<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [_]
- -------------------------------------------------------------------------------
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CAMBRIDGE HEART, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggegate 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>
CAMBRIDGE HEART, INC.
ONE OAK PARK DRIVE
BEDFORD, MASSACHUSETTS 01730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Meeting") of Cambridge Heart, Inc., a Delaware corporation (the "Company")
will be held at the offices of Hale and Dorr LLP, 26th floor, 60 State Street,
Boston, Massachusetts 02109, on June 23, 1997, at 10:00 a.m., local time, for
the purpose of considering and voting upon the following matters:
1. To elect two directors of the Company for terms to expire at the 2000
Annual Meeting of the stockholders.
2. To ratify the appointment by the Board of Directors of Price
Waterhouse LLP as the Company's independent auditors for the year ending
December 31, 1997.
3. To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice of Meeting. The Board of Directors has no
knowledge of any other business to be transacted at the Meeting or at any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 28, 1997 as
the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting or any adjournment or postponement thereof. A list
of such stockholders will be available for examination by any stockholder, for
any purpose germane to the Meeting, during ordinary business hours for ten
days prior to the Meeting at the office of the Secretary of the Company at the
above address, and at the time and place of the Meeting.
If you would like to attend the Meeting and your shares are held by a
broker, bank or other nominee, you must bring to the Meeting a recent
brokerage statement or a letter from the nominee confirming your beneficial
ownership of such shares. You must also bring a form of personal
identification. In order to vote your shares at the Meeting, you must obtain
from the nominee a proxy issued in your name.
A copy of the Company's Annual Report for the year ended December 31, 1996,
which contains financial statements and other information of interest to
stockholders, accompanies this Notice of Meeting and the enclosed Proxy
Statement.
By Order of the Board of Directors,
Paul Albrecht, Secretary
Bedford, Massachusetts
May 23, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
CAMBRIDGE HEART, INC.
ONE OAK PARK DRIVE
BEDFORD, MASSACHUSETTS 01730
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Cambridge Heart, Inc., a Delaware
corporation (the "Company") for use at the 1997 Annual Meeting of Stockholders
(the "Meeting") to be held on June 23, 1997, at 10:00 a.m., local time, at
Hale and Dorr LLP, 26th floor, 60 State Street, Boston, Massachusetts 02109,
and at any adjournments or postponements thereof. All proxies will be voted in
accordance with the stockholders' instructions, and, if no choice is
specified, the shares will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of written revocation to the
Secretary of the Company. Attendance at the Meeting will not in itself be
deemed to revoke a Proxy unless the stockholder gives affirmative notice at
the Meeting that the stockholder intends to revoke the Proxy and vote in
person.
On April 28, 1997, the record date for the determination of stockholders
entitled to notice of and to vote at the Meeting, there were issued and
outstanding and entitled to vote 10,365,013 shares of Common Stock, $.001 par
value per share (the "Common Stock"). Each share entitles the record holder to
one vote on each matter.
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote at the Meeting shall constitute a quorum for the transaction
of business at the Meeting. Shares of Common Stock present in person or
represented by proxy (including shares which abstain or do not vote with
respect to one or more of the matters presented for stockholder approval) will
be counted for purposes of determining whether a quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting on the matter is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of Common Stock
voting on the matter is required to ratify the selection of Price Waterhouse
LLP as the Company's independent auditors for the year ending December 31,
1997. Shares held by stockholders who abstain from voting as to a particular
matter, and shares held in "street name" by brokers or nominees who indicate
on their proxies that they do not have discretionary authority to vote such
shares as to a particular matter, will not be counted as votes in favor of
such matter, and also will not be counted as shares voting on such matter.
Accordingly, abstentions and "broker non-votes" will have no effect on the
voting on a matter that requires the affirmative vote of a certain percentage
of the shares voting on the matter.
THE NOTICE OF MEETING, THIS PROXY STATEMENT AND THE COMPANY'S ANNUAL REPORT
TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1996 ARE BEING MAILED TO
STOCKHOLDERS ON OR ABOUT MAY 23, 1997. A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), EXCLUDING EXHIBITS,
WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST TO
THE COMPANY, ONE OAK PARK DRIVE, BEDFORD, MASSACHUSETTS, 01730, ATTENTION:
THOMAS V. HENNESSEY, JR. EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST AND
PAYMENT OF AN APPROPRIATE PROCESSING FEE.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock by (i) each stockholder known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each current director of the Company, (iii) the Company's Chief
Executive Officer and the executive officers named in the Summary Compensation
Table below and (iv) all directors and executive officers of the Company as a
group. Unless otherwise indicated in the footnotes to the table, (i) all
information set forth in the table is as of March 31, 1997 and (ii) the
address for each director and executive officer of the Company is: c/o
Cambridge Heart, Inc., One Oak Park Drive, Bedford, MA 01730.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED (1) CLASS OUTSTANDING
---------------------- -----------------
<S> <C> <C>
Dr. Richard J. Cohen(2)............... 1,360,509 13.0%
Funds Managed by Invesco Funds(3)..... 1,439,000 13.9
Venture capital partnerships
affiliated
with Morgan Stanley & Co.
Incorporated(4)...................... 1,166,667 11.3
Zachary C. Berk and Marlene Krauss(5). 926,796 8.9
Goldman, Sachs & Co.(6)............... 646,068 6.2
Jeffrey M. Arnold(2).................. 405,498 3.8
Thomas V. Hennessey, Jr.(2)........... 15,000 *
Paul Albrecht......................... 136,750 1.3
J. Alex Martin(2)..................... 15,000 *
Robert T. Miragliuolo(2).............. 10,000 *
Laurence Blumberg(7).................. 424,000 4.1
M. Fazle Husain(8).................... 1,166,667 11.3
F. David Rollo........................ 25,000 *
Rolf S. Stutz......................... 25,000 *
J. Daniel Cole........................ -- --
All Directors and Executive Officers
as a Group (13 persons)(9)........... 4,510,220 41.4
</TABLE>
- --------
*Represents less than 1% of the outstanding Common Stock.
(1) The Company believes that each stockholder has sole voting and investment
power with respect to the shares listed, except as otherwise noted. The
number of shares beneficially owned by each stockholder is determined
under rules of the Commission, and the information is not necessarily
indicative of ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the person has sole
or shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days after March 31, 1997
through the exercise of any stock option or other right. The inclusion
herein of any shares of Common Stock deemed beneficially owned does not
constitute an admission by such stockholder of beneficial ownership of
those shares of Common Stock. Shares of Common Stock which an individual
or entity has a right to acquire within the 60-day period following March
31, 1997 pursuant to the exercise of options or warrants are deemed to be
outstanding for the purposes of computing the percentage ownership of such
individual or entity, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person or entity shown
in the table.
(2) The shares shown in the table to be beneficially owned include any shares
that such stockholder has the right to acquire within 60 days of March 31,
1997 by exercise of any stock option or warrant of which the Company has
knowledge. The shares subject to such options or warrants are as follows:
Dr. Cohen: 111,634 shares; Mr. Arnold: 316,835 shares; Mr. Hennessey:
15,000 shares; Mr. Martin: 15,000 shares; and Mr. Miragliuolo: 10,000
shares.
(3) Includes 686,000 shares of Common Stock held by The Global Health Sciences
Fund, 600,000 shares of Common Stock held by The Invesco Strategic
Portfolios, Inc., 76,000 shares of Common Stock held by the Admax Global
Health Sciences Fund, and 77,000 shares of Common Stock held by the
Invesco Strategic Health Sciences Fund. The business address of Invesco
Funds is 7800 East Union Avenue, Denver, CO 80237.
2
<PAGE>
(4) Includes 773,306 shares of Common Stock held by Morgan Stanley Venture
Capital Fund II, L.P., 200,702 shares of Common Stock held by Morgan
Stanley Venture Investors, L.P. and 192,659 shares of Common Stock held by
Morgan Stanley Venture Capital Fund II, C.V. The business address of
Morgan Stanley is 1221 Avenue of the Americas, New York, NY 10020.
(5) Dr. Berk and Dr. Krauss are married to each other. Includes 35,384 shares
held by KBL Healthcare, Inc. ("KBL"), 54,290 shares issuable upon the
exercise of warrants held by KBL, 483,538 shares of Common Stock held by
Dr. Krauss, 177,300 shares of Common Stock held by Dr. Berk, 60,000 shares
held by the Berk Krauss Foundation, and 116,284 shares of Common Stock
held in trust for the benefit of their children.
(6) Consists of shares beneficially owned by the Goldman Sachs Group, L.P. The
business address of Goldman, Sachs & Co. is 85 Broad Street, New York, NY
10004.
(7) Includes 100,000 shares of Common Stock beneficially owned by Mr.
Blumberg's father.
(8) Includes 1,166,667 shares of Common Stock held by venture capital
partnerships affiliated with Morgan Stanley & Co. Incorporated. See
footnote (4). Mr. Husain is a Vice President of Morgan Stanley & Co.
Incorporated.
(9) Includes a total of 522,759 shares which the executive officers and
directors together have a right to acquire pursuant to outstanding options
or warrants exercisable within 60 days after March 31, 1997.
To the Company's knowledge there are no agreements among any of the
foregoing persons or entities with respect to the voting of shares of Common
Stock of the Company.
DIRECTORS
ELECTION OF DIRECTORS
At the Meeting, two directors, Jeffrey M. Arnold and J. Daniel Cole, are to
be elected to serve for terms that expire at the 2000 Annual Meeting of
Stockholders. Mr. Arnold is presently a director of the Company. Zachary C.
Berk and David F. Rollo, whose respective terms as directors will expire at
the Meeting, are not standing for reelection.
Unless otherwise instructed, the persons named in the accompanying proxy
will vote to elect as directors the two nominees named below. The proxy may
not be voted for more than two directors. If a nominee becomes unable or
unwilling to serve as a director, the person acting under the proxy may vote
the proxy for the election of a substitute. It is not presently contemplated
that either of the nominees will be unable or unwilling to serve as a
director.
Set forth below are the name and age of each nominee for director and the
positions and offices held by him with the Company, his principal occupation
and business experience during the past five years, the names of other
publicly held companies of which he serves as a director and the year of the
commencement of his term as a director of the Company.
JEFFREY M. ARNOLD A Director since 1993
Age: 48
Mr. Arnold has been President and Chief Executive Officer of the Company
since September 1993. From 1990 to 1992, Mr. Arnold was President and Chief
Executive Officer and a director of Molecular Simulations Inc., formerly
Polygen Corporation, a leading supplier of software for rational drug design.
From 1992 until 1993, Mr. Arnold was an independent management consultant
providing interim executive management to high technology companies. He was
formerly Vice President of Operations, Instrumentation Products for Datascope
Corporation and has held positions as director of marketing and director of
research and development positions for the medical systems division of Becton
Dickinson.
3
<PAGE>
J. DANIEL COLE Age: 50
Mr. Cole has been General Partner of the Spray Venture Fund, a venture
capital organization in part funded by Boston Scientific Corporation, since
March 1997. From March 1995 to March 1997 Mr. Cole was Senior Vice President,
and President of the Vascular Group, of Boston Scientific Corporation. From
April 1993 to March 1995 Mr. Cole was President and Chief Operating Officer of
SciMed Life System Corporation. From 1990 to April 1993 Mr. Cole was President
of the Edwards Critical Care Division of Baxter Healthcare Corporation.
CURRENT DIRECTORS
Set forth below (with the exception of Jeffrey M. Arnold, the information
with respect to whom is set forth above) are the name and age of each current
director and the positions and offices held by him or her with the Company,
his or her principal occupation and business experience during the past five
years, the names of other publicly held companies of which he or she serves as
a director and the year of the commencement of his or her term as a director
of the Company.
MARLENE KRAUSS, M.D. A Director since 1990
Age: 52
Dr. Krauss, a founder of the Company, has been Chairperson of the Board of
Directors of the Company since 1990. Since August 1991 Dr. Krauss has served
as Chairperson and Chief Executive Officer of KBL Healthcare, Inc., a merchant
and investment banking firm focused exclusively on the health care industry.
In November 1992, Dr. Krauss co-founded KBL Healthcare Acquisition
Corporation, a publicly traded acquisition company, and served as its
Chairperson and Chief Executive Officer through its acquisition of Concord
Health Group, Inc. ("CHG"), an operator of long-term care facilities, in
August 1994. Dr. Krauss served as Vice Chairperson of the Board of CHG from
August 1994 until the sale of CHG to the Multicare Companies, Inc., in
February 1996. Dr. Krauss was formerly President and Managing Director of the
Med-Tech Group, a division of D.H. Blair & Co. Dr. Krauss is married to Dr.
Berk.
ZACHARY C. BERK, O.D. A Director since 1993
Age: 49
Dr. Berk is a founder of the Company. Since August 1991 Dr. Berk has been
Managing Director of KBL Healthcare, Inc., a merchant and investment banking
firm which he co-founded. In November 1992, Dr. Berk co-founded KBL Healthcare
Acquisition Corporation, a publicly traded acquisition company, and served as
Vice President, Treasurer and director through its acquisition of CHG in
August 1994. Dr. Berk served as a director of CHG from August 1994 until the
sale of CHG to the Multicare Companies, Inc., in February 1996. Dr. Berk is a
former Senior Vice President of the Med-Tech Group, a division of D.H. Blair &
Co. Dr. Berk is married to Dr. Krauss.
LAURENCE J. BLUMBERG, M.D. A Director since 1996
Age: 35
Dr. Blumberg is a founder of the Company. From June 1994 to present, Dr.
Blumberg has also served as Vice President, Equity Research at Alliance
Capital Management, L.P., an investment fund manager. From August 1992 to June
1994, Dr. Blumberg was an independent healthcare consultant. During this time
he consulted for KBL Healthcare, Inc. and S Squared Technology, a money
management firm. From October 1991 to August 1992, he was vice president of
Castle Group Ltd, a medical technology venture capital group. From June 1989
until October 1991, he was with D.H. Blair & Co.
4
<PAGE>
RICHARD J COHEN, M.D., PH.D. A Director since 1993
Age: 46
Dr. Cohen, the scientific founder of the Company, has been a consultant to
the Company since February 1993. Dr. Cohen has been, since 1979, Professor of
Health Sciences and Technology at the Harvard-MIT Division of Health Sciences
and Technology and is on the staff at the Brigham and Women's Hospital and
Children's Hospital, both in Boston. From 1985 to 1995, Dr. Cohen was the
Director of the Harvard-MIT Center for Biomedical Engineering, and he is
currently the Director of the NASA Center for Quantitative Cardiovascular
Physiology, Modeling and Data Analysis located at MIT. He serves on the
editorial board of the Journal of Cardiovascular Electrophysiology and The
Annals of Noninvasive Electrocardiology.
M. FAZLE HUSAIN A Director since 1995
Age: 33
Mr. Husain is a Vice President of Morgan Stanley & Co. Incorporated, an
investment banking firm ("Morgan Stanley") where he has been employed since
1991, and of the Managing General Partner of certain partnerships affiliated
with Morgan Stanley which beneficially own Common Stock of the Company. Mr.
Husain was also employed at Morgan Stanley from 1987 until 1989. Mr. Husain
serves on the Board of Directors of Enterprise Systems, Inc. and several
private healthcare companies.
DAVID F. ROLLO, M.D., PH.D. A Director since 1993
Age: 58
Since June 1996 Dr. Rollo has been the Senior Vice President of Medical
Affairs & Medical Director of Raytel Medical Corporation. From April 1995
until June 1996, Dr. Rollo was Senior Vice President of HClA Healthlnfo Co., a
medical device company. From October 1992 to April 1995, he was President and
Chief Executive Officer of Metricor, lnc., a health care consulting
organization and former subsidiary of Humana, Inc., where he was Senior Vice
President of Medical Affairs from September 1980 to October 1992. Dr. Rollo is
a Director of Positron Corporation, ADAC Laboratories and Raytel Medical Corp.
ROLF S. STUTZ A Director since 1993
Age: 47
Since 1983 Mr. Stutz has been Chief Executive Officer and director of Zoll
Medical, a medical device manufacturer, where he was named Chairman in June
1996. Mr. Stutz is also a Director of Hemasure, Inc.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met 10 times during the year ended December 31, 1996
("Fiscal 1996"), and acted by written consent on one occasion. Each director
attended at least 75% of the aggregate number of Board meetings and the number
of meetings held by all committees on which he or she then served.
The Company has a standing Audit Committee of the Board of Directors, which
reviews the effectiveness of the auditors during the annual audit, reviews the
adequacy of financial statement disclosures, discusses the Company's internal
control policies and procedures and considers and recommends the selection of
the Company's independent accountants. Because shares of the Company were
first sold to the public in the third quarter of Fiscal 1996, no Audit
Committee meetings were held during Fiscal 1996. The members of the Audit
Committee are currently Messrs. Berk and Stutz.
The Company also has a standing Compensation Committee of the Board of
Directors, which is responsible for establishing compensation policies with
respect to the Company's executive officers, including the Chief Executive
Officer and the other Named Executive Officers, and setting the compensation
levels for these individuals. The Compensation Committee also considers and
makes recommendations to the Board of Directors with respect to such matters
as the establishment and implementation of employee incentive plans and
administers the Company's Amended and Restated Incentive and Non-Qualified
Stock Option Plan, the 1996 Equity Incentive Plan, the 1996 Employee Stock
Purchase Plan and the 1996 Director Option Plan. The Compensation Committee
met eight times during Fiscal 1996. The members of the Compensation Committee
are Mr. Husain and Dr. Krauss. See "Report of the Compensation Committee on
Executive Compensation."
5
<PAGE>
The Company has no standing nominating committee of the Board of Directors.
COMPENSATION OF DIRECTORS
The Company's non-employee directors, other than those representing major
stockholders of the Company, receive a fee of $500 per meeting of the Board of
Directors. All non-employee directors receive reasonable travel and out-of-
pocket expenses for attendance at meetings of the Board of Directors. Non-
employee directors are also eligible to receive stock options under the 1996
Director Stock Option Plan (the "Director Plan"). See--"Director Option Plan."
DIRECTOR OPTION PLAN
The Director Plan was adopted by the Board of Directors in May 1996, was
approved by the stockholders in June 1996, and became effective on August 7,
1996. Under the terms of the Director Plan, options (the "Director Options")
to purchase 10,000 shares of Common Stock will be granted to each person who
becomes a non-employee director and who is not otherwise affiliated with the
Company, effective as of the date of initial election to the Board of
Directors. The Director Options will vest in equal annual installments over
three years after the date of grant. Director Options will become immediately
exercisable upon the occurrence of a change in control (as defined in the
Director Plan). A total of 100,000 shares of Common Stock may be issued upon
the exercise of stock options granted under the Director Plan. The exercise
price of options granted under the Director Plan will equal the closing price
of the Common Stock on the Nasdaq National Market on the date of grant.
On August 7, 1996, each of Messrs. Rollo and Stutz were granted options to
purchase 10,000 shares of Common Stock at $8.375 per share.
6
<PAGE>
EXECUTIVE OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth certain
information with respect to the compensation, for the last three fiscal years,
of the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers (the "Named Executive Officers") during
Fiscal 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(2)
COMPENSATION(1) AWARDS
--------------------- ---------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUUS OPTIONS COMPENSATION
--------------------------- ---- -------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Jeffrey M. Arnold........... 1996 $172,000 $60,000 -- --
President and Chief 1995 157,466 30,000 191,500 --
Executive Officer 1994 150,700 29,167 -- --
Thomas V. Hennessey, Jr..... 1996 115,893 10,000 -- --
Vice President of Opera- 1995 13,564 -- 75,000 --
tions,
Treasurer and Chief
Financial Officer(3)
Paul Albrecht, Ph.D......... 1996 122,965 20,000 -- --
Vice President of 1995 107,559 25,000 -- --
Engineering and Secretary 1994 102,292 25,000 -- --
J. Alex Martin.............. 1996 113,224 10,000 -- --
Vice President of Sales and 1995 57,468 5,417 75,000
Business Development(4)
Robert T. Miragliuolo....... 1996 89,336 35,000 50,000 --
Vice President of Clinical
and Regulatory Affairs(5)
</TABLE>
- --------
(1) Perquisites for the Named Executive Officers listed in the table did not
exceed the lesser of $50,000 or 10% of total salary and bonus for the
respective fiscal years and accordingly have been omitted in accordance
with the rules of the Commission.
(2) The Company does not have a long-term compensation plan that includes
long-term incentive payouts. No stock appreciation rights ("SARs") have
been granted to or are held by any of the Named Executive Officers.
(3) Mr. Hennessey was appointed to the position of Vice President of
Operations and Chief Financial Officer in November 1995.
(4) Mr. Martin was appointed to the position of Vice President of Sales and
Business Development in June 1995.
(5) Mr. Miragliuolo was appointed to the position of Vice President of
Regulatory and Clinical Affairs in April 1996.
7
<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during Fiscal 1996 by the Company to the Named
Executive Officers. The Company granted no SARs in Fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE DATE 0% 5% 10%
---- ---------- ------------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey M. Arnold....... -- -- -- -- -- -- --
Thomas V. Hennessey,
Jr..................... -- -- -- -- -- -- --
Paul Albrecht, Ph.D..... -- -- -- -- -- -- --
J. Alex Martin.......... -- -- -- -- -- -- --
Robert T. Miragliuolo... 50,000(3) 22% $1.00 3/25/06 $350,000 $601,558 $987,497
</TABLE>
- --------
(1) The securities underlying the options are shares of Common Stock.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 0%, 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. This table does not take into account actual
appreciation in the price of the Common Stock to date. Actual gains, if
any, on stock option exercises will depend on the future performance of
the Common Stock and the date on which the options are exercised. The
gains shown are net of the option exercise price, but do not reflect taxes
or other expenses associated with the exercise.
(3) The fair market value of the Common Stock underlying the options at the
time of grant was $8.00 per share. The options vest 20% per year.
Year End Option Table. The following table sets forth certain information
regarding stock options exercised during Fiscal 1996 and held as of December
31, 1996 by the Named Executive Officers. The Company granted no SARs during
Fiscal 1996.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT FISCAL
SHARES AT FISCAL YEAR-END YEAR-END(2)
ACQUIRED VALUE ------------------------------- -------------------------------
NAME ON EXERCISE REALIZED($)(1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
---- ----------- -------------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey M. Arnold....... -- -- 316,835 399,666 3,495,321 4,206,256
Thomas V. Hennessey,
Jr..................... -- -- 15,000 60,000 153,750 615,000
Paul Albrecht, Ph.D..... 90,000 $792,495 -- 90,000 -- 1,003,410
J. Alex Martin.......... -- -- 15,000 60,000 153,750 615,000
Robert T. Miragliuolo... -- -- -- 50,000 -- 512,500
</TABLE>
- --------
(1) Value based on last reported sale price of the Common Stock on the date of
exercise.
(2) Value based on last reported sale price of the Common Stock at the fiscal
year end ($11.25 per share) less the exercise price.
EMPLOYMENT AND CONSULTING AGREEMENTS AND OTHER ARRANGEMENTS
The Company is a party to an employment agreement with Mr. Arnold for the
period commencing September 1, 1993 and ending September 1, 1998. The
employment agreement provides that Mr. Arnold is entitled to receive a base
salary of $150,000 and is eligible to receive an annual bonus based upon the
achievement of mutually agreed-upon objectives determined annually by the
Company's Board of Directors. The Company also granted Mr. Arnold an option to
purchase 616,162 shares of Common Stock, of which 123,232 have an exercise
price of $.02 per share, 401,767 have an exercise price of $.20 per share and
91,163 have an exercise price of $2.00 per share. If his employment is
terminated by the Company without cause, Mr. Arnold will be entitled to
receive severance compensation in an amount equal to nine months' base salary.
In the event of a Change in Control of the Company (as defined in the
employment agreement), all options which are currently outstanding will become
immediately exercisable. Furthermore, Mr. Arnold is entitled to terminate his
employment agreement within 90 days of a Change in Control of the Company and
to receive severance compensation equal to nine months' base salary. The
agreement also contains a non-competition covenant pursuant to which Mr.
Arnold is prohibited from competing with the Company during his employment
with the Company and for a period of one year thereafter. Throughout the term
of this employment agreement, the Board agrees to nominate Mr. Arnold, and the
Company agrees to use its best efforts to cause Mr. Arnold to be elected, to
the Board of Directors of the Company.
The Company is a party to an employment agreement with Dr. Albrecht which
provides for a five-year term ending on June 15, 1998. The agreement provides
for an annual base salary of $100,000, as well as an annual bonus based upon
the achievement of mutually agreed-upon objectives determined annually by the
Company's Board of Directors. The Company also granted Dr. Albrecht an option
to purchase 225,000 shares of Common Stock, of which 112,500 have an exercise
price of $.002 per share and 112,500 have an exercise price of $.20 per share.
If his employment is terminated by the Company without cause, Dr. Albrecht
will be entitled to receive severance compensation in an amount equal to six
months' base salary. The agreement also contains a non-competition covenant
pursuant to which Dr. Albrecht is prohibited from competing with the Company
during his employment by the Company and for a period of 18 months thereafter.
The Company is a party to a consulting and technology agreement with Dr.
Cohen pursuant to which Dr. Cohen spends one day a week at the Company working
on the development and commercialization of certain technology licensed to the
Company by the Massachusetts Institute of Technology. This agreement, which
commenced in February 1993 and expires in February 1998, requires the Company
to pay monthly consulting fees of up to $12,500. Total payments made during
1996, 1995, 1994 and 1993 were approximately $106,000, $100,000, $142,000 and
$116,000, respectively. In connection with this agreement, a warrant to
purchase 109,634 shares of Common Stock for $2.00 per share was issued to Dr.
Cohen. During the term of the consulting
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agreement, and for a period of up to two additional years following the
termination or expiration of this agreement, Dr. Cohen is obligated not to
compete with the Company so long as the Company makes continuing payments to
Dr. Cohen during such two year period.
The Company is also a party to a license agreement with Dr. Cohen, which
commenced in February 1993 and pursuant to which Dr. Cohen granted to the
Company an exclusive license to certain cardiac output monitoring technology
developed by Dr. Cohen. This license agreement provides that the Company must
achieve certain milestones, which include raising equity capital, spending a
minimum of $200,000 in each two-year period during the term of the agreement
and conducting clinical trials. If such milestones are not achieved, Dr. Cohen
has the right to terminate the agreement. The license agreement also sets
forth certain provisions relating to potential infringement of the patent
rights that allow, but do not require, either party to take action against
such infringement. The Company is required to pay Dr. Cohen a royalty based on
3% of net sales of products developed from such technology. If the Company
chooses to sublicense this technology to an unrelated party, the royalty will
be based on 20% of the gross revenue received from the unrelated party for
products developed from such technology.
COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors consists of
Mr. Husain and Dr. Krauss.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company has served as a director or member of
the compensation committee (or other committee serving an equivalent function)
of any other entity, one of whose executive officers served as a director of
or member of the Compensation Committee of the Company.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors is
responsible for establishing compensation policies with respect to the
Company's executive officers, including the Chief Executive Officer and the
Named Executive Officers, and setting the compensation for these individuals.
The Compensation Committee seeks to achieve three broad goals in connection
with the Company's executive compensation programs and decisions regarding
individual compensation. First, the Compensation Committee structures
executive compensation programs in a manner that the Committee believes will
enable the Company to attract and retain key executives. In order to ensure
continuity of certain key members of management, the Compensation Committee
has approved in the past multi-year employment contracts. Second, the
Compensation Committee establishes compensation programs that are designed to
reward executives for the achievement of specified business objectives of the
Company and/or the individual executive's particular business unit. By tying
compensation in part to particular goals, the Compensation Committee believes
that a performance-oriented environment is created for the Company's
executives. Finally, the Company's executive compensation programs are
intended to provide executives with an equity interest in the Company so as to
link a portion of the compensation of the Company's executives with the
performance of the Common Stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended in 1993,
generally disallows a tax deduction to public companies for compensation over
$1,000,000 paid to its chief executive officer or any of its four other most
highly compensated executive officers. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements,
such as stockholder approval of a compensation plan, are met. Although the
Compensation Committee has considered the limitations on the deductibility of
executive compensation imposed by Section 162(m) in designing the Company's
executive compensation programs, the Committee believes that it is unlikely
that such limitations will affect the deductibility of the compensation to be
paid to the Company's executive officers in the near term. Based in part on
this judgment, the Compensation Committee has determined not to recommend to
the Company's Board of Directors that the bonus arrangements
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for the Company's executive officers be submitted to the Company's
stockholders for their approval. The Compensation Committee believes that
option grants and stock awards made at fair market value under the Company's
1996 Equity Incentive Plan are exempt from the limitations of Section 162(m).
The compensation programs for the Company's executives established by the
Compensation Committee consist of three elements based upon the objectives
described above: base salary; annual cash bonus; and a stock-based equity
incentive in the form of participation in the Company's 1996 Equity Incentive
Plan and/or Stock Purchase Plan. In establishing base salaries for executives,
the Compensation Committee monitors salaries at other companies, considers
historic salary levels of the individual and the nature of the individual's
responsibilities and compares the individual's base salary with those of other
executives at the Company. To the extent determined to be appropriate, the
Compensation Committee also considers general economic conditions, the
Company's financial performance and the individual's performance in
establishing base salaries of executives.
During Fiscal 1996, two of the executive officers, including the Chief
Executive Officer, were parties to multi-year employment agreements with the
Company that provide for bonuses upon satisfaction of certain criteria.
Pursuant to such agreements, for Fiscal 1996 Mr. Arnold was awarded a bonus of
$60,000 and Mr. Albrecht was awarded a bonus of $20,000. The Compensation
Committee believes that the base salary levels provided for in these contracts
and the bonus criteria established appropriate salary levels for the covered
individuals in light of the factors described above. Moreover, each of these
employment agreements includes provisions prohibiting the executive from
engaging in a business competitive with the Company during the term of the
agreement; in the case of Mr. Arnold the prohibition of competition is for one
year after the termination of his employment, and in the case of Mr. Albrecht
the prohibition of competition is for 18 months after the termination of his
employment. The employment agreement with Mr. Arnold expires on September 1,
1998 and the employment agreement with Mr. Albrecht expires on June 15, 1998.
The Compensation Committee generally structures cash bonuses not associated
with the above employment agreements by linking them to the achievement of
specified Company and/or business unit performance objectives. Pursuant to
such bonus policy, for Fiscal 1996 each of Messrs. Hennessey, Martin and
Miragliuolo were awarded a bonus of $10,000. The Compensation Committee from
time to time awards signing bonuses to attract qualified personnel. Pursuant
to such bonus policy, the Company awarded a $25,000 signing bonus to Mr.
Miragliuolo in Fiscal 1996.
Stock option grants in Fiscal 1996 were designed to link the overall
compensation of any executive officers receiving such awards with his
performance, in light of all other current and past compensation received by
such executive officer. Such grants, as a result of the applicable vesting
arrangements, also serve as a means for the Company to retain the services of
these individuals. Mr Miragliuolo, the only Named Executive Officer to receive
stock options in Fiscal 1996, received an option to purchase 50,000 shares of
Common Stock in Fiscal 1996. The option grant to Mr. Miragliuolo was based on
the above criteria.
M. Fazle Husain
Marlene Krauss
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STOCK PERFORMANCE CHART
The following chart compares the percentage change in the cumulative total
stockholder return on the Common Stock during the period beginning August 2,
1996 (the date of the Company's initial public offering) and ending December
31, 1996 with the total return on the NASDAQ Composite Index and the Dow Jones
Advanced Medical Devices index consisting of Acuson Corporation, Alza
Corporation, Beckman Instruments, Inc., Biomet, Inc., Dentsply International,
Inc., Guidant Corporation and Medtronic, Inc. The comparison assumes $100 was
invested on August 2, 1996 in the Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends.
[GRAPH APPEARS HERE]
8/2/96 12/31/96
-------- ----------
Cambridge Heart, Inc. $100 $125
Dow Jones Advanced Medicial Devices $100 $121
NASDAQ Composite Index $100 $114
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the stockholders, the Board of Directors, on the
recommendation of its Audit Committee, has appointed the firm of Price
Waterhouse LLP as the Company's independent auditors for the year ending
December 31, 1997. Price Waterhouse LLP has been the Company's independent
auditors since the Company's inception. Although stockholder approval of the
Board of Directors' selection of Price Waterhouse LLP is not required by law,
the Board of Directors believes that it is advisable to give stockholders an
opportunity to ratify this appointment. If this proposal is not approved at
the Meeting, the Board of Directors will reconsider this appointment.
Representatives of Price Waterhouse LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they desire to
do so and will also be available to respond to appropriate questions from
stockholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of
the Common Stock to file with the Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. The Company believes that during Fiscal 1996, the Company's
officers, directors and holders of more than 10% of the Common Stock complied
with all Section 16(a) filing requirements.
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OTHER MATTERS
Management does not know of any other matters which may come before the
Meeting. However, if any other matters are properly presented to the Meeting,
it is the intention of the persons named in the accompanying proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telecopy, personal interviews, and other means. Brokers, custodians
and fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them for
their out-of-pocket expenses in connection therewith.
Stockholder proposals to be included in the Company's proxy statement for the
1998 Annual Meeting of Stockholders must be received by the Company, for
consideration, on or before January 23, 1998.
By Order of the Board of Directors,
Paul Albrecht, Ph.D, Secretary
May 23, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED.
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PROXY CAMBRIDGE HEART, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS - JUNE 23, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY.
The undersigned, having received notice of the meeting and the proxy
statement therefor, and revoking all prior proxies, hereby appoint(s) Jeffrey M.
Arnold and Thomas V. Hennessey, Jr., and each of them, attorneys or attorney of
the undersigned (with full power of substitution in them and each of them) for
and in the name(s) of the undersigned to attend the Annual Meeting of
Stockholders of Cambridge Heart, Inc. (the "Company") to be held at the offices
of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, at 10:00 a.m.
(local time), on Monday, June 23, 1997 and any adjourned sessions thereof, and
there to vote and act upon the following matters in respect of shares of Common
Stock of the Company which the undersigned would be entitled to vote or act
upon, with all powers the undersigned would possess if personally present. Each
of the following matters is being proposed by the Company.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT THEREOF.
(To Be Signed on Reverse Side)
<PAGE>
____ Please mark your
/_X_/ votes as in this
example.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, print
that nominee's name in the line provided below.)
____ ____
1. Election of directors /___/ FOR /___/ WITHHELD
FOR (all nominees except as marked below)
_________________________________________
Nominees: Jeffrey M. Arnold and J. Daniel Cole.
2. Ratification of the selection of Price Waterhouse LLP as the Company's
independent accountants.
____ ____ ____
/___/ FOR /___/ AGAINST /___/ ABSTAIN
The shares represented by this proxy will be voted as directed by the
undersigned. If no direction is given with respect to any election to office or
proposal specified above, this proxy will be voted for such election to office
or proposal.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company in
a fiduciary, custodial or joint capacity or capacities, this proxy is signed by
the undersigned in every such capacity as well as individually.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S) DATE
--------------------------------------------- -----------------
Note: Please sign name(s) exactly as appearing hereon. When signing as
attorney, executor, administrator, or other fiduciary, please give your
full title as such. Joint owners should each sign personally.
