of its executive officers be increasingly based upon annual and
long-term incentives tied to the attainment of corporate objectives and overall
performance.
In the second half of 1997, the Company and its then collaborative partner,
BI, discontinued patient enrollment into the two Phase III clinical trials of
aptiganel after interim analyses indicated that continuation of the trials was
not justified. In March 1998, due to the setback in the clinical development of
aptiganel, the Company implemented a cost reduction plan that included a
reduction in workforce by 34 employees, or approximately half. In June 1998, the
Company entered into an agreement with a third party to sub-lease approximately
half of the Company's office and laboratory facilities, thereby reducing
facilities-related operating expenses. In line with these cost containment
measures and in keeping with the Company's belief
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<PAGE> 10
that the compensation of its executive officers should be more closely tied to
the attainment of corporate objectives and overall performance, the base
salaries of all executive officers were frozen in 1998, with the exception of
those individuals who were appointed to their positions in 1998.
Incentive Compensation: Annual Incentives
Annual incentives are payable to each executive officer upon the attainment
of predetermined corporate objectives which are approved at the beginning of the
year by the Committee. In accordance with the Annual Incentive Plan for 1998,
these objectives included product, program, financial and business objectives.
At the end of the year, the Committee reviews the attainment of the overall plan
and objectives and determines the appropriate bonus payment. For the fiscal year
1998, the Board established an incentive bonus plan covering all employees of
the Company, including the executive officers. This plan provided for the
payment of up to 20% of each employee's base salary at full attainment of
objectives. The Committee determined that the Company had achieved 50% of its
objectives for 1998 and has, accordingly, awarded bonuses of 10% of base salary
which were paid in the first quarter of 1999.
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 employees. After two years of employment, each regular,
full-time employee is eligible to receive additional 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, thereby increasing value for all
stockholders. In 1998, the size of these grants was based upon industry surveys,
individual employee performance and anticipated ongoing contribution to the
Company's development. As discussed below, 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 under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
Annual grants made to the named executive officers (as defined below) in
1998 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 if they achieve
the performance goals established for them and the Company, and if they succeed
in building value for the Company's stockholders.
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<PAGE> 11
Chief Executive Officer's 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.
Accordingly, on his appointment as CEO in May 1998, Mr. Wilcox's base salary was
adjusted to reflect his new position and responsibilities. Annual incentive
compensation reflects the Committee's assessment of performance against
pre-established objectives. For 1998, as discussed above, the CEO was awarded an
annual incentive award equal to 10% of his base salary, reflecting the
Committee's assessment that the Company had met approximately 50% of the annual
objectives for 1998. Upon his appointment as CEO in May 1998, Mr. Wilcox 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, to provide significant reward upon
achievement of Company objectives and especially to align the CEO's interests
with the interests of the stockholders. 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 annual and long-term
incentives tied to the Company's attainment of objectives and overall
performance.
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
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COMPARATIVE STOCK PERFORMANCE GRAPH
The table 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 the Nasdaq Pharmaceutical Index
("Nasdaq Pharmaceutical Index") and a peer group index ("Peer Group Index").
The Company has found that it is becoming increasing difficult, due to the
volatility of the biotechnology industry, to maintain a self-determined peer
group. In each of the last two years, the composition of the Company's
self-determined peer group has changed due to mergers, dissolutions and
successes and failures of product candidates resulting in lack of comparability
with the Company. The peer group index included in the stock performance graph
presented in this Proxy Statement and in the Company's 1998 Proxy Statement is
comprised of the following neuroscience companies, each on an annual basis:
Cocensys, Inc.; Neurex Corporation; Neurocrine Biosciences, Inc.; Neurogen
Corporation; and Sibia Neurosciences, Inc. During 1998, Neurex Corporation
merged with another entity, the business of which is not comparable to that of
the Company. The Company has also noted that many of its peer companies use the
Nasdaq Pharmaceutical Index for the purpose of preparing the Comparative Stock
Performance Graph. Therefore, in an effort to maintain a more consistent
presentation of data going forward and to provide information which is more
comparable within the Company's industry, the Company will present its stock
performance data in comparison with the Nasdaq Pharmaceutical Index and will no
longer present the Peer Group Index defined above.
The comparative returns assume an investment of $100 in the Common Stock of
the Company, the stock comprising the Nasdaq Market Index, the Nasdaq
Pharmaceutical Index and the stock comprising the Peer Group Index on December
31, 1993.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
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12/31/93 12/31/94 12/30/95 12/29/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAMBRIDGE NEUROSCIENCE, INC. $100.00 $54.80 $116.10 $153.20 $ 25.40 $ 16.00
- --------------------------------------------------------------------------------------------------
NASDAQ MARKET INDEX $100.00 $97.80 $138.30 $170.00 $208.50 $293.80
- --------------------------------------------------------------------------------------------------
NASDAQ PHARMACEUTICAL INDEX $100.00 $75.30 $138.00 $138.50 $143.00 $181.90
- --------------------------------------------------------------------------------------------------
PEER GROUP INDEX $100.00 $80.80 $294.80 $301.90 $228.20 $378.70
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</TABLE>
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<PAGE> 13
The following table sets forth certain compensation information for the
individuals who served as Chief Executive Officer of the Company during the
fiscal year ended December 31, 1998 and each of the four other most highly
compensated executive officers whose salary and bonus for 1998 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>
Harry W. Wilcox, III (5).............. 1998 212,807 22,500 250,000 11,974
President and Chief 1997 189,578 -- 30,000 12,116
Executive Officer 1996 175,000 26,250 -- 11,187
Elkan R. Gamzu (6).................... 1998 91,879 -- -- 235,186
President and Chief 1997 262,500 -- 135,000 12,044
Executive Officer 1996 262,500 59,063 50,000 11,653
Robert N. McBurney.................... 1998 224,700 22,470 -- 11,009
Senior Vice President, 1997 224,700 -- 15,000 10,694
Research and Chief 1996 210,000 39,375 30,000 10,579
Scientific Officer
Laima I. Mathews...................... 1998 121,100 12,100 50,000 6,338
Vice President, Drug 1997 119,206 -- 1,250 6,774
Development 1996 108,284 13,400 6,000 5,558
David I. Gwynne....................... 1998 136,143 14,185 50,000 8,342
Vice President, 1997 121,993 -- 1,250 8,298
Biotechnology and 1996 115,959 13,915 7,500 7,101
Business Development
</TABLE>
- ---------------
(1) Includes compensation deferred by the Company's named executive officers
during fiscal years 1998, 1997 and 1996 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 1998 are derived from
the following figures for Mr. Wilcox, Dr. Gamzu, Dr. McBurney, Mrs. Mathews
and Dr. Gwynne, respectively: $102, $96, $174, $288 and $174 for Company
paid group life insurance benefits; and, $9,600, $9,600, $9,600, $6,050 and
$8,168 for the Company match of contributions to the Cambridge NeuroScience,
Inc. 401(k) Plan. The amounts shown for 1998 also include $2,272, $2,946 and
$1,235 for Company paid term life insurance premiums for Mr. Wilcox and Drs.
Gamzu and McBurney, respectively (Mrs. Mathews and Dr. Gwynne did not
receive this benefit in 1998). The amount shown for Dr. Gamzu in 1998 also
includes $222,544 of severance and consulting fees paid to him in 1998
following his resignation as CEO in May 1998 and pursuant to his severance
and consulting agreement with the Company. See Note (6). The amounts shown
in this column for the fiscal year 1997 are derived from the following
figures for Mr. Wilcox, Dr. Gamzu, Dr. McBurney, Mrs. Mathews and Dr.
Gwynne: $2,476, $2,400 and $1,050 for Company paid term life insurance
premiums (Mrs. Mathews and Dr. Gwynne did not receive this benefit in 1997);
$144 each for Company paid group life insurance premiums; and, $9,496,
$9,500, $9,500, $6,630 and $8,154 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 Mr.
Wilcox,
10
<PAGE> 14
Dr. Gamzu, Dr. McBurney, Mrs. Mathews and Dr. Gwynne, respectively: $9,500,
$9,500, $9,500, $5,414 and $6,957 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 Mr. Wilcox and Drs. Gamzu and McBurney, respectively: $1,543,
$2,009 and $935 for Company paid term life insurance premiums.
(5) Mr. Wilcox was named President and Chief Executive Officer and Director on
May 6, 1998, following the resignation of Dr. Gamzu.
(6) Dr. Gamzu resigned from the Company on May 6, 1998. Pursuant to the terms of
the Equity Plan, all options outstanding on the date of Dr. Gamzu's
resignation were forfeited. The terms of the agreement between Dr. Gamzu and
the Company provide that the Company pay Dr. Gamzu a severance payment equal
to his annual base salary and continue to provide employment benefits to Dr.
Gamzu for a period of 12 months following termination. Effective with his
resignation, Dr. Gamzu was retained as a consultant to the Company. The
terms of Dr. Gamzu's consulting agreement provided that the Company pay him
a monthly amount equal to one-half of his base salary at the time of his
resignation for a period of two months, following which, Dr. Gamzu is
currently being paid a monthly amount equal to one-quarter of his base
salary at the time of his resignation. The agreement may be terminated upon
90 days written notice by either party. See "Employment Agreements."
The following table provides information regarding the stock options
granted during 1998 to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OR OPTION TERM(1)
GRANTED FISCAL BASE PRICE EXPIRATION --------------------
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- ------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Harry W. Wilcox, III (2).... 250,000 57.9% 0.844 5/28/08 132,645 336,168
Elkan R. Gamzu (3).......... -- -- -- -- -- --
Robert N. McBurney.......... -- -- -- -- -- --
Laima I. Mathews............ 50,000 11.6% 0.844 5/28/08 26,529 67,234
David I. Gwynne............. 50,000 11.6% 0.844 5/28/08 26,529 67,234
</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.
11
<PAGE> 15
The following table provides information regarding the number of securities
underlying unexercised options held by the named executive officers at December
31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT
FISCAL YEAR-END (#)
----------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Harry W. Wilcox, III (2)............................ 81,875 248,125
Elkan R. Gamzu (3).................................. -- --
Robert N. McBurney.................................. 196,562 28,438
Laima I Mathews..................................... 37,858 48,392
David I. Gwynne..................................... 50,139 49,611
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market on December 31, 1998 of $0.719, none of the above
named executive officers had in-the-money options at the end of the fiscal
year. None of the above named executive officers exercised any options
during the fiscal year ended December 31, 1998.
(2) See Note (5) to the Summary Compensation Table, above.
(3) See Note (6) to the Summary Compensation Table, above.
EMPLOYMENT AGREEMENTS
Elkan R. Gamzu, Ph.D. resigned as President and CEO and Director of the
Company in May 1998. The terms of the agreement between Dr. Gamzu and the
Company provide that the Company pay him a severance payment equal to his annual
base salary, payable over 12 months, and continue to provide employment benefits
for a period of 12 months following termination. Effective with his resignation,
the Company retained Dr. Gamzu to provide consulting services with respect to
clinical and business development activities. The terms of Dr. Gamzu's
consulting agreement provided that the Company pay him a monthly amount equal to
one-half of his base salary at the time of his resignation for a period of two
months, following which, Dr. Gamzu is currently being paid a monthly amount
equal to one-quarter of his base salary at the time of his resignation. This
consulting agreement may be terminated by either party upon 90 days written
notice. See also "Compensatory Arrangements" below.
COMPENSATORY ARRANGEMENT
The Company has adopted a compensatory arrangement pursuant to which
certain current and former 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 executive officers covered by this
arrangement are Drs. David Gwynne, Vice President, Biotechnology and Business
Development and Robert N. McBurney, Sr. Vice President, Research, and Mr. Harry
W. Wilcox, President and CEO and Mrs. Laima I. Mathews, Vice President, Drug
Development. 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. The bonus does not become
payable until the dollar value of the
12
<PAGE> 16
transaction reaches a minimum value of $40.0 million. The total bonus payable
ranges from 2.25% to 5% of the incremental value of the transaction above the
minimum and the bonus is allocated to the eligible individuals based upon a
pre-determined percentage per person. 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.
Also covered by this arrangement are the following individuals whose
employment was terminated in connection with the reduction in workforce in March
1998 and who, pursuant to the terms of the arrangement, remain eligible to
participate in the success bonus: Drs. Gregory B. Butler, former Vice President,
Legal Affairs and Intellectual Property; and, William F. Holt, former Vice
President, Drug Discovery. Dr. Gamzu, the former President and Chief Executive
Officer, resigned as President and Chief Executive Officer and as Director of
the Company, effective May 6, 1998 and is, therefore, no longer eligible for the
severance or success bonus provided pursuant to this arrangement. See
"Employment Agreements." Dr. Graham Durant retired from the Company on October
31, 1998 and is no longer eligible for the severance or success bonus provided
pursuant to this arrangement.
DIRECTOR COMPENSATION
The Company compensates 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, Messrs. Jackson and O'Brien and Ms. Amer are currently
compensated pursuant to this arrangement. Effective March 31, 1999, Dr. Blank is
no longer a designee of BI (See "Election of Directors") and has been nominated
to stand for re-election. If re-elected to the Board of Directors, Dr. Blank
will be eligible to be compensated in accordance with 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 fiscal year 1998 the executive officers and directors of the Company
complied with all applicable Section 16(a) filing requirements, with the
following exception: an Initial Statement of Ownership on Form 3 for Dr. Gwynne
was filed late upon his appointment as Vice President of Biotechnology and
Business Development of the Company.
INFORMATION CONCERNING AUDITORS
The firm of Ernst & Young LLP, independent auditors, examined the Company's
financial statements for the fiscal year ended December 31, 1998. The Board of
Directors has appointed Ernst & Young LLP to serve as the Company's auditors for
its fiscal year ending December 31, 1999. 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.
13
<PAGE> 17
DEADLINE FOR STOCKHOLDER PROPOSALS
Under Rule 14a-8 promulgated under the Exchange Act, shareholders of the
Company may present proper proposals for inclusion in the Company's proxy
statement and for consideration at the next annual meeting of shareholders by
submitting their proposals to the Company in a timely manner. In order to be
considered for inclusion in the proxy statement distributed to shareholders
prior to the annual meeting in the year 2000, a shareholder proposal must be
received by the Company no later than December 30, 1999 and must otherwise
comply with the requirements of Rule 14a-8. In order to be considered for
presentation at the annual meeting of shareholders in the year 2000, although
not included in the proxy statement, a stockholder proposal must comply with the
requirements of the Company's by-laws and be received by the Company no later
than March 15, 2000 and no earlier than February 13, 2000. Shareholder proposals
should be delivered in writing to Harry W. Wilcox, III, President and Chief
Executive Officer, Cambridge Neuroscience, Inc., One Kendall Square, Building
700, Cambridge, MA 02139. A copy of the Company's by-laws may be obtained from
the Company upon written request to Mr. Wilcox.
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 $5,000.
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: April 29, 1999
14
<PAGE> 18
PROXY
CAMBRIDGE NEUROSCIENCE, INC.
ANNUAL MEETING OF STOCKHOLDERS - JUNE 3, 1999
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 3, 1999 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.
<PAGE> 19
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
(except as specified for all nominees
at right)
---------------------------------------------
[ ] [ ]
PLEASE SIGN AND MAIL THIS PROXY TODAY
Date: _______________________________
-------------------------------------
Signature
Date: _______________________________
-------------------------------------
Signature (if held jointly)
Please sign exactly as same 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)
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SIGNATURE
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Name & Address as it appears in our records
