<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)
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ____
(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 JUNE 15, 1999
NOTICE IS HEREBY GIVEN that the 1999 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 15, 1999, 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 2002
Annual Meeting of the stockholders.
2. To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
year ending December 31, 1999.
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 20, 1999 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, 1998,
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
May 10, 1999
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
1999 Annual Meeting of Stockholders
To Be Held On June 15, 1999
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 1999 Annual Meeting of Stockholders
(the "Meeting") to be held on June 15, 1999, 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 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 20, 1999, 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 10,913,150 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
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending December 31, 1999. 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, 1998 ARE BEING MAILED TO
STOCKHOLDERS ON OR ABOUT MAY 10, 1999. A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, 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 February 28, 1999
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. ................. 1,859,400(2) 17.1%
Dr. Richard J. Cohen, M.D., Ph.D. .... 1,315,385(3) 12.1%
Jeffrey M. Arnold..................... 971,328(4) 8.3%
Laurence Blumberg, M.D. .............. 324,000(5) 3.0%
Harris A. Berman...................... 20,833(6) *
J. Daniel Cole........................ 14,167(7) *
Rolf S. Stutz......................... 6,670(8) *
Robert B. Palardy..................... 2,000 *
Eric Dufford.......................... 1,502 *
All directors and executive officers
as a group (9 persons)............... 2,655,885(9) 22.6%
</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 February 28,
1999 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 February 28, 1999 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. as reported in a
Schedule 13G filed with the Securities and Exchange Commission on January
11, 1999. The business address of Goldman, Sachs & Co. is 85 Broad
Street, New York, NY 10004.
(3) Includes 6,000 shares of Common Stock of the Company issuable to Dr.
Cohen within 60 days of February 28, 1999 upon exercise of stock options.
(4) Includes 812,665 shares of Common Stock of the Company issuable to Mr.
Arnold within 60 days of February 28, 1999 upon exercise of stock
options.
(5) Includes 7,500 shares of Common Stock of the Company issuable to Dr.
Blumberg within 60 days of February 28, 1999 upon exercise of stock
options.
(6) Includes 10,833 shares issuable to Dr. Berman within 60 days of February
28, 1999 upon exercise of stock options.
(7) Includes 14,167 shares of Common Stock of the Company issuable to Mr.
Cole within 60 days of February 28, 1999 upon exercise of stock options.
(8) Includes 6,670 shares of Common Stock of the Company issuable to Mr.
Stutz within 60 days of February 28, 1999 upon exercise of stock options.
2
<PAGE>
(9) Includes a total of 857,835 shares which the executive officers and
directors together have a right to acquire pursuant to outstanding
options or warrants exercisable within 60 days after February 28, 1999.
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 III, Class I and Class II
directors were elected to serve until the annual meeting of stockholders to be
held in 1999, 2000 and 2001, respectively, and until their respective
successors are elected and qualified.
The persons named in the enclosed proxy will vote to elect, as Class III
directors, Laurence J. Blumberg and Rolf S. Stutz, unless the proxy is marked
otherwise. The proxy may not be voted for more than two directors. Dr.
Blumberg and Mr. Stutz are presently directors of the Company. Each Class III
director will be elected to hold office until the year 2002 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.
<TABLE>
<S> <C>
LAURENCE J. BLUMBERG, M.D. A Director since 1996
Age: 37
</TABLE>
Dr. Blumberg is a founder of the Company. In February 1999, Dr. Blumberg
founded Blumberg Capital Management LLC, an investment fund management firm,
of which he is General Partner. From June 1994 to January 1999, Dr. Blumberg
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.
<TABLE>
<S> <C>
ROLF S. STUTZ A Director since 1993
Age: 49
</TABLE>
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.
3
<PAGE>
Current Directors
Set forth below (with the exception of Laurence J. Blumberg and Rolf S.
Stutz, 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.
<TABLE>
<S> <C>
JEFFREY M. ARNOLD A Director since 1993
Age: 49
</TABLE>
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 and Co.
<TABLE>
<S> <C>
HARRIS A. BERMAN, M.D. A Director since 1998
Age: 60
</TABLE>
Dr. Berman has been Chairman of the Board of Directors and Chief Executive
Officer of Tufts Health Plan, a 900,000 member managed care 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.
<TABLE>
<S> <C>
RICHARD J COHEN, M.D., PH.D. A Director since 1993
Age: 48
</TABLE>
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
Annal of Noninvasive Electrocardiology.
<TABLE>
<S> <C>
J. DANIEL COLE A Director since 1997
Age: 52
</TABLE>
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.
4
<PAGE>
Board and Committee Meetings
The Board of Directors met five times during the year ended December 31,
1998 ("Fiscal 1998"), 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
1998. The members of the Audit Committee are currently Messrs. Cole and Stutz.
The Board of Directors also has a standing Compensation Committee, that 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 five times
during Fiscal 1998. The members of the Compensation Committee are Mr. Stutz,
Mr. Cole, Dr. Berman 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."
In April 1998, Dr. Berman was granted options under the Director Plan to
purchase 10,000 shares of Common Stock at $9.25 per share, the fair market
value per share on the date of grant. These options will vest in equal annual
installments over three years after the date of grant. At the same time,
Dr. Berman was granted options under the 1996 Equity Incentive Plan to
purchase 15,000 shares of Common Stock at $9.25 per share, the fair market
value 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 Director Plan will equal the closing price
of the Common Stock on the Nasdaq National Market on the date of grant.
5
<PAGE>
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 and each of the two other most highly compensated executive
officers who were serving as executive officers on December 31, 1998 (the
"Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation(1) Compensation Awards(2)
--------------------- ------------------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
- --------------------------- ---- -------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Jeffrey M. Arnold............... 1998 $225,000 $67,500 25,000 --
President and Chief 1997 191,458 30,000 -- --
Executive Officer 1996 172,525 60,000 -- --
Eric Dufford.................... 1998 $164,013 $20,000 90,000(3) --
Vice President, Marketing 1997 59,712 10,000 75,000 --
and Sales and Secretary
Robert B. Palardy............... 1998 $134,167 $15,000 75,000(4) --
Vice President, Finance and 1997 18,250 4,167 75,000 --
Administration and Chief
Financial Officer
</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) These options were granted originally on August 8, 1997 and April 28,
1998 and were repriced on October 16, 1998.
(4) These options were originally granted on November 11, 1997 and were
repriced on October 16, 1998.
Option Grant Table. The following table sets forth certain information
regarding options granted during Fiscal 1998 by the Company to the Named
Executive Officers. The Company granted no SARs in Fiscal 1998.
OPTION GRANTS IN LAST FiSCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Exercise Price Appreciation
Underlying Granted to or Base for Option Term(2)
Options Employees in Price Expiration ---------------------
Name Granted(1) Fiscal Year Per Share Date 5% 10%
- ---- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey M. Arnold....... 25,000(3) 6% $9.375 4/16/08 $ 147,375 $ 373,625
Eric Dufford............ 75,000(4) 18% $ 5.00 10/16/08 $ 235,500 $ 597,750
15,000(4) 4% $ 5.00 10/16/08 $ 47,100 $ 119,550
Robert B. Palardy....... 75,000(4) 18% $ 5.00 10/16/08 $ 235,500 $ 597,750
</TABLE>
- --------
(1) The securities underlying the options are shares of Common Stock.
6
<PAGE>
(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 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) All of these 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.
(4) All of these options were repriced to $5.00 in October 1998 and are
deemed to be new grants under applicable rules of the Securities and
Exchange Commission. The repriced options vest at a rate of 25% per year.
See "Report on Repricing of Options."
Year End Option Table. The following table sets forth certain information
regarding stock options exercised during Fiscal 1998 and held as of December
31, 1998 by the Named Executive Officers. The Company granted no SARs during
Fiscal 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
Shares at Fiscal Year-End Fiscal Year-End($)(2)
Acquired Value ------------------------------- -------------------------------
Name on Exercise Realized($)(1) Exercisable(#)/Unexercisable(#) Exercisable($)/Unexercisable($)
- ---- ------------ -------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Jeffrey M. Arnold....... 80,000 564,000 539,900/101,600 3,036,938/571,500
Eric Dufford............ -- -- 0/90,000 0/506,250
Robert B. Palardy....... -- -- 0/75,000 0/421,875
</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 ($5.625 per share) less the exercise price.
Report on Repricing of Options
On October 16, 1998, the Board of Directors determined that certain stock
options held by employees and members of the Company's Scientific Advisory
Board ("SAB") had an exercise price significantly higher than the fair market
value of the Company's Common Stock, and therefore such options were not
providing the desired incentive to employees. Accordingly, the Board provided
employees, other than the Company's Chief Executive Officer, the right to
elect to surrender previously granted unexercised options with exercise prices
between $6.75 and $10.25 in return for new option grants at $5.00, the fair
market value of the Company's Common Stock on October 16, 1998. All vesting in
the exchanged options was forfeited by employees. The new options vest at the
rate of 25% each year over four years starting October 16, 1998. Options to
purchase 396,250 shares of Common Stock were surrendered by employees and
repriced, including an aggregate of 165,000 stock options surrendered by
Messrs. Dufford and Palardy. Options to purchase a total of 538,998 shares of
Common Stock were eligible for this program.
Members of the Company's SAB were granted the right to elect to surrender
previously granted unexercised options with an exercise price of $7.75 in
return for new option grants at $6.75, the fair market value of the Company's
Common Stock on October 21, 1998. All vesting in the exchanged options was
forfeited. The new options vest at the rate of 33% per year over three years
starting October 21, 1998. Options to purchase 40,000 shares of Common Stock
were surrendered by SAB members and repriced. Options to purchase a total of
60,000 shares of Common Stock were eligible for this program.
7
<PAGE>
Option Repricing Table
The following table sets forth information with respect to all repricings of
options by the Named Executive Officers since Cambridge Heart became a public
company in August 1996.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Original Option
Underlying of Stock at Exercise Price New Term Remaining
Options Repriced Time of at Time of Exercise at Date of
Name Date (#) Repricing ($) Repricing ($) Price ($) Repricing
- ---- -------- ---------------- ------------- -------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Eric Dufford............ 10/16/98 75,000 5.00 7.625 5.00 3 years, 10 months
10/16/98 15,000 5.00 9.375 5.00 4 years, 6 months
Robert B. Palardy....... 10/16/98 25,000 5.00 8.875 5.00 4 years, 1 month
</TABLE>
Employment and Consulting Agreements and Other Arrangements
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 May 31, 2000, requires the
Company to pay monthly consulting fees of either $12,500 or $10,000, as
stipulated in the agreement. Total payments made during 1998, 1997, 1996,
1995, 1994 and 1993 were approximately, $118,600, $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. This warrant expired in September 1998. 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, Harris A. Berman, M.D. 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 under the
Company's 1996 Equity Incentive Plan should be 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.
9
<PAGE>
During Fiscal 1998, Jeffrey M. Arnold was a party to a multi-year employment
agreement with the Company that provided for a bonus upon satisfaction of
certain criteria. Pursuant to such agreement, for Fiscal 1998 Mr. Arnold was
awarded a bonus of $67,500. The Compensation Committee believes that the base
salary levels provided for in Mr. Arnold's contract and the bonus criteria
established appropriate salary levels for Mr. Arnold in light of the factors
described above. Moreover, Mr. Arnold's employment agreement included
provisions prohibiting Mr. Arnold from engaging in a business competitive with
the Company during the term of the agreement and for one year after the
termination of his employment. The employment agreement with Mr. Arnold
expired on September 1, 1998. Mr. Arnold continues to be employed by the
Company as an employee at will.
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 1998 each of Messrs. Palardy, Dufford and Andra
Thomas were awarded a bonus of $15,000, $20,000 and $7,500, respectively.
Stock option grants in Fiscal 1998 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 1998, Mr. Arnold and Ms. Thomas received options
to purchase 25,000 and 15,000 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.
Compensation Committee
Harris A. Berman
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
1998 the Reporting Persons complied with all Section 16(a) filing
requirements, other than two late filings by Dr. Cohen each disclosing one
transaction, a late filing by Mr. Arnold disclosing one transaction, a late
filing by Mr. Dufford disclosing one transaction and a late filing by Dr.
Berman disclosing two transactions.
10
<PAGE>
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 consummation of the Company's initial public offering)
and ending December 31, 1998 with the total return on the Nasdaq Stock Market
(U.S.) Index and the Dow Jones Advanced 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.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/2/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Cambridge Heart, Inc. $100 $127 $ 80 $103 $ 97 $ 63
Dow Jones Advanced
Technology Medical Devices Index $100 $121 $146 $180 $213 $262
Nasdaq Stock Market (U.S.)
Index $100 $114 $128 $140 $169 $198
</TABLE>
(Cumulative total return numbers provided by Research Data Group, Inc.)
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, on the recommendation of its Audit Committee, has
appointed the firm of PricewaterhouseCoopers LLP as the Company's independent
accountants for the year ending December 31, 1999, subject to ratification by
the stockholders at the Meeting. PricewaterhouseCoopers 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
PricewaterhouseCoopers 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 PricewaterhouseCoopers 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 2000 Annual Meeting
Proposals of stockholders intended to be presented at the 2000 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
January 10, 1999 in order to be considered for inclusion in the Proxy
Statement relating to that meeting.
If a stockholder of the Company wishes to present a proposal before the 2000
Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy card, such stockholder
must also give written notice to the Secretary of the Company at the address
noted above. The Secretary must receive such notice not less than 60 days nor
more than 90 days prior to the 2000 Annual Meeting; provided that, in the
event that less than 70 days' notice or prior public disclosure of the date of
the 2000 Annual Meeting is given or made, notice by the stockholder must be
received not later than the close of business on the 10th day following the
date on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. If a stockholder fails to provide
timely notice of a proposal to be presented at the 2000 Annual Meeting, the
proxies designated by the Board of Directors of the Company will have
discretionary authority to vote on any such proposal.
By Order of the Board of Directors,
Eric Dufford, Secretary
May 10, 1999
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 PROXY
CAMBRIDGE HEART, INC.
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 15, 1999
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 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
Tuesday, June 15, 1999 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 date, sign and mail your
proxy card back as soon as possible.
Annual Meeting of Stockholders
CAMBRIDGE HEART, INC.
June 15, 1999
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
FOR
1. Election of (all nominees except
directors as marked below) WITHHELD Nominees:
[_] [_] Laurence J. Blumberg
Rolf S. Stutz
(INSTRUCTIONS: To withhold authority to vote for
any individual nominee, print that nominee's name
in the line provided below.)
- -----------------------------------------------------------
2. Ratification of the selection of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as the [_] [_] [_]
Company's independent accountants.
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.
