<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:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement 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 MAY 31, 2000
NOTICE IS HEREBY GIVEN that the 2000 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 31, 2000, 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 2003
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, 2000.
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 17, 2000 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, 1999,
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 24, 2000
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
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2000
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 2000 Annual Meeting of Stockholders
(the "Meeting") to be held on May 31, 2000, 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 17, 2000, 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 14,541,798 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, 2000. 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, 1999 ARE BEING MAILED TO
STOCKHOLDERS ON OR ABOUT APRIL 24, 2000. A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, 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, 2000
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>
The Goldman Sachs Group, Inc.......... 1,627,900 (2) 11.2%
Richard J. Cohen, M.D., Ph.D.......... 1,282,385 (3) 8.8%
Jeffrey M. Arnold..................... 741,863 (4) 4.9%
Maren D. Anderson..................... 0 0%
Harris A. Berman, M.D. ............... 20,833 (5) *
Jeffrey J. Langan..................... 0 0%
Daniel M. Mulvena .................... 0 0%
Robert B. Palardy..................... 20,750 (6) *
Eric Dufford.......................... 28,249 (7) *
Andra Thomas.......................... 18,750 (8) *
All directors and executive officers
as a group (10 persons).............. 2,112,830 (9) 13.9%
</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, 2000
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, 2000 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 in which The Goldman Sachs Group, Inc. shares voting
and dispositive power, as reported in a Schedule 13G filed with the
Securities and Exchange Commission on December 7, 1999. The business
address of The Goldman Sachs Group, Inc. is 85 Broad Street, New York, NY
10004.
(3) Includes 8,000 shares of Common Stock of the Company issuable to Dr. Cohen
within 60 days of January 31, 2000 upon exercise of stock options.
(4) Includes 583,200 shares of Common Stock of the Company issuable to Mr.
Arnold within 60 days of January 31, 2000 upon exercise of stock options.
(5) Includes 10,883 shares issuable to Dr. Berman within 60 days of January
31, 2000 upon exercise of stock options.
(6) Includes 18,750 shares issuable to Mr. Palardy within 60 days of January
31, 2000 upon exercise of stock options.
(7) Includes 22,500 shares issuable to Mr. Dufford within 60 days of January
31, 2000 upon exercise of stock options.
(8) Includes 18,750 shares issuable to Ms. Thomas within 60 days of January
31, 2000 upon exercise of stock options. Ms. Thomas resigned as Vice
President, Clinical Affairs as of February 1, 2000.
2
<PAGE>
(9) Includes a total of 662,083 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, 2000. 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 Maren D. Anderson), two Class II
directors (Richard J. Cohen and Harris A. Berman) and two Class III directors
(Jeffrey J. Langan and Daniel M. Mulvena). One class of directors is elected
each year to serve for a three-year term. The Class I, Class II and Class III
directors were elected to serve until the annual meeting of stockholders to be
held in 2000, 2001 and 2002, respectively, and until their respective
successors are elected and qualified.
The persons named in the enclosed proxy card will vote to elect, as Class I
directors, Jeffrey M. Arnold and Maren D. Anderson, unless the proxy is marked
otherwise. The proxy may not be voted for more than two directors. Mr. Arnold
and Ms. Anderson are presently directors of the Company. Each Class I director
will be elected to hold office until the year 2003 annual meeting of
stockholders and until his or her successor is elected and qualified. Each of
the nominees has indicated a 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 or her with the Company, his or her
principal occupation and business experience during the past five years, the
names of other publicly held companies of which he or she serves as a director
and the year of the commencement of his or her term as a director of the
Company.
3
<PAGE>
JEFFREY M. ARNOLD
A Director since 1993
Age: 50
Mr. Arnold has served as President and Chief Executive Officer of the
Company since September 1993. Mr. Arnold was appointed Chairman of the Board
of Directors in August 1997. Mr. Arnold was formerly the President and Chief
Executive Officer and a director of Molecular Simulations Inc., a supplier of
software for rational drug design. Formerly the Vice President of Operations
for Datascope Corporation's Instrumentation Products division, Mr. Arnold held
senior marketing and research and development positions for Becton Dickinson
and Co. Mr. Arnold holds a B.S. in Electrical Engineering from MIT.
MAREN D. ANDERSON
A Director since 2000
Age: 46
Ms. Anderson was a Founding Partner, Vice President and a Director of
Covance Health Economics and Outcomes Services, Inc., from 1988 to March 1999.
Covance is a consulting firm specializing in strategic reimbursement planning
and market research for new medical technologies. She left the firm in 1999 to
pursue other business interests. From 1981 to 1988 she was a Consultant with
Lewin and Associates, Inc. specializing in market research and strategic
planning for the development and launch of biotechnology, medical device and
pharmaceutical products. Ms. Anderson has six years of government service
experience, from 1974 to 1981, including three years at the Health Care
Financing Administration. Ms. Anderson holds a BA from the University of
Michigan and a Masters in Public Policy from the University of California.
Current Directors
Set forth below (with the exception of Jeffrey M. Arnold and Maren D.
Anderson, 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.
HARRIS A. BERMAN, M.D.
A Director since 1998
Age: 61
Dr. Berman has been Chief Executive Officer of Tufts Health Plan, a managed
healthcare organization of over 1,000,000 members, since 1986. He is also the
immediate past chairman of the Massachusetts Association of HMO's, co-chairman
of Affiliated Health Information Networks of New England, a director of the
American Association of Health Plans, and of the BankBoston Celebrity Series.
Dr. Berman is also a fellow of the American College of Physicians and a
Clinical Professor of Medicine and of Community Health at Tufts University
School of Medicine.
RICHARD J. COHEN, M.D., PH.D.
A Director since 1993
Age: 49
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.
4
<PAGE>
JEFFREY J. LANGAN
A Director since 1999
Age: 54
Mr. Langan served as President and CEO of Idexx Laboratories, Inc. from
November 1997 to July 1999 and as President and CEO of Thermedics Detection,
Inc. from April 1996 to November 1997. Mr. Langan was also General Manager of
the Healthcare Information Management Division and General Manager of the
Clinical Systems Business Unit for Hewlett-Packard Medical Systems from 1973
to 1996. Mr. Langan currently works as an independent consultant. Mr. Langan
holds a B.S. in Mechanical Engineering from Villanova University, an M.S. in
Engineering Mechanics from Rensselaer Polytechnic Institute and an M.B.A from
the Harvard University Graduate School of Business Administration.
DANIEL M. MULVENA
A Director since 1999
Age: 51
Mr. Mulvena is the founding partner of Commodore Associates, a consulting
firm for medical device and services companies, of which he has served as a
partner since May 1995. He served as Group Vice-President, Cardiology, Boston
Scientific Corporation from February 1992 to May 1995. From 1989 to 1991, Mr.
Mulvena served as Chairman and CEO of Lithox Systems, Inc. Prior to joining
Lithox Systems, Mr. Mulvena was President of C.R. Bard's Cardiosurgery
Division. Mr. Mulvena holds a B.A. from Vanderbilt University. Mr. Mulvena is
also a director of Echo-Cath, Inc., Magna-Lab, Inc., Zoll Medical Corp. and
Thoratec Laboratories Corp.
Board and Committee Meetings
The Board of Directors met five times during the year ended December 31,
1999 ("Fiscal 1999"), and acted by written consent on six occasions. 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
1999. The members of the Audit Committee are currently Mr. Langan, Mr. Mulvena
and Dr. Berman.
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 two times
during Fiscal 1999. The members of the Compensation Committee are Dr. Berman
and Mr. Mulvena. 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 $2,500 per meeting of the Board
of Directors. All non-employee directors receive reasonable
5
<PAGE>
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 December 1999, Mr. Langan and Mr. Mulvena were each
granted options under the Director Plan to purchase 10,000 shares of Common
Stock at $2.56 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, Mr. Langan and Mr. Mulvena were
each granted options under the 1996 Equity Incentive Plan to purchase 15,000
shares of Common Stock at $2.56 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. In February 2000, Ms. Anderson was
granted options under the Director Plan to purchase 10,000 shares of Common
Stock at $3.625 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, Ms. Anderson was granted options
under the 1996 Equity Incentive Plan to purchase 15,000 shares of Common Stock
at $3.625 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.
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.
6
<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, 1999 (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............... 1999 $211,667 $64,500 165,000 --
President and Chief 1998 225,000 67,500 25,000 --
Executive Officer 1997 191,458 30,000 -- --
Eric Dufford.................... 1999 $159,706 $15,000 40,000 --
Vice President, Marketing 1998 164,013 20,000 90,000(3) --
and Sales and Secretary 1997 59,712 10,000 75,000 --
Robert B. Palardy...............
Vice President, Finance and 1999 $136,648 $15,000 25,000 --
Administration and Chief 1998 134,167 15,000 75,000(4) --
Financial Officer 1997 18,250 4,167 75,000 --
Andra Thomas....................
Vice President, Clinical 1999 $130,000 $12,500 20,000 --
Affairs 1998 59,084 7,500 75,000 --
</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) These options were originally granted 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.
7
<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during Fiscal 1999 by the Company to the Named
Executive Officers. The Company granted no SARs in Fiscal 1999.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of Stock Price
Securities Percent of Total Appreciation for
Underlying Options Granted Exercise or Option Term(2)
Options to Employees in Base Price Expiration ---------------------
Name Granted(1) Fiscal Year Per Share Date 5% 10%
---- ---------- ---------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey M. Arnold....... 100,000(3) 20% $2.935 10/05/09 $ 184,600 $467,800
65,000(3) 13% $2.563 12/21/09 $104,780 $265,525
Eric Dufford............ 20,000(3) 4% $2.810 10/21/09 $ 35,340 $ 89,580
20,000(3) 4% $2.563 12/21/09 $ 32,240 $ 81,700
Robert B. Palardy....... 15,000(3) 3% $2.810 10/21/09 $ 26,505 $ 67,185
10,000(3) 2% $2.563 12/21/09 $ 16,120 $ 40,850
Andra Thomas............ 10,000(3) 2% $2.810 10/21/09 $ 17,670 $ 44,790
10,000(3) 2% $2.563 12/21/09 $ 16,120 $ 40,850
</TABLE>
- --------
(1) The securities underlying the options are shares of Common Stock.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 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.
Year End Option Table. The following table sets forth certain information
regarding stock options exercised during Fiscal 1999 and held as of December
31, 1999 by the Named Executive Officers. The Company granted no SARs during
Fiscal 1999.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options at Fiscal
Shares Options at Fiscal Year-End Year-End($)(2)
Acquired on Value ------------------------------- --------------------------------
Name Exercise Realized($)(1) Exercisable(#)/Unexercisable(#) Exercisable/($)/Unexercisable($)
---- ----------- -------------- ------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Jeffrey M. Arnold....... -- -- 583,200/223,300 1,637,954/100,849
Eric Dufford............ -- -- 22,500/107,500 0/0
Robert B. Palardy....... -- -- 18,750/81,250 0/0
Andra Thomas............ -- -- 18,750/76,250 0/0
</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 ($3.4375 per share) less the exercise price.
8
<PAGE>
Option Repricing Table. The following table sets forth information with
respect to all repricings of options by the Named Executive Officers since
Cambridge Heart became a public company in August 1996.
Ten-Year Option Repricings
<TABLE>
<CAPTION>
Number of Market Price Length of
Securities of Stock at Original Option
Underlying Time of Exercise Price New Term Remaining
Options Repriced Repricing at Time of Exercise at Date of
Name Date (#) ($) 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 an employment agreement with Mr. Arnold dated
September 1, 1993. The original term of the employment agreement expired on
September 1, 1998. On October 21, 1999, the Company's Board of Directors
renewed the employment agreement effective as of September 1, 1999 for a three
year term ending on September 1, 2002. The employment agreement provides that
Mr. Arnold is to receive a base annual salary of $215,000 and is eligible to
receive an annual bonus of up to 50% of base salary 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
100,000 shares of Common Stock at an exercise price of $2.94 per share. In
addition, Mr. Arnold is eligible to receive an annual stock option grant of up
to 65,000 shares of Common Stock based upon the achievement of mutually
agreed-upon objectives determined annually by the Company's Board of
Directors. If his employment is terminated by the Company without cause, Mr.
Arnold will be entitled to receive severance compensation in an amount equal
to twelve months base salary. In the event of a change in control (as defined
in the employment agreement) that does not result in termination of Mr.
Arnold's employment, 50% of all Mr. Arnold's unvested options which are then
outstanding will become immediately exercisable. In the event of a change in
control resulting in the termination of Mr. Arnold's employment, all of Mr.
Arnold's unvested options which are then 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 employment
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 the employment agreement, the Company's Board of Directors has agreed to
nominate Mr. Arnold, and the Company has agreed 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 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 1999, 1998, 1997,
1996, 1995, 1994 and 1993 were approximately, $121,000, $118,000, $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
9
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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.
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COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors consists of
Harris A. Berman, M.D. and Daniel M. Mulvena.
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 1999, the Company renewed Jeffrey M. Arnold's multi-year
employment agreement with the Company that provides for a bonus upon
satisfaction of certain criteria. Pursuant to this agreement, for Fiscal
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<PAGE>
1999 Mr. Arnold was awarded a cash bonus of $64,500 and a bonus stock option
grant for the purchase of 65,000 shares of Common Stock. The Compensation
Committee believes that the base salary level provided for in Mr. Arnold's
employment agreement and the bonus criteria established an appropriate salary
level for Mr. Arnold in light of the factors described above. Moreover, Mr.
Arnold's employment agreement includes 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. Mr.
Arnold's employment agreement expires on September 1, 2002.
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 1999 each of Mr. Palardy, Mr. Dufford and Ms.
Thomas were awarded a bonus of $15,000, $15,000 and $12,500, respectively.
Stock option grants in Fiscal 1999 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 1999, Mr. Dufford, Mr. Palardy and Ms. Thomas
received options to purchase 40,000, 25,000 and 20,000 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, M.D.
Daniel M. Mulvena
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 during Fiscal 1999 the Reporting
Persons complied with all Section 16(a) filing requirements, other than a
filing by Mr. Langan disclosing the grant of a stock option and a filing by
Mr. Mulvena disclosing the grant of a stock option.
12
<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, 1999 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]
8/2/96 12/31/96 12/31/97 12/31/98 12/31/99
------ -------- -------- -------- --------
Cambridge Heart, Inc. $100.00 $127 $103 $ 63 $ 39
Dow Jones Advanced
Medical Devices Index $100.00 $121 $180 $262 $256
Nasdaq Stock Market (U.S.)
Index $100.00 $114 $140 $198 $357
(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, 2000, 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.
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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 2001 Annual Meeting
Proposals of stockholders intended to be presented at the 2001 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 26, 2000 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 2001
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 2001 Annual Meeting; provided that, in the
event that less than 70 days' notice or prior public disclosure of the date of
the 2001 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 2001 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
April 24, 2000
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED.
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PROXY PROXY
CAMBRIDGE HEART, INC.
ANNUAL MEETING OF STOCKHOLDERS -- MAY 31, 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
Wednesday, May 31, 2000 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.
May 31, 2000
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:
[_] [_] Jeffrey M. Arnold
Maren D. Anderson
(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.
