SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
[_] CONFIDENTIAL, FOR USE OF THE
Check the appropriate box: COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CARDIMA, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
CARDIMA, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
TO BE HELD MAY 19, 1998
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Cardima, Inc., a Delaware corporation (the "Company"), will be
held at the principal executive offices of the Company, located at 47266
Benicia Street, Fremont, California 94538 on Tuesday, May 19, 1998, at 10:00
a.m., local time, for the following purposes:
1. To elect a Board of five (5) directors of the Company to serve until the
next Annual Meeting of Stockholders or until their respective successors
are elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1998;
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part
of this Notice.
The Board of Directors has fixed the close of business on March 31, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card
as promptly as possible in the postage-prepaid envelope provided to ensure
your representation and the presence of a quorum at the Annual Meeting. If you
send in your proxy card and then decide to attend the Annual Meeting to vote
your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
Ronald E. Bourquin
Secretary
Fremont, California
April 23, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED
EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND
SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
CARDIMA, INC.
47266 BENICIA STREET, FREMONT, CALIFORNIA 94538
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Cardima, Inc., a Delaware corporation (the
"Company"), of proxies in the enclosed form for use in voting at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held at the principal
executive offices of the Company, located at 47266 Benicia Street, Fremont,
California 94538 on Tuesday, May 19, 1998 at 10:00 a.m., local time, and any
adjournment or postponement thereof.
This Proxy Statement, the enclosed proxy card and the Company's Annual
Report to Stockholders for the year ended December 31, 1997, including
financial statements, were first mailed to stockholders entitled to vote at
the meeting on or about April 23, 1998.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Phillip C. Radlick, Ph.D. or Ronald E. Bourquin, Inspectors of Election) a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person.
RECORD DATE; VOTING SECURITIES
The close of business on March 31, 1998 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of
the Company entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, the Company had approximately 8,170,729
shares of Common Stock outstanding and held of record by approximately 1,941
stockholders.
VOTING AND SOLICITATION
Each outstanding share of Common Stock on the Record Date is entitled to one
vote on all matters. Shares of Common Stock may not be voted cumulatively.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspectors of Elections (the "Inspectors") with the assistance of the
Company's transfer agent. The Inspectors will also determine whether or not a
quorum is present. The nominees for election as directors at the Annual
Meeting will be elected by a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the meeting. All other
matters submitted to the stockholders will require the affirmative vote of a
majority of shares present in person or represented by proxy at a duly held
meeting at which a quorum is present as required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law
provides that a quorum consists of a majority of the shares entitled to vote
and present in person or represented by proxy. The Inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum and as votes against any matter submitted
to the stockholders for a vote. Any proxy that is returned unmarked as to a
particular item will be voted FOR the election of directors, FOR ratification
of the appointment of the designated independent auditors and as the proxy
holders deem advisable on other matters that may come before the meeting. If a
broker indicates on the enclosed proxy or its substitute that it does not have
discretionary authority as to certain shares to vote on a particular matter
("broker non-votes"), those shares will not be considered as present with
respect to that matter. The Company believes that the tabulation procedures to
be followed by the Inspector are consistent with the general statutory
requirements in Delaware concerning voting of shares and determination of a
quorum.
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing
and mailing proxy solicitation materials for the Annual Meeting and
reimbursements paid to brokerage firms and others for their expenses incurred
in forwarding solicitation materials regarding the Annual Meeting to
beneficial owners of the Company's Common Stock. The Company may conduct
further solicitation personally, telephonically, by facsimile or via
electronic mail through its officers, directors and employees, none of whom
will receive additional compensation for assisting with the solicitation.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Company no later than
January 14, 1999.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the stockholders will elect a Board of five (5)
directors to serve until the next Annual Meeting of Stockholders or until
their respective successors are elected and qualified. In the event any
nominee is unable or unwilling to serve as a director at the time of the
Annual Meeting, the proxies may be voted for the balance of those nominees
named and for any substitute nominee designated by the present Board or the
proxy holders to fill such vacancy, or for the balance of the nominees named
without nomination of a substitute, or the size of the Board may be reduced in
accordance with the Bylaws of the Company. Director Joseph S. Lacob, a member
of the Board of Directors since 1993, has indicated that he will not stand for
re-election to the Board of Directors at the Annual Meeting. Accordingly, Mr.
Lacob has submitted his resignation from the Board, effective immediately
prior to the Annual Meeting. The Board has no reason to believe that any of
the nominees named below will be unable or unwilling to serve as a director if
elected.
Assuming a quorum is present, the five nominees receiving the highest number
of affirmative votes of shares entitled to be voted for them will be elected
as directors of the Company for the ensuing year. Unless marked otherwise,
proxies received will be voted FOR the election of each of the five nominees
named below. In the event that additional persons are nominated for election
as directors, the proxy holders intend to vote all proxies received by them in
such a manner as will ensure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders.
The names of the nominees, their ages as of March 31, 1998 and certain other
information about them are set forth below:
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
--------------- --- -------------------- --------------
Phillip C. Radlick, Ph.D. .. 60 President and Chief 1994
Executive Officer of the
Company
Gabriel B. Vegh............. 58 Chief Operating Officer and 1992
Executive Vice President of
the Company
Michael J.F. Du Cros........ 60 Partner of Atlas Venture 1997
and General Partner of
Aspen Venture Partners,
L.P.
Neal Moszkowski............. 32 Vice President, Principal 1997
Investment Area, Goldman,
Sachs & Co.
Charles P. Waite, Jr. ...... 42 General Partner of Olympic 1996
Venture Partners
There are no family relationships among any of the directors or executive
officers of the Company.
2
Dr. Radlick has been the President, Chief Executive Officer and a Director
of Cardima since November 1994. Prior to joining the Company, from November
1992 until October 1994, Dr. Radlick was the President and Chief Executive
Officer of Hepatix, Inc., a start-up medical device company. From November
1986 until November 1992, Dr. Radlick was the President of Edward's
Cardiovascular Surgery Division, a division of Baxter Healthcare responsible
for the development, manufacture and sale of cardiovascular products. Dr.
Radlick received a B.S. in Chemistry and a Ph.D. in Organic Chemistry from the
University of California, Los Angeles.
Mr. Vegh, the founder of the Company, has been a Director of Cardima since
November 1992. Mr. Vegh has been the Chief Operating Officer of Cardima since
November 1994, and its Executive Vice President since January 1995. From May
1993 until November 1994, Mr. Vegh was the Company's President, and from May
1993 until July 1996, he served as the Company's Chief Financial Officer.
Prior to joining the Company, from August 1985 until May 1993, Mr. Vegh was
the Vice President, Operations of Target Therapeutics, Inc. ("Target," now a
division of Boston Scientific Corporation ("Boston Scientific")); and from
February 1983 until August 1985, Mr. Vegh was General Manager, Pilot
Operations of Advanced Cardiovascular Systems, Inc. ("ACS," now a division of
Guidant Corporation). Mr. Vegh received a B.S. in Mechanical Engineering from
the New Jersey Institute of Technology.
Mr. Du Cros has served as a Director of Cardima since March 1997. Mr. Du
Cros has served as a partner of Atlas Venture, a venture capital firm, since
1993, and as a general partner of Aspen Venture Partners, L.P., a limited
partnership formed to carry on the venture capital activities of 3i Ventures
in the United States, since 1991. Mr. Du Cros served as Chief Executive
Officer of Protein Databases, Inc., a life sciences instrumentation company,
from 1984 to 1988. Mr. Du Cros received a B.Sc. in Industrial Chemistry from
the City University of London.
Mr. Moszkowski has served as a Director of Cardima since March 1997. Since
1997, Mr. Moszkowski has been a Vice President in the Principal Investment
Area of Goldman, Sachs & Co. Prior to joining Goldman, Sachs & Co. in 1993,
Mr. Moszkowski was enrolled in the Standard University Graduate School of
Business. Mr. Moszkowski received a B.A. from Amherst College and a M.B.A.
from the Stanford University Graduate School of Business.
Mr. Waite has served as a Director of Cardima since February 1996. Mr. Waite
joined Olympic Venture Partners, a venture capital firm, as a general partner
in 1987, having previously been a general partner at Hambrecht & Quist Venture
Partners from 1984 to 1987. Mr. Waite also serves as a director of CellPro,
Inc. and Verity, Inc., which develops and markets tools for locating
information on the Internet and other databases. He received an A.B. in
History from Kenyon College and a M.B.A. from Harvard University.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the period from January 1, 1997 through December 31, 1997 (the "last
fiscal year"), the Board met 11 times and, except for director Neal
Moszkowski, who attended seven of the 11 meetings of the entire Board, no
director attended fewer than 75% of the aggregate number of meetings of the
Board and meetings of the committees of the Board on which he serves. The
Board has an Audit Committee and a Compensation Committee. The Board does not
have a nominating committee or a committee performing the functions of a
nominating committee. Although there are no formal procedures for stockholders
to nominate persons to serve as directors, the Board will consider nominations
from stockholders, which should be addressed to Ronald E. Bourquin at the
Company's address set forth above.
The Audit Committee currently consists of directors Michael J.F. Du Cros and
Joseph S. Lacob and held one meeting during the last fiscal year. The Audit
Committee recommends the engagement of the firm of certified public
accountants to audit the financial statements of the Company and monitors the
effectiveness of the audit effort, the Company's financial and accounting
organization and its system of internal accounting controls.
3
The Compensation Committee currently consists of directors Joseph S. Lacob
and Charles P. Waite, Jr., and held one meeting during the last fiscal year.
Its functions are to establish and administer the Company's policies regarding
annual executive salaries and cash incentives and long-term equity incentives.
The Compensation Committee administers the Company's 1993 Stock Option Plan,
1997 Directors' Stock Option Plan and 1997 Employee Stock Purchase Plan.
COMPENSATION OF DIRECTORS
Directors currently receive no cash fees for services provided in that
capacity but are reimbursed for reasonable expenses incurred in connection
with attendance at meetings of the Board. The Company's 1997 Directors' Stock
Option Plan (the "Directors' Plan") provides that each person who becomes a
nonemployee director of the Company will be granted a nonstatutory stock
option to purchase 20,000 shares of Common Stock on the date on which the
optionee first becomes a nonemployee director of the Company. Thereafter, on
the date of each annual meeting of the Company's stockholders at which such
director is elected, each such nonemployee director shall be granted an
additional option to purchase 2,000 shares of Common Stock if, on such date,
he or she shall have served on the Company's Board of Directors for at least
three months. Each of the nominees for director will have served for more than
three months at the time of the Annual Meeting, and so will receive options to
purchase 2,000 shares of the Company's Common Stock under the Directors' Plan
if they are reelected to the Board at the Annual Meeting. As of March 31, 1998
no shares had been issued under this plan.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
4
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Ernst & Young LLP has served as the Company's independent auditors since
1993 and has been appointed by the Board to continue as the Company's
independent auditors for the fiscal year ending December 31, 1998. In the
event that ratification of this selection of auditors is not approved by a
majority of the shares of Common Stock voting at the Annual Meeting in person
or by proxy, the Board will reconsider its selection of auditors.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. This representative will have an opportunity to make a
statement and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
5
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information that has been provided to the
Company with respect to beneficial ownership of shares of the Company's Common
Stock as of March 31, 1998 for (i) each person who is known by the Company to
own beneficially more than five percent of the outstanding shares of Common
Stock, (ii) each director and nominee of the Company, (iii) each of the
executive officers named in the Summary Compensation Table of this proxy
statement (the "Named Executive Officers"), and (iv) all directors and
executive officers of the Company as a group.
SHARES BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) COMMON STOCK(1)(2)
- ---------------- ------------------- ------------------
Kleiner Perkins Caufield & Byers VI(3). 1,252,056 15.4%
2750 Sand Hill Road
Menlo Park, CA 94025
The Goldman Sachs Group, L.P.(4)....... 1,132,050 13.9
85 Broad Street
New York, New York 10004
Target Therapeutics Corporation(5)..... 786,380 9.6
47201 Lakeview Blvd.
Fremont, CA 94537
Atlas Venture(6)....................... 554,373 6.8
222 Berkeley Street
Boston, MA 02116
Chase Venture Capital Associates,
L.P. ................................. 505,069 6.2
380 Madison Avenue, 12th Floor
New York, New York 10017
T. Rowe Price Associates, Inc.(7)...... 500,000 6.1
100 East Pratt Street
Baltimore, MD 21202
New Enterprise Associates V, L.P.(8)... 477,645 5.9
1119 St. Paul Street
Baltimore, MD 21202
Olympic Venture Partners III, L.P.(9).. 443,500 5.4
2420 Carillon Point
Kirkland, WA 98033
Phillip C. Radlick, Ph.D.(10).......... 209,851 2.6
Gabriel B. Vegh(11).................... 269,325 3.3
Allan L. Abati, Ph.D.(12).............. 63,821 *
Omar Amirana, M.D.(13)................. 97,997 1.2
Ronald E. Bourquin(14)................. 47,216 *
Joseph S. Lacob(3)..................... 1,252,056 15.4
Michael J.F. Du Cros(6)................ 554,373 6.8
Neal Moszkowski(4)..................... * *
Charles P. Waite, Jr.(9)............... 443,500 5.4
All Directors and executive officers as
a group (11 persons)(15).............. 4,196,257 51.5
- --------
* Less than 1%.
6
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In determining the number of shares
beneficially owned by a person, options or warrants to purchase Common
Stock held by that person that are currently exercisable, or become
exercisable within 60 days following March 31, 1998, are deemed
outstanding; however, such shares are not deemed outstanding for purposes
of computing the percentage ownership of any other person. The Company
believes that all of the persons named in this table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and except as indicated in the other footnotes to this table.
(2) As of March 31, 1998, 8,170,729 shares of Common Stock were issued and
outstanding.
(3) Includes 317,321 shares issuable upon the exercise of outstanding
warrants held by Kleiner Perkins Caufield & Byers VI, L.P., a California
limited partnership ("KPCB VI"), and exercisable within 60 days of March
31, 1998. Joseph S. Lacob, a director of the Company, is a general
partner of KPCB VI Associates, L.P., the general partner of Kleiner
Perkins Caufield & Byers VI, L.P., and, as such, may be deemed to share
voting and investment power with respect to such shares. Mr. Lacob
disclaims beneficial ownership of such shares, except to the extent of
his pecuniary interest in such shares. Mr. Lacob has submitted his
resignation from the Board, effective immediately prior to the Annual
Meeting. Beneficial ownership calculation is based solely on a review of
Schedule 13G filings made with the Securities and Exchange Commission.
Such filings set forth beneficial ownership as of December 31, 1997.
(4) Represents 1,132,050 shares owned by certain investment partnerships, of
which affiliates of The Goldman Sachs Group, L.P. ("GS Group") are the
general partner, managing general partner or investment manager. Includes
710,248 shares held by GS Capital Partners II, L.P., 282,333 shares held
by GS Capital Partners II Offshore, L.P., 26,151 shares held by Goldman,
Sachs & Co. Verwaltungs GmbH, 76,280 shares held by Stone Street Fund
1997, L.P. and 37,038 shares held by Bridge Street Fund 1997, L.P. Each
of such investment partnership shares voting and investment power with
certain of its respective affiliates, Mr. Moszkowski, a director of the
Company, is a Vice President of Goldman, Sachs & Co., the general partner
of which is GS Group. Mr. Moszkowski has no beneficial ownership of such
shares.
(5) Includes 13,370 shares issuable upon the exercise of outstanding warrants
exercisable within 60 days of March 31, 1998.
(6) Includes 304,907 shares held by Atlas Venture Fund II, L.P. and 249,466
shares held by Atlas Venture Europe Fund B.V. Mr. Du Cros, a director of
the Company, is a limited partner of Atlas Venture Associates II, L.P.,
the general partner of Atlas Venture Fund II, L.P. The shares of each of
these funds may be deemed to be beneficially owned by the others, because
the parent entity of Atlas Venture Europe Fund B.V., Atlas Investerings
Groep N.V., holds an approximate 80% interest in Atlas Venture Fund II,
L.P. Mr. Du Cros disclaims beneficial ownership of such shares except to
the extent of his pecuniary interests. Beneficial ownership calculation
is based solely on a review of Schedule 13G filings made with the
Securities and Exchange Commission. Such filings set forth beneficial
ownership as of December 31, 1997.
(7) Their securities are owned by various individual and institutional
investors, which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or sole
power to vote the securities. For purposes of reporting requirements of
the Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
Beneficial ownership calculation is based solely on a review of Schedule
13G filings made with the Securities and Exchange Commission. Such
filings set forth beneficial ownership as of December 31, 1997.
(8) Includes 400,493 shares held by New Enterprise Associates V, L.P. ("NEA
V"), 16,502 shares held by Catalyst Ventures, Limited Partnership,
issuable upon the exercise of outstanding warrants exercisable within 60
days of March 31, 1998 and 60,650 shares held by ONSET Partners, Limited
Partnership, issuable upon the exercise of outstanding warrants
exercisable within 60 days of March 31, 1998. Some of
7
the general partners of NEA Partners V, Limited Partnership, the general
partner of NEA V, are also the general partners of NEA Partners IV,
Limited Partnership, the general partner of New Enterprise Associates IV,
Limited Partnership, which is a general partner of Catalyst, and as such,
may be deemed to share voting and investment power with respect to such
shares. Beneficial ownership of such shares is disclaimed except to the
extent of the respective pecuniary interests in such shares. Beneficial
ownership calculation is based solely on a review of Schedule 13G filings
made with the Securities and Exchange Commission. Such filings set forth
beneficial ownership as of December 31, 1997.
(9) Includes 421,326 shares held by Olympic Venture Partners III, L.P. and
22,174 shares held by OVP III Entrepreneurs Fund. Mr. Waite, a director
of the Company, is a general partner Olympic Venture Partners III, L.P.,
the general partner of Olympic Venture Partners III, L.P. and OVP III
Entrepreneurs Fund, and, as such, may be deemed to share voting and
investment power with respect to such shares. Mr. Waite disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest in such shares. Beneficial ownership calculation is based solely
on a review of Schedule 13G filings made with the Securities and Exchange
Commission. Such filings set forth beneficial ownership as of December
31, 1997.
(10) Includes 209,851 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1998.
(11) Includes 143,184 shares issuable upon exercise of options and 37,301
shares issuable upon the exercise of outstanding warrants exercisable
within 60 days of March 31, 1998.
(12) Includes 63,821 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1998.
(13) Includes 93,977 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1998.
(14) Includes 46,826 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1998.
(15) Includes shares referred to in footnotes (3)-(4), (6), (9) and (10)-(14).
8
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation received by (a) the individual
who served as the Company's Chief Executive Officer during the fiscal year
ended December 31, 1997; (b) the four other most highly compensated
individuals who served as an executive officer of the Company during the
fiscal year ended December 31, 1997; and (c) the compensation received by each
such individual for the Company's preceding fiscal year.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS
--------------------- ---------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)
- ------------------------- ------ ---------- --------- --------------- ---------------
(1) (2) (3)
Phillip C. Radlick, Ph.D.
(4)..................... 1997 195,344 25,000 75,000 --
President, Chief 1996 177,832 25,000 127,559 29,718
Executive Officer and
Director
Gabriel B. Vegh (5)...... 1997 175,417 -- 75,000 --
Executive Vice 1996 166,561 60,000 127,559 --
President, Chief
Operating Officer and
Director
Allan L. Abati, Ph.D. ... 1997 140,385 -- 15,000 --
Vice President, 1996(6) 116,383 -- 60,696 111,884
Regulatory Affairs,
Clinical Programs and
Quality Assurance
Omar Amirana, M.D. ...... 1997 119,905 -- 25,000 --
Vice President, 1996 110,173 15,000 50,286 --
Marketing
Ronald E. Bourquin....... 1997 115,830 15,000 15,000 --
Vice President and Chief 1996(6) 44,851 15,000 43,701 --
Financial Officer
- --------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes bonuses earned in the indicated year and paid in the subsequent
year. Excludes bonuses paid in the indicated year but earned in the
preceding year.
(3) Stated amounts represent (a) a relocation expense reimbursement in the
amount of $29,718 to Dr. Radlick and (b) a relocation expense
reimbursement in the amount of $111,884 to Dr. Abati.
(4) In October, 1994, the Company entered into an employment agreement with
Dr. Radlick which provides for, among other things, an annual salary of
$175,000, bonus compensation as may from time to time be awarded by the
Board of Directors and participation in all employee benefit plans
sponsored by the Company. Additionally, if Dr. Radlick's employment is
terminated other than for "good cause" (as defined in the employment
agreement), Dr. Radlick shall immediately resign from all positions with
the Company and enter into a six month consulting arrangement with the
Company. Stock options held by Dr. Radlick would continue to vest over
such six month period. Under this consulting arrangement, Dr. Radlick
would be paid a consulting fee in an amount equal to the salary in effect
at the time of his resignation, and would be eligible to continue to
receive Company benefits. If Dr. Radlick were to obtain new employment
during such period, the consulting fee payable to Dr. Radlick would be
reduced by the amount of compensation payable to Dr. Radlick under such
new arrangement.
(5) In May 1993, the Company entered into an employment agreement with Mr.
Vegh which provides for, among other things, an annual salary, bonus
compensation as may from time to time be awarded by the Board of Directors
and participation in all employee benefit plans sponsored by the Company.
Additionally, if Mr. Vegh's employment is terminated other than for "good
cause" (as defined in the employment agreement), Mr. Vegh shall
immediately resign from all positions with the Company and enter into a
six month consulting arrangement with the Company. Stock options held by
Mr. Vegh would continue to vest over such six month period. Under this
consulting arrangement, Mr. Vegh would be paid a consulting fee in an
amount equal to the salary in effect at the time of his resignation, and
would be eligible to continue to receive Company benefits. If Mr. Vegh
were to obtain new employment during such period, the consulting fee
payable to Mr. Vegh would be reduced by the amount of compensation payable
to Mr. Vegh under such new arrangement and the continued vesting of his
option would terminate.
(6) Dr. Abati and Mr. Bourquin joined the Company on February 15, 1996 and
July 31, 1996, respectively.
9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Securities and Exchange Commission rules, the table
sets forth the hypothetical gains that would exist for the options based on
assumed rates of annual compound stock price appreciation during the option
term.
INDIVIDUAL GRANTS
---------------------------------------------------
POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL OPTIONS/ ANNUAL RATES OF STOCK
SECURITIES SARS GRANTED EXERCISE PRICE APPRECIATION
UNDERLYING TO EMPLOYEES OF BASE FOR OPTION TERM(3)
OPTIONS/SARS IN FISCAL PRICE ----------------------
NAME GRANTED(#) YEAR(%)(4) ($/SH)(5) EXPIRATION 5%($) 10%($)
- ---- ------------ ----------------- --------- ---------- ---------- -----------
Phillip C. Radlick,
Ph.D................... 75,000(1) 17% $5.00 8/5/07 $ 235,835 $ 597,653
Gabriel B. Vegh......... 75,000(1) 17 5.00 8/5/07 235,835 597,653
Allan L. Abati, Ph.D.... 15,000(1) 3 5.00 8/5/07 47,167 119,531
Omar Amirana, M.D....... 25,000(2) 6 5.00 8/5/07 78,612 199,218
Ronald E. Bourquin...... 15,000(1) 3 5.00 8/5/07 47,167 119,531
- --------
(1) Consists of stock options granted pursuant to the Company's 1993 Stock
Option Plan. Options become exercisable over a four-year period subject to
continued employment with the Company. The maximum term of each option
granted is ten years from the date of grant. The exercise price is
generally equal to the fair market value of the Common Stock on the grant
date as determined by the Board of Directors.
(2) Consists of stock options granted pursuant to the Company's 1993 Stock
Option Plan. Options become exercisable over a twelve-month period subject
to continued employment with the Company. The maximum term of each option
granted is ten years from the date of grant. The exercise price is
generally equal to the fair market value of the Common Stock on the grant
date as determined by the Board of Directors.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the 10
year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates
over the option term, no value will be realized from the option grants
made to the executive officers.
(4) The Company granted stock options representing 438,162 shares of the
Company's Common Stock to employees in the last fiscal year.
(5) The exercise price may be paid in cash, in shares of Common Stock valued
at fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company
may also finance the option exercise by loaning the optionee sufficient
funds to pay the exercise price for the purchased shares and the federal
and state income tax liability incurred by the optionee in connection with
such exercise.
10
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the fiscal year ended
December 31, 1997. In addition, the table sets forth the number of shares
covered by stock options as of the fiscal year ended December 31, 1997 and the
value of "in-the-money" stock options, which represents the positive spread
between the exercise price of a stock option and the market price of the
shares subject to such option at the end of the fiscal year ended December 31,
1997.
NUMBER OF
UNEXERCISED
OPTIONS/SARS AT VALUE OF UNEXERCISED
SHARES FISCAL YEAR END(#) IN-THE-MONEY OPTIONS/SARS AT
ACQUIRED ON VALUE EXERCISABLE/ FISCAL YEAR END($)
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ----------- ----------- ------------------ ----------------------------
Phillip C. Radlick,
Ph.D................... 0 -- 269,226 / 0 $601,156 / $0
Gabriel B. Vegh......... 0 -- 202,559 / 0 $379,488 / $0
Allan L. Abati, Ph.D.... 0 -- 75,696 / 0 $224,811 / $0
Omar Amirana, M.D....... 0 -- 98,144 / 0 $229,604 / $0
Ronald E. Bourquin...... 0 -- 58,701 / 0 $114,715 / $0
- --------
(1) Based on the $4.375 per share closing price of the Company's Common Stock
on the Nasdaq National Market on December 31, 1997, less the exercise
price of the options.
11
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933 or the Securities Exchange Act of
1934 that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Stock Performance Graph which
follows shall not be deemed to be incorporated by reference into any such
filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report of the Compensation Committee of the Board (the
"Committee") describing the compensation policies applicable to the Company's
executive officers during the fiscal year ended December 31, 1997. The
Committee is responsible for establishing and monitoring the general
compensation policies and compensation plans of the Company, as well as the
specific compensation levels for executive officers. Executive officers who
are also directors have not participated in deliberations or decisions
involving their own compensation.
GENERAL COMPENSATION POLICY
Under the supervision of the Board, the Company's compensation policy is
designed to attract and retain qualified key executives critical to the
Company's growth and long-term success. It is the objective of the Board to
have a portion of each executive's compensation contingent upon the Company's
performance as well as upon the individual's personal performance.
Accordingly, each executive officer's compensation package is comprised of two
elements: (i) base salary which reflects individual performance and expertise,
and (ii) long-term stock-based incentive awards which are designed to
strengthen the mutuality of interests between the executive officers and the
Company's stockholders. Additionally, some executives are eligible for
variable bonus awards payable in cash which are tied to the achievement of
certain performance goals that the Board establishes from time to time for the
Company.
The summary below describes in more detail the factors which the Board
considers in establishing each of the three primary components of the
compensation package provided to the executive officers.
BASE SALARY
The level of base salary is established primarily on the basis of the
individual's qualifications and relevant experience, the strategic goals for
which he or she has responsibility, the compensation levels at companies which
compete with the Company for business and executive talent, and the incentives
necessary to attract and retain qualified management. Base salary is adjusted
each year to take into account the individual's performance and to maintain a
competitive salary structure. Company performance does not play a significant
role in the determination of base salary.
CASH-BASED INCENTIVE COMPENSATION
Cash bonuses are awarded on a discretionary basis to executive officers on
the basis of their success in achieving designated individual goals and the
Company's success in achieving specific Company-wide goals, such as customer
satisfaction, revenue growth and earnings growth.
LONG-TERM INCENTIVE COMPENSATION
The Company has utilized its stock option plans to provide executives and
other key employees with incentives to maximize long-term stockholder values.
Awards under this plan by the Board take the form of stock options designed to
give the recipient a significant equity stake in the Company and thereby
closely align his or her interests with those of the Company's stockholders.
Factors considered in making such awards include the individual's position in
the Company, his or her performance and responsibilities, and internal
comparability considerations.
12
Each option grant allows the executive officer to acquire shares of the
Company's Common Stock at a fixed price per share (the fair market value on
the date of grant) over a specified period of time (up to 10 years). The
options typically vest in periodic installments over a four-year period,
contingent upon the executive officer's continued employment with the Company.
Accordingly, the option will provide a return to the executive officer only if
he or she remains in the Company's service, and then only if the market price
of the Common Stock appreciates over the option term.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Phillip C. Radlick has served as the Company's President and Chief Executive
Officer since November 1994. His base salary for fiscal 1997 was $220,000.
Other compensation paid to Dr. Radlick included a bonus based on his
performance to objectives as set by the Board and relocation benefits as set
forth in Dr. Radlick's employment agreement.
The factors discussed above in "Base Salary," "Cash-Based Incentive
Compensation," and "Long-Term Incentive Compensation" were applied by the
Compensation Committee in establishing the amount of Dr. Radlick's salary and
stock option grant. Dr. Radlick did not participate in any decisions related
to his compensation. Significant factors the Compensation Committee considered
in establishing Dr. Radlick's compensation included his individual
performance, the achievement of specific objectives including clinical
milestones achieved and performance to plan for the year. The Committee felt
Dr. Radlick's performance in these areas contributed to achieving these
objectives and, accordingly, exercised its judgment in awarding the salary
increase, bonus and incentive stock options shown in the Summary Compensation
Table.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Compensation Committee has considered the impact of Section 162(m) of
the Internal Revenue Code adopted under the Omnibus Budget Reconciliation Act
of 1993, which section disallows a deduction for any publicly held corporation
for individual compensation exceeding $1 million in any taxable year for the
CEO and four other most highly compensated executive officers, respectively,
unless such compensation meets the requirements for the "performance-based"
exception to Section 162(m). As the cash compensation paid by the Company to
each of its executive officers is expected to be below $1 million and the
Committee believes that options granted under the Company's 1993 Stock Option
Plan to such officers will meet the requirements for qualifying as
performance-based, the Committee believes that Section 162(m) will not affect
the tax deductions available to the Company with respect to the compensation
of its executive officers. It is the Committee's policy to qualify, to the
extent reasonable, its executive officers' compensation for deductibility
under applicable tax law. However, the Company may from time to time pay
compensation to its executive officers that may not be deductible.
Compensation Committee:
Joseph S. Lacob
Charles P. Waite, Jr.
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
Joseph S. Lacob and Charles P. Waite, Jr. No member of the Compensation
Committee or executive officer of the Company has a relationship that would
constitute an interlocking relationship with executive officers or directors
of another entity.
TRANSACTIONS WITH MANAGEMENT
In October 1996, the Company entered into a $2.5 million convertible note
purchase agreement with certain of its existing investors, including Gabriel
B. Vegh, Executive Vice President, Chief Operating Officer and a Director of
the Company. Mr. Vegh loaned the Company $14,750, plus interest, as his
portion of the $2.5 million note purchase agreement. Upon closing of the
Company's sale of shares of its Series E Convertible Preferred Stock, the
$14,750 plus accrued interest converted to 2,605 shares of the Company's
Series E Convertible Preferred Stock. During the period from November 1996 to
January 1997, the Company borrowed a total of $2.5 million under this
convertible note purchase agreement at an annual interest rate equal to the
applicable Internal Revenue Service imputed rate in effect at the time of the
borrowing. In March 1997, the holders of these notes converted the principal
amount of these notes, together with accrued interest, into 440,963 shares of
Series E Convertible Preferred Stock.
In February 1997, the Company entered into a convertible note purchase
agreement with certain investors and borrowed $750,000 under this convertible
note purchase agreement at an annual interest rate of 5.66%. In March 1997,
the holders of these notes converted the principal amount of these notes,
together with accrued interest, into 130,955 shares of the Company's Series E
Convertible Preferred Stock. At such time, an additional 1,784,823 shares of
Series E Convertible Preferred Stock were issued and sold to certain investors
at a purchase price of $5.74 per share.
In December 1997, the Company loaned $300,000 to Phillip C. Radlick, Ph.D.,
its President and Chief Executive Officer, to facilitate the purchase of a
principal residence in the Bay Area. The note bears interest at the minimum
applicable federal rate and matures in December 2001. As security interest,
Dr. Radlick granted the Company a security interest in his vested stock
options.
During 1997, the Company engaged the services of Armus Corporation and paid
Armus a total of $67,484 for such services. Gabriel B. Vegh, a director of the
Company and the Company's Executive Vice President and Chief Operating
Officer, was the beneficial owner of 50% of the outstanding capital stock of
Armus, as of December 31, 1997.
The Company has entered into employment agreements with Dr. Radlick and Mr.
Vegh, the terms of which are discussed in footnotes 4 and 5, respectively, of
"Compensation of Executive Officers--Summary Compensation Table."
The Company has entered into indemnification agreements with its officers
and directors containing provisions which may require the Company, among other
things, to indemnify its officers and directors (other than liabilities
arising from willful misconduct of a culpable nature) and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified.
14
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return data
for the Company's stock since June 6, 1997 (the date on which the Company's
stock was first registered under Section 12 of the Securities Exchange Act of
1934, as amended) to the cumulative return over such period of (i) Cardima,
Inc., (ii) the S&P Midcap Medical Products and Supplies Index and (iii) the
Nasdaq National Market U.S. Composite Index. The graph assumes that $100 was
invested on June 6, 1997, the date on which the Company completed the initial
public offering of its Common Stock, in the Common Stock of the Company and in
each of the comparative indices. The graph further assumes that such amount
was initially invested in the Common Stock of the Company at a per share price
of $7.00, the price to which such stock was first offered to the public by the
Company on the date of its initial public offering, and reinvestment of any
dividends. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
COMPARISON OF YEAR CUMULATIVE TOTAL RETURN *
AMONG CARDIMA, INC., S&P MIDCAP MEDICAL PRODUCTS AND SUPPLIES INDEX
AND NASDAQ NATIONAL MARKET U.S. COMPOSITE INDEX
COMPARISON OF CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
- --------
* Assumes $100 invested on June 6, 1997, the effective date of the Company's
Initial Public Offering, in stock or index, including reinvestment of
dividends. Fiscal year ending December 31, 1997.
6/6/97 12/31/97
------ --------
Cardima, Inc.............................................. 100 63
S&P Midcap Medical Products and Supplies Index............ 100 116
Nasdaq National Market Total.............................. 100 112
15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports
they file. To the Company's knowledge, based solely on its review of the
copies of such reports received or written representations from certain
Reporting Persons that no other reports were required, the Company believes
that during its fiscal year ended December 31, 1997, all Reporting Persons
complied with all applicable filing requirements.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement incorporates certain documents of the Company by
reference that are not presented herein or delivered herewith. Such documents
are available to any person, including any beneficial owner, to whom this
Proxy Statement is delivered, upon oral or written request, without charge,
directed to 47266 Benicia Street, Fremont, California 94538, Attention: Chief
Financial Officer, Cardima, Inc., telephone number (510) 354-0300. In order to
ensure timely delivery of the documents, such requests should be made by May
7, 1998.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented to
the Annual Meeting. If any other business is properly brought before the
Annual Meeting, proxies in the enclosed form will be voted in respect thereof
as the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
Ronald E. Bourquin
Secretary
Fremont, California
April 23, 1998
16
CARDIMA, INC.
Proxy
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned hereby appoints Phillip C. Radlick, Ph.D. and Ronald E.
Bourquin proxies with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote all the shares
of stock of Cardima, Inc. standing in the name of the undersigned with all
powers which the undersigned would possess if present at the Annual Meeting of
Stockholders of the Company to be held May 19, 1998, or any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
Unless contrary instructions are given below, this Proxy shall be voted
according to the recommendations of the Board of Directors.
ITEM 1. ELECTION OF DIRECTORS:
[_] FOR [_] WITHHELD FOR ALL
Michael J.F. Du Cros, Neal Moszkowski, Phillip C. Radlick, Ph.D., Gabriel B.
Vegh, Charles P. Waite, Jr.
WITHHELD FOR (Write that nominee's name.) ______________________________________
ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board recommends a vote for ratification of the appointment of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] MARK HERE FOR ADDRESS
CHANGE AND NOTE BELOW
I PLAN TO ATTEND MEETING [_]
Dated: ____________________ , 1998
----------------------------------
----------------------------------
Signature(s)
Note: Please sign as name appears
hereon. Joint owners must each
sign. When signing as attorney-
in-fact, executor, administrator,
trustee or guardian, please give
full title as such.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE.