<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 (S)240.14a-11(c) or (S)240.14a-12
Cambridge Heart, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Cambridge Heart, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
CAMBRIDGE HEART, INC.
ONE OAK PARK DRIVE
BEDFORD, MASSACHUSETTS 01730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1998
NOTICE IS HEREBY GIVEN that the 1998 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 May 21, 1998, 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 2001
Annual Meeting of the stockholders.
2. To ratify the appointment by the Board of Directors of Price
Waterhouse LLP as the Company's independent accountants for the year ending
December 31, 1998.
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
adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 8, 1998 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, 1997,
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,
Eric Dufford, Secretary
Bedford, Massachusetts
April 15, 1998
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
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1998
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 1998 Annual Meeting of Stockholders
(the "Meeting") to be held on May 21, 1998, at 10:00 a.m., local time, at Hale
and Dorr LLP, 26th floor, 60 State Street, Boston, Massachusetts 02109, and at
any adjournment or postponement 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 a 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 8, 1998, 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 10,631,496 shares of Common Stock, $.001 par
value per share (the "Common Stock"). Each share entitles the record holder to
one vote on each matter.
VOTING SECURITIES AND VOTES REQUIRED
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 accountants for the fiscal year ending
December 31, 1998. 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, 1997 ARE BEING MAILED TO
STOCKHOLDERS ON OR ABOUT APRIL 15, 1998. A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K, AS AMENDED, FOR THE YEAR ENDED DECEMBER 31, 1997, 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:
ROBERT B. PALARDY. 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 to the
Company to be the beneficial owner of 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 January 31, 1998
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>
Goldman, Sachs & Co. ................. 1,733,600(2) 16.3%
Dr. Richard J. Cohen, M.D., Ph.D. .... 1,360,509(3) 12.7
Funds Managed by Invesco Funds........ 953,775(4) 9.0
Zachary C. Berk, O.D. and Marlene
Krauss, M.D. ........................ 679,295(5) 6.4
Jeffrey M. Arnold..................... 557,032(6) 5.0
Laurence Blumberg, M.D. .............. 424,000(7) 4.0
Rolf S. Stutz......................... 28,333(8) *
J. Daniel Cole........................ 3,333(9) *
Eric Dufford.......................... -- --
Robert B. Palardy..................... -- --
Harris A. Berman...................... -- --
Paul Albrecht, Ph.D. ................. 117,500 1.1
Kenneth Collins....................... -- --
All Directors and Executive Officers
as a Group (8 persons)............... 2,373,207(10) 21.2
</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 January 31, 1998
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
January 31, 1998 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) Consists of shares held by the Goldman Sachs Group, L.P. The business
address of Goldman, Sachs & Co. is 85 Broad Street, New York, NY 10004.
(3) Includes 109,634 shares of Common Stock of the Company issuable to Dr.
Cohen within 60 days of January 31, 1998 upon exercise of warrants. Also
includes 4,000 shares of Common Stock of the Company issuable to Dr.
Cohen within 60 days of January 31, 1998 upon exercise of stock options.
(4) Includes 495,963 shares of Common Stock held by Pirate Ship & Co. and
457,812 shares of Common Stock held by Sea Lion & Co. The business
address of Invesco Funds Group is 7800 East Union Avenue, Denver, CO
80237.
(5) Dr. Berk and Dr. Krauss are married to each other. Includes 30,384 shares
held by KBL Healthcare, Inc. ("KBL"), 54,290 shares issuable within 60
days of January 31, 1998 upon the exercise of warrants held by KBL,
283,537 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 73,784 shares of Common Stock held in
2
<PAGE>
trust for the benefit of their children. The business address for both Dr.
Berk and Dr. Krauss is KBL Healthcare, Inc., 645 Madison Avenue, New York,
NY 10022.
(6) Includes 458,369 shares of Common Stock of the Company issuable to Mr.
Arnold within 60 days of January 31, 1998 upon exercise of stock options.
(7) Includes 100,000 shares of Common Stock beneficially owned by Dr.
Blumberg's father.
(8) Includes 3,333 shares of Common Stock of the Company issuable to Mr. Stutz
within 60 days of January 31, 1998 upon exercise of stock options.
(9) Includes 3,333 shares of Common Stock of the Company issuable to Mr. Cole
within 60 days of January 31, 1998 upon exercise of stock options.
(10) Includes a total of 578,669 shares which the executive officers and
directors together have a right to acquire pursuant to outstanding options
or warrants exercisable within 60 days after January 31, 1998.
To the knowledge of the Company, 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
The Company has a classified Board of Directors currently consisting of two
Class I directors (Jeffrey M. Arnold and J. Daniel Cole), two Class II
directors (Richard J. Cohen and Harris A. Berman) and two Class III directors
(Laurence J. Blumberg and Rolf S. Stutz). One class of directors is elected
each year to serve for a three-year term. The Class II, Class III and Class I
directors were elected to serve until the annual meeting of stockholders to be
held in 1998, 1999 and 2000, respectively, and until their respective
successors are elected and qualified.
The persons named in the enclosed proxy will vote to elect, as Class II
directors, Richard J. Cohen and Harris A. Berman, unless the proxy is marked
otherwise. The proxy may not be voted for more than two directors. Dr. Cohen
and Dr. Berman are presently directors of the Company. Each Class II director
will be elected to hold office until the year 2001 annual meeting of
stockholders and until his successor is elected and qualified. Each of the
nominees has indicated his willingness to serve, if elected; however 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.
RICHARD J. COHEN, M.D., PH.D. A Director since 1993
Age: 47
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.
3
<PAGE>
HARRIS A. BERMAN, M.D. A Director since 1998
Age: 58
Dr. Berman was elected to the Board of Directors on April 10, 1998 to fill
the seat left vacant by M. Fazle Husain. Dr. Berman has been Chairman of the
Board of Directors and Chief Executive Officer of Tufts Health Plan, a managed
healthcare organization, since 1986. Dr. Berman has also served as Chairman of
ManagedComp, Inc. since 1995 and was a Director of HPR, Inc. from 1994 to
1997. Dr. Berman is Chairman of the Executive Committee of Massachusetts
Association of HMO's, Co-Chair of Tufts Managed Care Institute, and a Director
of American Association of Health Plans, formerly Group Health Association of
America. Dr. Berman is also a Clinical Professor of Medicine at Tufts
University School of Medicine and is a Clinical Professor of Community Health
at Tufts University School of Medicine.
CURRENT DIRECTORS
Set forth below (with the exception of Richard J. Cohen and Harris A.
Berman, 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
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: 49
Mr. Arnold has been President and Chief Executive Officer of the Company
since September 1993. Mr. Arnold was appointed Chairman of the Board of
Directors in August 1997. From 1990 to January 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 January 1992 until September 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.
J. DANIEL COLE A Director since 1997
Age: 51
Mr. Cole has been General Partner of the Spray Venture Fund, a venture
capital organization funded in part by Boston Scientific Corporation, since
March 1997. From March 1995 to March 1997, Mr. Cole was Senior Vice President
of Boston Scientific Corporation. From 1993 to March 1995, Mr. Cole was
President and Chief Operating Officer of SciMed Life Systems Corporation. From
1990 to April 1993, Mr. Cole was President of the Edwards Critical Care
Division of Baxter Healthcare Corporation. Mr. Cole is a director of Thoratec
Laboratories Corp.
LAURENCE J. BLUMBERG, M.D. A Director since 1996
Age: 36
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.
4
<PAGE>
ROLF S. STUTZ A Director since 1993
Age: 48
Since 1983 Mr. Stutz has been Chief Executive Officer and director of Zoll
Medical Corporation, 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 six times during the year ended December 31, 1997
("Fiscal 1997"), 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 Board of Directors has a standing Audit Committee, 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. The Audit Committee met once during Fiscal
1997. The members of the Audit Committee are currently Messrs. Cole and Stutz.
The Board of Directors also has a standing Compensation Committee, 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 six times
during Fiscal 1997. The members of the Compensation Committee are Messrs.
Stutz and Cole and Dr. Cohen. See "Report of the Compensation Committee on
Executive Compensation."
The Board of Directors has no standing nominating committee.
COMPENSATION OF DIRECTORS
The Company's non-employee directors, other than those representing major
stockholders of the Company, receive a fee of $1,500 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."
On October 10, 1997, Messrs. Stutz, Cole and Dr. Blumberg were each granted
options under the 1996 Equity Incentive Plan to purchase 15,000 shares of
Common Stock at $7.875 per share, the fair market value per share on the date
of grant. On April 10, 1998, Dr. Berman was granted options under the 1996
Equity Incentive Plan to purchase 15,000 shares of Common Stock at the fair
market value per share on the date of grant. These options will vest in equal
annual installments over two years after the date of grant.
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
5
<PAGE>
Director Plan will equal the closing price of the Common Stock on the Nasdaq
National Market on the date of grant. On February 3, 1997, Mr. Cole was
granted options under the Director Plan to purchase 10,000 shares of Common
Stock at $13.125 per share, the fair market value per share on the date of
grant. On April 10, 1998, Dr. Berman was granted options under the Director
Plan to purchase 10,000 shares of Common Stock at the fair market value per
share on the date of grant.
EXECUTIVE OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation
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, each of the three other most highly compensated executive
officers who were serving as executive officers on December 31, 1997 and the
most highly compensated executive officer during Fiscal 1997 who was not
serving as an executive officer on December 31, 1997 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS(2)
--------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jeffrey M. Arnold.............. 1997 $191,458 $30,000 -- --
President and Chief 1996 172,525 60,000 -- --
Executive Officer 1995 157,466 30,000 191,500 --
Robert B. Palardy.............. 1997 18,250 4,167 75,000 --
Vice President, Finance and
Administration and
Chief Financial Officer(3)
Eric Dufford................... 1997 59,712 10,000 75,000 --
Vice President, Marketing and
Sales and Secretary(4)
Kenneth Collins................ 1997 76,154 20,000 90,000 --
Vice President, Regulatory,
Clinical and Quality
Affairs(5)
Paul Albrecht, Ph.D............ 1997 98,691 -- 35,000 --
Vice President of Engineering
and 1996 122,965 20,000 -- --
Secretary(6) 1995 107,559 25,000 -- --
</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. Palardy joined the Company as Vice President, Finance and
Administration and Chief Financial Officer in November 1997. Mr. Palardy's
1998 annual salary is $130,000.
(4) Mr. Dufford joined the Company in August 1997 as Vice President, Marketing
and Sales and Secretary. Mr. Dufford's 1998 annual salary is $150,000.
(5) Mr. Collins joined the Company in July 1997 as Vice President, Regulatory,
Clinical & Quality Affairs. Mr. Collins resigned from the Company in
February 1998.
(6) In July, 1997, Dr. Albrecht became Chief Scientist for the Company and
resigned as Vice President of Engineering and Secretary.
6
<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during Fiscal 1997 by the Company to the Named
Executive Officers. The Company granted no SARs in Fiscal 1997.
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(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE(2) DATE 5% 10%
- ---- ---------- ------------- ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey M. Arnold....... -- -- -- -- -- --
Robert B. Palardy....... 75,000 19% $8.875 11/11/07 $ 418,875 $ 1,060,875
Eric Dufford............ 75,000 19% $7.625 8/8/07 $ 359,625 $ 911,625
Kenneth Collins......... 90,000 23% $ 7.50 7/7/07 $ 424,800 $ 1,075,776
Paul Albrecht, Ph.D. ... 35,000 9% $ 7.75 5/20/07 $ 170,450 $ 432,355
</TABLE>
- --------
(1) The securities underlying the options are shares of Common Stock.
(2) All options were granted at the fair market value of the Company's Common
Stock on the date of grant. The options vest at a rate of 20% per year.
(3) 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 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.
Year End Option Table. The following table sets forth certain information
regarding stock options exercised during Fiscal 1997 or held as of December
31, 1997 by the Named Executive Officers. The Company granted no SARs during
Fiscal 1997.
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
SHARES AT FISCAL YEAR-END FISCAL YEAR-END($)(2)
ACQUIRED VALUE ------------------------------- -------------------------------
NAME ON EXERCISE REALIZED($)(1) EXERCISABLE(#)/UNEXERCISABLE(#) EXERCISABLE($)/UNEXERCISABLE($)
- ---- ------------ -------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Jeffrey M. Arnold....... 20,000 $136,000 458,367/238,133 $4,073,718/1,926,769
Robert B. Palardy....... -- -- -- / 75,000 $ -- / 18,750
Eric Dufford............ -- -- -- / 75,000 $ -- / 112,500
Kenneth Collins......... -- -- -- / 90,000 $ -- / 146,250
Paul Albrecht, Ph.D..... 50,000 $403,490 17,500/ 57,500 $ 159,653/ 253,393
</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 ($9.125 per share) less the exercise price.
7
<PAGE>
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 has been extended to June 1998, requires the
Company to pay monthly consulting fees of up to $12,500. Total payments made
during 1997, 1996, 1995, 1994 and 1993 were approximately $113,000, $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 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. Because the Company has chosen not to
invest in this technology as required by the license agreement, the license
agreement may be cancelled at the sole option of the licensor at any time.
Royalties earned under this license agreement have not been material to date.
8
<PAGE>
COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors consists of
J. Daniel Cole, Rolf S. Stutz and Richard J. Cohen, M.D., Ph.D.
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 member of the
Compensation Committee or director 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 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 1997, Jeffrey M. Arnold and Paul Albrecht were parties to
multi-year employment agreements with the Company that provide for bonuses
upon satisfaction of certain criteria. Pursuant to such agreements, for
9
<PAGE>
Fiscal 1997 Mr. Arnold was awarded a bonus of $30,000. Mr. Albrecht did not
receive a bonus award for Fiscal 1997. 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. From November
1997 to February 1998, Mr. Albrecht was on a sabbatical leave from the
Company. Mr. Albrecht returned to work at the Company in February 1998 on a
reduced schedule.
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 1997 each of Messrs. Palardy, Dufford and
Collins were awarded a bonus of $4,167, $10,000 and $20,000, respectively.
Stock option grants in Fiscal 1997 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. In fiscal 1997, Messrs. Palardy, Dufford, Collins and
Albrecht each received options to purchase 75,000, 75,000, 90,000 and 35,000
shares of Common Stock, respectively. These option grants to the above Named
Executive Officers were based on the above described criteria. The exercise
price of these options was equal to the fair market value of the Company's
Common Stock on the date of grant. Mr. Arnold was not granted any options in
Fiscal 1997.
Compensation Committee
Richard J. Cohen
J. Daniel Cole
Rolf S. Stutz
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock ("Reporting Persons")
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. Based solely on its review of copies of reports filed by the
Reporting Persons furnished to the Company, or written representations from
Reporting Persons, the Company believes that, except as follows, during Fiscal
1997 the Reporting Persons complied with all Section 16(a) filing
requirements. Jeffrey M. Arnold filed a Statement of Changes in Beneficial
Ownership on Form 4 (a "Form 4") for November 1997 on March 2, 1998. Paul
Albrecht filed a Form 4 for June 1997 on September 8, 1997. J. Daniel Cole
filed an Initial Statement of Beneficial Ownership on Form 3 due on
February 13, 1997 on July 19, 1997. Rolf S. Stutz, J. Daniel Cole and Laurence
J. Blumberg each filed an Annual Statement of Changes in Beneficial Ownership
on Form 5 due on February 17, 1998 on April 7, 1998.
10
<PAGE>
STOCK PERFORMANCE CHART
The following chart compares the change in the cumulative total stockholder
return on the Common Stock during the period beginning August 2, 1996 (the
date of the consummation of the Company's initial public offering) and ending
December 31, 1997 with the total return on the Nasdaq Market Composite Index
and the Dow Jones Advanced Technology Medical Devices index. 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.
[PERFORMANCE GRAPH APPEARS HERE]
Dow Jones
Advanced Nasdaq
Technology Market
Cambridge Medical Composite
Measurement period Heart, Inc. Devices Index
- ------------------ ----------- ---------- ---------
Measurement PT -
08/02/96 $100.00 $100.00 $100.00
12/31/96 $126.76 $111.61 $113.24
03/31/97 $128.17 $104.60 $107.10
06/30/97 $ 80.28 $125.57 $126.73
09/30/97 $ 91.55 $145.82 $148.17
12/31/97 $102.82 $142.67 $138.96
(Cumulative total return numbers provided by Media General Financial Services)
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, on the recommendation of its Audit Committee, has
appointed the firm of Price Waterhouse LLP as the Company's independent
accountants for the year ending December 31, 1998, subject to ratification by
the stockholders at the Meeting. Price Waterhouse LLP has been the Company's
independent accountants since the Company's inception in 1990. 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.
11
<PAGE>
OTHER MATTERS
The Board of Directors 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.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at
its offices, One Oak Park Drive, Bedford, Massachusetts 01730, no later than
December 16, 1998 in order to be considered for inclusion in the Proxy
Statement relating to that meeting.
By Order of the Board of Directors,
Eric Dufford, Secretary
April 15, 1998
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.
12
<PAGE>
PROXY CAMBRIDGE HEART INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS -- MAY 21, 1998
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
therefor, and revoking all prior proxies, hereby appoint(s) Jeffrey M. Arnold
and Robert B. Palardy, 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
Thursday, May 21, 1998 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: Richard J. Cohen and Harris A. Berman.
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 this 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.
