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 (Amendment No.             )

Filed by the Registrant	x
Filed by a Party other than the Registrant	¨

Check the appropriate box:

¨	Preliminary Proxy Statement	¨	Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
¨	Definitive Additional Materials
¨	Soliciting Material Pursuant to Rule 14a-12

NMT Medical, 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 (setforth 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:                                  

NMT MEDICAL, INC.

27 Wormwood Street

Boston, Massachusetts 02210-1625

Notice of 2003 Annual Meeting of Stockholders

To Be Held on Wednesday, June 18, 2003

The 2003 Annual Meeting of Stockholders of NMT Medical, Inc. (the “Company”) will be held at the Constitution Room at the Seaport Hotel, One Seaport Lane, Boston, Massachusetts 02210, on Wednesday, June 18, 2003 at 10:00 a.m., local time, to consider and act upon the following matters:

1. To elect eight members of the Board of Directors, each to serve for a term expiring at the next Annual Meeting of Stockholders;

2. To approve an amendment to the 2001 Stock Incentive Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder from 500,000 shares to 700,000 shares;

3. To approve an amendment to the 2001 Employee Stock Purchase Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder from 125,000 shares to 275,000 shares;

4. To approve an amendment to the 1996 Stock Option Plan for Non-Employee Directors to increase the number of shares of the Company’s common stock authorized for issuance thereunder from 225,000 shares to 325,000 shares;

5. To ratify the appointment of Ernst & Young LLP as the Company’s independent public accountants; and

6. To transact such other business as may properly come before the meeting or any adjournment thereof.

Stockholders of record at the close of business on April 21, 2003 are entitled to notice of and to vote at the meeting or any adjournment thereof.

By Order of the Board of Directors,

Richard E. Davis, Secretary

Boston, Massachusetts

May 9, 2003

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.

NMT MEDICAL, INC.

27 Wormwood Street

Boston, Massachusetts 02210-1625

Proxy Statement for the

2003 Annual Meeting of Stockholders

To Be Held on June 18, 2003

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors”) of NMT Medical, Inc. (the “Company”) for use at the 2003 Annual Meeting of Stockholders to be held at the Constitution Room at the Seaport Hotel, One Seaport Lane, Boston, Massachusetts 02210, on Wednesday, June 18, 2003 at 10:00 a.m., local time, and at any adjournment of that meeting (the “Annual Meeting”). All proxies will be voted in accordance with the stockholders’ instructions and, if no choice is specified, the proxies will be voted in favor of the matters set forth in the accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at any time before its exercise by delivery of a written revocation or a subsequently dated proxy to the Secretary of the Company or by voting in person at the Annual Meeting.

At the close of business on April 21, 2003, the record date for the determination of stockholders entitled to vote at the Annual Meeting, there were outstanding and entitled to vote an aggregate of 11,792,842 shares of common stock of the Company, par value $.001 per share (the “Common Stock”), constituting all of the outstanding voting stock of the Company. Each share of Common Stock entitles the record holder to one vote on each of the matters to be voted upon at the Annual Meeting.

The Company’s Annual Report for the year ended December 31, 2002 is being mailed to stockholders with the mailing of this Notice and Proxy Statement and the enclosed proxy on or about May 12, 2003.

A copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, as amended, as filed with the Securities and Exchange Commission (the “Commission”), will be furnished without charge to any stockholder upon written request to the Secretary, NMT Medical, Inc., 27 Wormwood Street, Boston, Massachusetts 02210-1625.

Votes Required

The holders of a majority of the shares of Common Stock issued and outstanding and entitled to vote at the Annual Meeting shall constitute a quorum for the transaction of business at the Annual Meeting. Shares of Common Stock present at the Annual Meeting 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 is present at the Annual 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 (i) approve the proposed amendment to the Company’s 2001 Stock Incentive Plan; (ii) approve the proposed amendment to the Company’s 2001 Employee Stock Purchase Plan; (iii) approve the proposed amendment to the Company’s 1996 Stock Option Plan for Non-Employee Directors; and (iv) ratify the appointment of Ernst & Young LLP (“Ernst & Young”) as the Company’s independent public accountants for the current year.

Shares which 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 voted in favor of such matter and will not be counted as shares voting or votes cast on such matter. Accordingly, abstentions and “broker non-votes” will have no effect with respect to the voting on the election of directors, which requires the affirmative vote of a plurality of the votes cast or shares voting on the matter. In addition, abstentions and “broker non-votes” will have no effect with respect to the remaining matters to be voted on at the Annual Meeting, each of which requires the affirmative vote of a majority of the votes cast or shares voting on the matter.

Stock Ownership of Certain Beneficial Owners and Management

Except as noted below, the following table sets forth certain information as of January 31, 2003 with respect to the beneficial ownership of Common Stock by (i) each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock; (ii) each director and nominee for director of the Company; (iii) each executive officer of the Company named in the Summary Compensation Table set forth under the caption “Executive Compensation” below; and (iv) all directors and executive officers of the Company as of January 31, 2003 as a group:

Name and Address of Beneficial Owner (1)	Number of Shares Beneficially Owned(2)	Percentage of Outstanding Common Stock(3)
Entities affiliated with Whitney & Co.(4)	2,504,010	21.22	%
177 Broad Street Stamford, CT 06901
Federated Investors, Inc.(5)	1,139,300	9.66	%
Federated Investors Tower 5800 Corporate Drive Pittsburgh, PA 15222
State of Wisconsin Investment Board(6)	780,000	6.61	%
P.O. Box 7842 Madison, WI 53707
Dimensional Fund Advisors Inc.(7)	622,500	5.28	%
1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401
R. John Fletcher(8)	417,352	3.53	%
c/o Fletcher Spaght, Inc. 222 Berkeley Street Boston, MA 02116-3761
John E. Ahern(9)	188,446	1.59	%
Robert G. Brown(10)	148,724	1.24	%
217 Echo Drive Jupiter, FL 33458

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Name and Address of Beneficial Owner (1)	Number of Shares Beneficially Owned(2)	Percentage of Outstanding Common Stock(3)
Richard E. Davis(11)	82,995	*
Cheryl L. Clarkson(12)	17,223	*
c/o SkinHealth, Inc. 233 Needham St., Suite 300 Newton, MA 02464
Francis J. Martin(13)	16,945	*
c/o Florence Medical Ltd. 892 Worcester St. Wellesley, MA 02482
James E. Lock, M.D.(14)	7,223	*
c/o Children’s Hospital 300 Longwood Avenue Boston, MA 02115
Harry A. Schult(15)	4,166	*
c/o Watch Hill Partners, Inc. 50 Park Row West Providence, RI 02903
Daniel F. Hanley, M.D.(16)	—	*
c/o The Johns Hopkins Medical Institutions Director, Department of Neurology Division of Brain Injury Outcomes 600 N. Wolfe Street Jefferson 1-109 Baltimore MD 21287-7840
All current directors and executive officers of the Company as a group (9 persons)(17)	883,074	7.36	%

* Less than 1%

(1) Except as otherwise indicated, the address of each beneficial owner is c/o NMT Medical, Inc., 27 Wormwood Street, Boston, MA 02210-1625.

(2) The number of shares of Common Stock beneficially owned by each holder named above is determined under the rules of the Commission, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which the holder has sole or shared voting power or investment power and any shares which the holder has the right to acquire within 60 days after January 31, 2003 through the exercise of any stock option or other right. Unless otherwise indicated, each holder has sole investment and voting power (or shares such power with an affiliate) with respect to the shares set forth in the table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

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(3) The number of shares deemed outstanding for the purpose of calculating these percentages consists of the 11,797,456 shares of Common Stock outstanding on January 31, 2003 plus any shares of Common Stock issuable to the holder in question within 60 days after January 31, 2003 upon exercise of stock options or any other rights.

(4) The number of shares owned by Whitney & Co., a New York limited partnership (“Whitney”), and entities affiliated with Whitney, consists of 1,829,010 shares held of record by Whitney Equity Partners, L.P., a Delaware limited partnership (“Equity Partners”), 561,207 shares held of record by Whitney Subordinated Debt Fund, L.P., a Delaware limited partnership (“Debt Fund”), and 113,793 shares held of record by Whitney. Each of Whitney, Equity Partners and Debt Fund disclaims beneficial ownership of the shares held by the other two partnerships. This information is derived from a Schedule 13D filed by Whitney with the Commission on July 17, 1998, and information provided as of February 4, 2003 by Whitney.

(5) This information is derived from a Schedule 13G filed by Federated Investors, Inc. with the Commission on February 14, 2003. Federated Investors, Inc. (the “Parent’) is the parent holding company of Federated Investment Management Corp. (the “Investment Advisers”), which act as investment advisers to registered investment companies and separate accounts that own shares of common stock in the Company (the “Reported Securities”). The Investment Advisers are wholly owned subsidiaries of FII Holdings, Inc., which is a wholly owned subsidiary of the Parent. All of the Parent’s outstanding voting stock is held in the Voting Shares Irrevocable Trust (the “Trust”) for which John F. Donahue, Rhodora J. Donahue and J. Christopher Donahue act as trustees (collectively, the “Trustees”). The Parent, the Trust, and each of the Trustees declare that this should not be construed as an admission that they are the beneficial owners of the Reported Securities, and the Parent, the Trust, and each of the Trustees expressly disclaim beneficial ownership of the Reported Securities.

(6) This information is derived from an Amendment to a Schedule 13G filed by State of Wisconsin Investment Board with the Commission on February 12, 2003.

(7) This information is derived from an Amendment to a Schedule 13G filed by Dimensional Fund Advisors Inc. (“Dimensional”) with the Commission on February 10, 2003, and from information provided as of February 10, 2003 by Dimensional. Dimensional, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other investment vehicles, including commingled group trusts (these investment companies and investment vehicles are the “Portfolios”). In its role as investment advisor and investment manager, Dimensional possessed both investment and voting power over 622,500 shares of Common Stock as of December 31, 2002. The Portfolios own all securities reported in this statement, and Dimensional disclaims beneficial ownership of such securities.

(8) Consists of 30,000 shares of Common Stock issuable to Mr. Fletcher within 60 days after January 31, 2003 upon exercise of stock options and 387,352 shares of Common Stock held by Fletcher Spaght, Inc. Mr. Fletcher is a principal stockholder of Fletcher Spaght, Inc. and disclaims ownership of these shares, except to the extent of his pecuniary interest therein.

(9) Includes 66,668 shares of Common Stock issuable to Mr. Ahern within 60 days after January 31, 2003 upon exercise of stock options and 18,000 shares of Common Stock held by Vanguard Fiduciary Trust FBO John E. Ahern.

(10) Includes 23,334 shares of Common Stock issuable to Mr. Brown within 60 days after January 31, 2003 upon exercise of stock options.

(11) Includes 34,687 shares of Common Stock issuable to Mr. Davis within 60 days after January 31, 2003 upon exercise of stock options.

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(12) Consists of 17,223 shares of Common Stock issuable to Ms. Clarkson within 60 days after January 31, 2003 upon exercise of stock options.

(13) Consists of 16,945 shares of Common Stock issuable to Mr. Martin within 60 days after January 31, 2003 upon exercise of stock options.

(14) Consists of 7,223 shares of Common Stock issuable to Dr. Lock within 60 days after January 31, 2003 upon exercise of stock options.

(15) Consists of 4,166 shares of Common Stock issuable to Mr. Schult within 60 days after January 31, 2003 upon exercise of stock options.

(16) Appointed as a director of the Company effective on May 7, 2003.

(17) Includes an aggregate of 200,246 shares of Common Stock issuable to all current directors and executive officers as a group within 60 days after January 31, 2003 upon exercise of stock options.

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PROPOSAL 1—ELECTION OF DIRECTORS

The persons named in the enclosed proxy will vote to elect as directors the eight nominees listed below, each to serve for a one-year term, unless authority to vote for the election of any or all of the nominees is withheld by marking the proxy to that effect. All of the nominees have indicated their willingness to serve, if elected, but if any should be unable or unwilling to serve, proxies may be voted for a substitute nominee designated by the Board of Directors.

Nominees

Set forth below for each director and nominee is the name and age, position(s) with the Company, principal occupation and business experience during the past five years, and, where applicable, the year of his or her first election as a director of the Company:

John E. Ahern, age 58, has served as President, Chief Executive Officer and Chairman of the Company since September 2000. Prior to joining the Company, Mr. Ahern was Vice President, Emerging Technology Investment Group at C.R. Bard, Inc. (“Bard”), a leading medical technology company, where he was responsible for identifying, investing in and managing early-stage medical technologies and companies. In his 13 years with Bard, Mr. Ahern also held the senior marketing and strategic planning positions in three of Bard’s cardiovascular divisions. Mr. Ahern’s more than 35 years of medical device industry experience also includes Vice President of Worldwide Sales and Marketing at Intra-Sonix, Inc., an early stage development company focused on minimally invasive surgery, Area Manager for the Middle East and North Africa at Abbott Laboratories, a leading health care company, and various sales and marketing positions at Becton Dickinson & Co., a major medical technology company. Mr. Ahern is also a member of the Board of Directors of Seacoast Technologies, Inc. and EndoBionics, Inc., two privately-held medical technology companies.

R. John Fletcher, age 57, was elected a director of the Company in January 1996. In May 2000, he served without compensation in the Office of the Chief Executive Officer of the Company as part of the Company’s interim management team until September 21, 2000 when John E. Ahern was hired as Chief Executive Officer. Mr. Fletcher is the founder and Chief Executive Officer of Fletcher Spaght, Inc., a management consulting company specializing in strategic development for health care and high technology businesses (“Fletcher Spaght”). He is also managing partner of Fletcher Spaght Ventures, a venture capital fund. Prior to founding Fletcher Spaght in 1983, he was a senior member of The Boston Consulting Group, a management consulting company. From April 1995 to February 1996, Mr. Fletcher was the Chairman of the Board of Directors of InnerVentions, Inc., a wholly-owned subsidiary of Fletcher Spaght (“InnerVentions”), which the Company acquired in February 1996. Mr. Fletcher is a director of AutoImmune, Inc., a publicly traded biotechnology company developing orally-administered pharmaceutical products, and of Spectranetics, Inc., a publicly-traded medical device company developing excimer laser technology.

Robert G. Brown, age 59, was elected a director in September 2000. Mr. Brown served as President and Chief Operating Officer of the Company from 1987 to 1992 and as a director of the Company from 1992 to 1997. From 1971 to 1985, Mr. Brown held various sales and marketing positions with Medi-tech Inc. and the Medi-tech division of Boston Scientific Corporation and Boston Scientific International Corporation, including Vice President, Marketing and International Market Development for Medi-tech Inc. and Director, Market Development for Boston Scientific International Corporation. From 1969 to 1971 he was a sales representative

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for Baxter Laboratories. Mr. Brown holds a B.S. from the University of Vermont. Mr. Brown also served as an officer in the United States Marine Corps from 1966 to 1969.

James E. Lock, M.D., age 53, was elected a director of the Company in August 2000. Since March 2002, Dr. Lock has been Physician-in-Chief at Children’s Hospital Boston and since October 1993, he has been Chairman of the Department of Cardiology at Children’s Hospital Boston and the Alexander S. Nadas Professor of Pediatrics at Harvard Medical School. Dr. Lock attended medical school at Stanford University and pursued his pediatric residency and cardiology fellowship at the University of Minnesota. Thereafter, he trained in cardiovascular physiology for two years at the University of Toronto, Hospital for Sick Children. In September 1999, a device invented by Dr. Lock and licensed to the Company became the first septal occlusion device to receive United States Food and Drug Administration approvals under the Humanitarian Device Exemption regulations for use inside the human heart in the United States. During his career, Dr. Lock has trained numerous academic physicians in cardiopulmonary physiology, experimental interventional cardiology, and clinical interventional cardiology. The earliest trainees are now becoming directors of pediatric cardiology divisions, cardiac catheterization laboratories, and intensive care units. He is the president of the Boston Children’s Heart Foundation and is the president of the Aldo Castanda Foundation, and serves on the Board of Directors of Children’s Hospital and of the Children’s Hospital Trust.

Cheryl L. Clarkson, age 50, was elected a director of the Company in January 2001. Ms. Clarkson is the founder and Chief Executive Officer of SkinHealth, Inc., a physician-based cosmetic dermatology company which operates SkinHealth Centers throughout eastern New England. Ms. Clarkson has previously served as the Chief Executive Officer and the Chief Operating Officer of Peer Review Analysis, Inc., a publicly traded health care adjudication and utilization review company, the President of ABIODENT, Inc., Danvers, Massachusetts, a dental device company, and the President of Beaver Steriseal, Inc., an ophthalmic surgical device company. Ms. Clarkson has also been the Vice President of Sales and Marketing for Rudolph Beaver, Inc., and spent ten years with American Hospital Supply Corporation in various management positions. She holds a Masters degree from the Sloan School of Management at M.I.T., where she was selected as a Sloan fellow. Ms. Clarkson is a member of several boards of directors of privately-held companies in the health care and medical device industry and serves as an overseer for two large teaching hospitals.

Francis J. Martin, age 65, was elected a director of the Company in February 2001. Since September 2000, Mr. Martin has been Chairman and Chief Executive Officer of Florence Medical LTD (Israel) and Chairman and President/Chief Executive Officer of Florence Medical, Inc., the global commercialization unit based in Boston. Florence Medical, Inc. is involved in developing and marketing vascular blood flow software and hardware systems used to assist the interventional cardiologist in the diagnosis and treatment of vascular disease. From September 1994 to September 2000, he was founder, Chairman and Chief Executive Officer of CorMedica Corporation, a private, independent developer and manufacturer of catheter-based navigation systems for use in percutaneous cardiovascular applications. He has an extensive background in the medical device industry, having co-founded and managed Advanced Biomedical Instruments from 1979 to 1986 and PLC Systems from 1987 to 1994. Prior to that Mr. Martin was with Becton Dickinson & Co. and Abbott Laboratories, where he had several domestic and international marketing and sales management positions. Mr. Martin is a board member of several privately-held medical device companies.

Harry A. Schult, age 63, was elected a director of the Company in May 2002. Since September 2001, Mr. Schult has been the Chief Financial Officer and Treasurer of Watch Hill Partners, Inc., a customer relationship

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management consultancy company. From October 1999 through August 2001, Mr. Schult was Vice President—Corporate Development of Mirus Information Technology Services, Inc., an application service provider. From 1992 to 1999, Mr. Schult performed independent consultant services for various companies, including acting as a part-time chief financial officer of CorMedica Corporation, a private, independent developer and manufacturer of catheter-based navigation systems for use in percutaneous cardiovascular applications, and also as an interim chief financial officer for The Paragon Gifts Holdings Inc., a retail catalog company. Mr. Schult has over 27 years of senior level experience in the public accounting profession at Ernst & Young, where he was Managing Partner of its Providence, Rhode Island office for eleven years and worked in its Paris, France office for five years. Mr. Schult is a certified public accountant.

Daniel F. Hanley, M.D., age 54, was elected a director in May 2003. Since 1996, Dr. Hanley has been a Professor of Neurology, Neurosurgery and Anesthesia/Critical Medicine at Johns Hopkins Medical Institutions. Since 1999, Dr. Hanley has also been Professor, School of Nursing, the Jeffrey and Harriett Legum Professor of Acute Care Neurology and Director of Brain Injury Outcomes Program at Johns Hopkins Medical Institutions. Dr. Hanley is a graduate of Williams College and Cornell University Medical College and has board certification in internal medicine, neurology and psychiatry. Dr. Hanley is a leading expert on brain injury and has received more than 20 basic research grants, predominantly from the National Institute of Health. He has published more than 100 articles in peer reviewed journals, has received the Alexander Humboldt Research Prize for his accomplishments in brain injury research and has extensive clinical trials experience in that field. His trainees are directors of over 20 brain intensive care units across the United States. Dr. Hanley is on the board of directors of the National Stroke Association and has developed nationally recognized education and training programs for that organization.

In connection with the acquisition by the Company of the CardioSEAL^® Septal Occluder technology in 1996 from InnerVentions, the Company agreed to use its best efforts to nominate a designee of Fletcher Spaght as a director of the Company, and certain of the Company’s stockholders agreed to vote their shares of Common Stock in favor of such designee. Fletcher Spaght’s designee, R. John Fletcher, was first elected to the Board of Directors of the Company in January 1996 and has served on the Board of Directors of the Company since that time.

There are no family relationships among any of the executive officers and director nominees of the Company.

Board and Committee Meetings

The Board of Directors met 13 times during 2002. Each director attended at least 75% of the meetings of the Board of Directors held during the period in which he or she served as a director and of the committees on which he or she then served.

The Board of Directors has a standing Audit Committee, which is responsible for reviewing the scope and results of the annual audit and interim quarterly reviews, discussing the Company’s internal accounting control policies and procedures and considering and recommending the selection of the Company’s independent auditors. The Audit Committee met four times during 2002. Between January and July 2002, the Audit Committee members were Messrs. Fletcher (Chair), Brown and Martin. Since July 2002, the current members of the Audit Committee are Messrs. Schult (Chair), Fletcher and Martin, each of whom is currently a non-employee director.

The Board of Directors has a standing Joint Compensation and Options Committee, which is responsible for reviewing the Company’s overall compensation policies, setting the compensation of the Company’s executive

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officers, and administering the Company’s stock option plans. Between January and July 2002, the members of the Joint Compensation and Options Committee were Ms. Clarkson (Chair) and Messrs. Brown and Martin. Since July 2002, the current members of the Joint Compensation and Options Committee are Mr. Martin (Chair), Ms. Clarkson and Dr. Lock, each a non-employee director. The Joint Compensation and Options Committee met six times during 2002.

The Board of Directors has a standing Nominating Committee, which is responsible for (i) development of criteria for the selection of appropriate new and independent director candidates; (ii) specific identification of director candidates; (iii) screening of such candidates; and (iv) making of nomination recommendations to the Board of Directors. The Nominating Committee was formed on December 2, 2002, and met once during 2002. The current members of the Nominating Committee are Messrs. Brown (Chair), Schult and Martin and Ms. Clarkson. The Nominating Committee has not established procedures beyond those provided in the Company’s By-laws for stockholders to recommend nominations for directors.

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, whose executive officers served as a director or member of the Joint Compensation and Options Committee of the Company during the year ended December 31, 2002.

Director Compensation

Each non-employee director of the Company, not otherwise compensated by the Company, receives a fee of $1,000 for attendance at each Board meeting, $500 for attendance at each telephonic Board meeting and $500 for attendance at each committee meeting. In addition, each director also receives an annual retainer of $12,000 payable on January 1st for the coming year, commencing with the year 2003. All directors receive reimbursement of travel expenses incurred in connection with their attendance at Board and committee meetings.

In 1996, the Board of Directors adopted, and the stockholders approved, the 1996 Stock Option Plan for Non-Employee Directors. On the effective date of the plan, each non-employee director of the Company who did not otherwise receive compensation from the Company received an option to purchase 10,000 shares of Common Stock. In 2001 and 2002, the Company’s stockholders voted to approve amendments to the 1996 Stock Option Plan for Non-Employee Directors (as amended, the “Director’s Plan”). The Director’s Plan provides for an option grant to purchase 20,000 shares of Common Stock to each new non-employee director upon his or her initial election to the Board of Directors. This option grant vests in equal monthly installments over a three-year period. In addition to this initial grant, immediately following each annual meeting of stockholders, each eligible director, other than an eligible director first elected to the Board of Directors within the 12 months immediately preceding and including such meeting, is granted an option to purchase 5,000 shares of Common Stock as of the date of such meeting. In addition, following each annual meeting of stockholders, each eligible director who served as a member of a committee of the Board of Directors during the preceding fiscal year is granted an additional option to purchase (i) 2,000 shares of Common Stock if such director served as chairperson of such committee or (ii) 1,000 shares of Common Stock if such director did not serve as chairperson of such committee. These annual option grants become fully vested six months after the date of grant. The exercise price of options granted under the Director’s Plan is equal to the fair market value of the Common Stock on the date of grant. In the event an optionee ceases to serve as a director, each option may be exercised by the optionee for the portion then exercisable at any time within one year after the optionee ceases to serve as a director of the Company.

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Executive Compensation

Summary Compensation Table

The following table sets forth certain information concerning the compensation for each of the last three years for the Company’s Chief Executive Officer and its other most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 in the year ended December 31, 2002 (collectively, the “Named Executives”).

	Annual Compensation						Long-Term Compensation Awards
Name and Principal Position	Year	Salary ($)			Bonus ($)		Number of Securities Underlying Stock Options (#)(1)		All Other Compensation ($)(2)
John E. Ahern	2002	$	350,000		$	97,500	190,000	(3)	—
President and Chief Executive Officer	2001 2000		313,750 83,270	(4) (6)		100,000 25,000	112,500 162,500	(5) (7)	—   —
Richard E. Davis Vice President and Chief Financial Officer	2002 2001		220,894 153,340	(8) (10)		85,000 78,750	70,000 122,500	(9) (11)	—   —

(1) The Company has never granted any stock appreciation rights.

(2) In accordance with the rules of the Commission, other compensation in the form of perquisites and other personal benefits has been omitted in those instances where such perquisites and other personal benefits did not exceed the lesser of $50,000 or ten percent of the total of annual salary and bonus for the Named Executive in question for the fiscal year.

(3) Consists of an option to purchase 50,000 shares of Common Stock at an exercise price of $6.60 per share, an option to purchase 75,000 shares of Common Stock at an exercise price of $3.03 per share, and an option to purchase 65,000 shares of Common Stock at an exercise price of $2.97 per share, which option was granted in February 2003 as a 2002 bonus.

(4) Reflects a base salary of $300,000 for the period January 1, 2001 through September 20, 2001 and $350,000 for the period September 21, 2001 through December 31, 2001. See “Employment and Severance Agreements.”

(5) Consists of an option to purchase 12,500 shares of Common Stock at an exercise price of $2.07 per share, an option to purchase 50,000 shares of Common Stock at an exercise price of $6.15 per share, and an option to purchase 50,000 shares of Common Stock at an exercise price of $7.07 per share, which option was granted in February 2002 as a 2001 bonus.

(6) Represents Mr. Ahern’s compensation for the period commencing on the date when Mr. Ahern joined the Company (September 21, 2000) and ending on December 31, 2000. Mr. Ahern’s annualized base salary for 2000 was $300,000. See “Employment and Severance Agreements”.

(7) Consists of an option to purchase 150,000 shares of Common Stock at an exercise price of $2.156 per share, which option represents a signing bonus (see “Employment and Severance Agreements”), and an option to purchase 12,500 shares of Common Stock at an exercise price of $1.31 per share, which option was granted in February 2001 as a 2000 bonus.

(8) Reflects a base salary of $190,000 per year for the period January 1, 2002 through February 14, 2002, and $225,000 for the period February 14, 2002 through December 31, 2002. See “Employment and Severance Agreements”.

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(9) Consists of an option to purchase 30,000 shares of Common Stock at an exercise price of $6.60 per share and an option to purchase 40,000 shares of Common Stock at an exercise price of $5.76 per share.

(10) Represents Mr. Davis’ compensation for the period commencing on March 12, 2001 and ending on December 31, 2001. Mr. Davis’ annualized base salary for 2001 was $190,000. See “Employment and Severance Agreements”.

(11) Consists of an option to purchase 85,000 shares of Common Stock at an exercise price of $1.25 per share, which option represents a signing bonus (see “Employment and Severance Agreements”), an option to purchase 7,500 shares of Common Stock at an exercise price of $1.76 per share, and an option to purchase 30,000 shares of Common Stock at an exercise price of $6.15 per share.

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Option Grants in Last Fiscal Year

The following table sets forth certain information concerning grants of stock options made during the year ended December 31, 2002 to each of the Named Executives.

	Individual Grants
	Number of Securities Underlying Options Granted (#)		Percentage of Total Options Granted to Employees in Fiscal Year (%)		Exercise or Base Price per Share ($/share)(1)	Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(2)
Name							5%($)		10%($)
John E. Ahern	50,000	(3)	7.29	%	$7.07	2/18/12	$	223,314	$	563,388
	50,000		7.29		6.60	3/6/12		207,535		525,935
	75,000		10.94		3.03	12/30/12		142,916		362,178
Richard E. Davis	30,000		4.37		6.60	3/6/12		124,521		315,561
	40,000		5.83		5.76	7/31/12		144,897		367,198

(1) The exercise price is equal to the fair market value of the Company’s Common Stock on the date of grant.

(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 appreciation of 5% and 10% compounded annually from the date the respective options were granted to their expiration date. The gains shown are net of the option exercise price but do not include deductions for taxes or other expenses associated with the exercise of the option or the sale of the underlying shares. Actual gains, if any, on stock option exercises will depend on the future performance of the Common Stock, the option holder’s continued employment through the option period and the date on which the options are exercised.

(3) Excludes Mr. Ahern’s option to purchase 65,000 shares of Common Stock at an exercise price of $2.97 per share, which was granted in February 2003 as a 2002 bonus.

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Aggregated Option Exercises in Last Fiscal

Year and Fiscal Year-End Option Values

The following table sets forth, for each Named Executive, the number of shares of Common Stock acquired upon exercise of options during the year ended December 31, 2002, the aggregate dollar value realized upon such exercise and the number and value of unexercised options held by each Named Executive on December 31, 2002.

Name	Number of Shares Acquired On Exercise (#)	Value Realized ($)(1)		Number of Securities Underlying Unexercised Options at December 31, 2002(#)		Value of Unexercised In-the-Money Options at December 31, 2002 ($)(2)
				Exercisable	Unexercisable	Exercisable	Unexercisable
John E. Ahern (3)	88,021	$	274,651	41,666	270,313	$6,858	$76,003
Richard E. Davis (4)	37,292		182,060	15,624	139,594	6,303	89,116

(1) Represents the difference between the exercise price and the fair market value of the Common Stock on the date of exercise, multiplied by the number of shares acquired on exercise.

(2) Represents the excess, if any, of the last reported sale price per share of the Common Stock on December 31, 2002, the last day of trading prior to the year end ($3.03 per share), as reported on the NASDAQ National Market, over the option exercise price, multiplied by the number of shares underlying the options.

(3) Exercisable consists of options to purchase 6,250 shares at an exercise price of $2.156 per share, 521 shares at $1.31 per share, 520 shares at $2.07 per share, 14,583 shares at $5.03 per share, 10,417 shares at $7.07 per share and 9,375 shares at $6.60 per share. Unexercisable consists of options to purchase 65,625 shares at an exercise price of $2.156 per share, 6,771 shares at $1.31 per share, 7,292 shares at $2.07 per share, 35,417 shares at $5.03 per share, 39,583 shares at $7.07 per share, 40,625 shares at $6.60 per share and 75,000 shares at $3.03 per share.

(4) Exercisable consists of options to purchase 3,541 shares at an exercise price of $1.25 per share, 8,750 shares at $5.03 per share and 3,333 shares at $5.76 per share. Unexercisable consists of options to purchase 46,052 shares at an exercise price of $1.25 per share, 5,625 shares at $1.76 per share, 21,250 shares at $5.03 per share, 30,000 shares at $6.60 per share and 36,667 shares at $5.76 per share.

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Equity Compensation Plan Information

The following table provides information about the securities authorized for issuance under the Company’s equity compensation plans as of December 31, 2002:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	1,585,315	$4.49	312,007
Equity compensation plans not approved by security holders	243,588	3.32	—
Total	1,828,903	$4.33	312,007

Set forth below is a summary of the warrants and nonqualified options to purchase shares of Common Stock granted by the Company to various officers, directors, employees and consultants.

In December 1993, the Company granted an option to purchase 26,315 shares to Jack Reinstein, former Chief Financial Officer and former director of the Company. The exercise price of the option was $0.76 per share. The option was fully vested on the date of grant and expires on December 15, 2003.

In May 1994, the Company granted an option to purchase 13,157 shares to each of Mr. Reinstein and Gilbert Segel, a former director of the Company. The exercise price of each option is $1.14 per share. The options vested fully one year from the date of grant and expire on May 31, 2004.

In October 1995, the Company granted an option to purchase 26,315 shares to each of Mr. Reinstein and Mr. Segel. The exercise price of each option is $2.15 per share. The options vested monthly over 36 months and expire on October 13, 2005.

In April 1997, the Company granted an option to purchase 10,000 shares to Robert G. Brown, a former officer and current director of the Company. The exercise price of the option was $10.50 per share. The option vested immediately as to 1,389 shares and monthly over 31 months for the remaining 8,611 shares and expires on April 30, 2007.

In February 1998, the Company granted an option to purchase 25,000 shares to Dr. Morris Simon, a former director of the Company. The exercise price of the option is $10.50 per share. The option vests upon the completion of certain milestones and expires on February 13, 2008.

The Company issued a warrant to Fletcher Spaght, dated July 1, 1998, for the purchase of 83,329 shares, and, in connection with certain consulting services provided by Fletcher Spaght to the Company, the Company later extended the exercise period of the warrant from February 14, 2001 to February 14, 2003. On January 20, 2003, Fletcher Spaght exercised this warrant and repaid in full the remaining balance of the note. (See “Executive Compensation—Certain Transactions”).

On April 3, 2000, in connection with the Company’s pay down of certain debt, the Company issued Brown Brothers a warrant to purchase 20,000 shares at $4.94 per share. This warrant expires on April 3, 2005.

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Employment and Severance Agreements

The Company entered into an employment agreement, dated as of September 21, 2000, with John E. Ahern, the Company’s President, Chief Executive Officer and Chairman of the Board of Directors, providing for a term of employment commencing on September 21, 2000 and ending on December 31, 2002. The Company subsequently entered into an amended and restated employment agreement, dated as of December 31, 2002, with Mr. Ahern, providing for a term of employment commencing on December 31, 2002 and ending on December 31, 2005. Pursuant to the original agreement, Mr. Ahern received a salary of $300,000 per year, which was increased to $350,000 per year effective as of the first anniversary of his commencement date pursuant to a vote of the Board of Directors on October 3, 2001. Under the amended and restated employment agreement, Mr. Ahern continues to receive a salary of $350,000 per year.

Upon the execution of the original employment agreement, the Company granted Mr. Ahern a stock option to purchase an aggregate of 150,000 shares of the Company’s Common Stock at an exercise price of $2.156 per share. Upon the execution of the amended and restated employment agreement, the Company granted Mr. Ahern a stock option to purchase an aggregate of 75,000 shares of the Company’s Common Stock at an exercise price of $3.03 per share. These option grants will, to the maximum extent permissible under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), constitute incentive stock options. The option grants will vest in 48 equal monthly installments on each monthly anniversary of the date of the grant. In connection with the amended and restated employment agreement, the Company amended the vesting provisions of the original option grant of 150,000 shares to provide that, if Mr. Ahern is terminated from the Company without cause, the option shall be exercisable within one year following termination, to the extent that the option was exercisable on the termination date. The option will terminate in the event of a discharge of Mr. Ahern for cause.

In order to reward Mr. Ahern if there were a liquidity event for the Company’s stockholders, the amended and restated employment agreement also provides for a cash payment to Mr. Ahern in the event of a change of control of the Company, as defined therein. Such cash payment is equal to a percentage ranging from 0% to 3.5% of the total deal consideration paid by an acquirer in a transaction constituting a change of control of the Company. The percentage paid to Mr. Ahern will vary based on the amount of the total deal consideration.

Mr. Ahern is also entitled to receive certain performance-based bonuses and equity awards relating to profit and other performance goals. Under his original employment agreement, Mr. Ahern was entitled to receive annual bonuses consisting of a cash bonus of up to $100,000 and a stock option to purchase up to 50,000 shares of Common Stock. Pursuant to a vote of the Board of Directors on October 3, 2001, the annual bonus Mr. Ahern could earn for performance in 2002 was increased to a maximum of $150,000 in cash and a stock option to purchase a maximum of 100,000 shares of Common Stock. For the year ended December 31, 2002, Mr. Ahern received a bonus of $97,500 and a stock option grant to purchase 65,000 shares of Common Stock. Any equity award granted to Mr. Ahern as a bonus will:

· have an exercise price equal to the closing price of the Common Stock on the date of grant;

· to the maximum extent permissible under Section 422 of the Code, constitute incentive stock options, with any balance of the options to be treated as non-statutory stock options; and

· vest in 48 equal monthly installments on each monthly anniversary of the date of grant.

Pursuant to the amended and restated employment agreement, Mr. Ahern is entitled to receive an annual cash bonus of up to $150,000 in cash. Mr. Ahern has agreed not to compete with the Company for a period of one year after he ceases to be employed by the Company.

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The Company entered into an employment agreement, dated as of February 14, 2001, with Richard E. Davis, the Company’s Vice President and Chief Financial Officer, for a term of three years. The Company subsequently entered into an amendment to this employment agreement, dated as of April 28, 2003, pursuant to which, among other things, the term of the employment agreement was extended for an additional year. Pursuant to the employment agreement, Mr. Davis received a salary of $190,000 per year, which was increased to $225,000 effective as of February 14, 2002 and further increased to $250,000 effective as of February 14, 2003, in each case by Mr. Ahern pursuant to discretion granted to Mr. Ahern under such agreement. Upon execution of the original agreement, the Company granted Mr. Davis a stock option to purchase an aggregate of 85,000 shares of the Company’s Common Stock at an exercise price of $1.25 per share. This option grant will, to the maximum extent permissible under Section 422 of the Code, constitute incentive stock options. The option grant will vest in 48 equal monthly installments on each monthly anniversary of the date of such option grant.

In order to reward Mr. Davis if there were a liquidity event for the Company’s stockholders, the amendment to his employment agreement also provides for a cash payment to Mr. Davis in the event of a change of control of the Company, as defined in the employment agreement, as amended. Such cash payment is equal to a percentage ranging from 0% to 0.875% of the total deal consideration paid by an acquirer in a transaction constituting a change of control of the Company. The percentage paid to Mr. Davis will vary based on the amount of the total deal consideration.

In addition, Mr. Davis is entitled to receive an annual bonus provided that he has satisfied certain financial and performance goals and that the Company has achieved an agreed upon profit margin. For the year ended December 31, 2002, Mr. Davis received a cash bonus of $85,000. Mr. Davis has agreed not to compete with the Company for a period of one year after he ceases to be employed by the Company.

Certain Transactions

In connection with certain consulting services provided by Fletcher Spaght to the Company, the Company extended the exercise period of the warrant, dated July 1, 1998, issued to Fletcher Spaght for the purchase of 83,329 shares of Common Stock, from February 14, 2001 to February 14, 2003. In connection with this extension, the Company incurred a one-time charge to earnings equal to $57,673. In connection with this charge, Fletcher Spaght issued a note in favor of the Company in the amount of $57,673, bearing interest equal to 5% per annum, and payable on or before February 14, 2003. On January 20, 2003, Fletcher Spaght exercised the warrant and paid in full the remaining amounts due under the note. R. John Fletcher, a member of the Board of Directors of the Company, is currently the Chief Executive Officer of Fletcher Spaght.

In connection with sales of the Company’s CardioSEAL^® product and pursuant to the terms of a license agreement with Children’s Medical Center Corporation (“CMCC”), the Company paid an aggregate of $1,632,645 in royalties to CMCC during 2002. James E. Lock, M.D., a member of the Board of Directors of the Company and an affiliate of CMCC, received approximately $392,000 of these royalty payments.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and holders of more than 10% of the outstanding shares of Common Stock to file with the Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Except as described below, and based solely upon a review of reports submitted, and

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representations made, to the Company, the Company believes that during 2002 its executive officers, directors and holders of more than 10% of the outstanding shares of Common Stock timely complied with all Section 16(a) filing requirements.

On September 18, 2002, Richard E. Davis filed a Statement of Changes in Beneficial Ownership on Form 4 to report the grant of an option to purchase 40,000 shares of Common Stock at an exercise price of $5.76 per share granted on September 12, 2002.

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Report of the Joint Compensation and Options Committee

The Joint Compensation and Options Committee of the Board of Directors has furnished the following report on executive compensation.

Between January and June 2002, the members of the Joint Compensation and Options Committee were Ms. Clarkson (Chair) and Messrs. Brown and Martin. The Joint Compensation and Options Committee, which currently consists of Mr. Martin (Chair), Ms. Clarkson and Dr. Lock, reviews, recommends and determines the annual bonus, stock options and other benefits, direct and indirect, of the senior executives and reviews new executive compensation programs and establishes and periodically reviews policies for the administration of executive compensation programs. In addition, the Joint Compensation and Options Committee establishes and periodically reviews policies in the area of management perquisites and makes stock option grants to employees of the Company as recommended by the Chief Executive Officer of the Company, within the parameters of the established plans.

The Company’s executive compensation program is designed to maximize the performance of the Company’s executive officers and, thereby, maximize the Company’s achievement of its business goals and improve stockholder returns. Executive compensation consists of a combination of base salary, annual cash bonuses and merit-based stock incentives. The Joint Compensation and Options Committee considers merit-based stock incentives to be a critical component of an executive’s compensation package for purposes of helping to align that executive’s interests with stockholder interests.

Compensation Philosophy

The objectives of the executive compensation program are to align executive compensation with business objectives and individual performance and to enable the Company to attract, retain and reward executive officers who are expected to contribute to the long-term success of the Company. The Company’s executive compensation philosophy is based on the principles of competitive and fair compensation and sustained performance.

· Competitive and Fair Compensation

The Company is committed to providing an executive compensation program that helps attract and retain highly qualified executives. To ensure that compensation is competitive, the Company compares its compensation practices with those of similar companies in its industry and sets the Company’s compensation guidelines based on this review. The Joint Compensation and Options Committee believes that compensation for the Company’s executive officers is within the range of compensation paid to executives with comparable qualifications, experience and responsibilities in the same or similar businesses and in companies of comparable size and success. The Joint Compensation and Options Committee also strives to achieve equitable relationships both among the compensation of individual officers and between the compensation of officers and other employees throughout the Company.

· Sustained Performance

Executive officers are rewarded based upon corporate performance and individual performance. Corporate performance is evaluated by reviewing the extent to which the Company’s goals relating to its strategic, scientific and business plans have been met, including such factors as meeting budgeted financial targets, continued innovation in the development of the Company’s technologies and

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formation of new business alliances and acquisitions. Individual performance is evaluated by reviewing the attainment of specified individual objectives.

In evaluating each executive’s performance, the Joint Compensation and Options Committee generally:

· sets Company and individual goals and objectives at the beginning of the year;

· evaluates and communicates the Company’s assessment of the executive’s performance and contributions to the Company; and

· reviews base salary levels and determines cash bonuses and stock compensation awards based on the foregoing taking into account the comparative compensation practices of other companies in its industry.

Components of Executive Compensation

Annual compensation for the Company’s executives generally consists of three elements—base salary, annual cash bonuses and merit-based stock incentives.

Base salaries of the Company’s executives are generally set by reviewing compensation for competitive positions in the market and the historical compensation levels of the particular executive. Payment of bonus awards is based on the Company’s financial performance as well as on individual performance measured against targeted performance and various additional performance criteria. Seventy-five percent of each executive’s bonus compensation is based on the Company’s objective achievement of financial goals established by the Board of Directors. The remaining twenty-five percent of each executive’s bonus compensation is based on a subjective assessment of certain targeted performance criteria which vary for each executive based on his or her area of responsibility. Subjective performance criteria include an executive’s ability to motivate others, develop the skills necessary to grow as the Company matures, recognize and pursue new business opportunities and initiate programs to enhance the Company’s growth and success.

Compensation at the executive officer level also includes the long-term incentives afforded by stock options. The stock option program, which is currently administered by the Joint Compensation and Options Committee, is designed to align the long-term interests of the Company’s employees and its stockholders and to assist in the retention of executives. The size of option grants is generally intended to reflect the executive’s position with the Company and his contributions to the Company, including his or her success in achieving the individual performance criteria described above. Options generally vest over a four-year period in order to encourage the retention of key employees. When granting stock options, the Company has generally fixed the exercise price of such options at 100% of the fair market value of the Common Stock on the date of grant. During 2002, all current executive officers were granted options to purchase an aggregate of 245,000 shares of Common Stock, at a weighted average exercise price of $5.47 per share.

Compliance with Internal Revenue Code Section 162(m)

Section 162(m) of the Code generally disallows a tax deduction to public companies for certain compensation in excess of $1 million paid to the company’s Chief Executive Officer and the four other most highly compensated executive officers. Certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if certain requirements are met. The Joint Compensation and Options Committee reviews the potential effect of Section 162(m) periodically and uses its judgment to

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authorize compensation payments that may be subject to the limit when the Joint Compensation and Options Committee believes such payments are appropriate and in the best interests of the company and its stockholders, after taking into consideration changing business conditions and the performance of its employees.

Mr. Ahern’s 2002 Compensation

Mr. Ahern became the President, Chief Executive Officer and Chairman of the Board of Directors on September 21, 2000. Pursuant to the terms of Mr. Ahern’s employment agreement, the Company paid Mr. Ahern a base salary of $350,000 during 2002. In connection with bonus payments or other awards to Mr. Ahern, the Board of Directors established certain targets for 2002 to be measured against actual performance at year end. In addition to a subjective assessment of the Company’s overall performance at year-end, the Board of Directors established certain specific performance targets relating to:

· CardioSEAL^® product sales;

· profitability of the Company;

· various business unit transaction milestones; and

· resolution of certain outstanding litigation.

After reviewing the Company’s actual year-end results against these targets, the Joint Compensation and Options Committee determined that Mr. Ahern had met some but not all of the targets. Accordingly, the Joint Compensation and Options Committee authorized the Company to pay Mr. Ahern a cash bonus of $97,500 and granted an option to purchase 65,000 shares of Common Stock at an exercise price equal to $2.97 per share which corresponds to the fair market value of the Common Stock on the date of grant.

On December 31, 2002, the Board of Directors, upon recommendation by the Joint Compensation and Options Committee, voted to approve an amended and restated employment agreement pursuant to which Mr. Ahern’s term as President, Chief Executive Officer and Chairman of the Board of Directors was extended to December 31, 2005. The amended and restated employment agreement provides Mr. Ahern with an annual salary of $350,000 per year and the potential to earn an annual cash bonus of up to $150,000 for performance in the preceding year. Upon the execution of the amended and restated employment agreement, the Company granted Mr. Ahern a stock option to purchase an aggregate of 75,000 shares of the Company’s Common Stock at an exercise price of $3.03 per share, and amended the vesting provisions of the original grant of 150,000 shares of Common Stock to provide that if Mr. Ahern is terminated without cause, the option shall be exercisable for one year following the termination date, to the extent that the option was exercisable on the termination date. In addition, in order to reward Mr. Ahern if there were a liquidity event for the Company’s stockholders, the amended and restated employment agreement also provides for a cash payment to Mr. Ahern in the event of a change of control of the Company, as defined therein. Such cash payment is equal to a percentage ranging from 0% to 3.5% of the total deal consideration paid by an acquirer in a transaction constituting a change of control of the Company. The percentage paid to Mr. Ahern will vary based on the amount of the total deal consideration. Mr. Ahern did not participate in the Board of Directors’ consideration of his salary and bonus.

Joint Compensation and Options Committee

Francis J. Martin, Chair

Cheryl L. Clarkson

James E. Lock, M.D.

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Report of the Audit Committee of the Board of Directors

The Audit Committee of the Company’s Board of Directors is composed of three members, currently Messrs. Schult (Chair), Fletcher and Martin, and acts under a written charter first adopted and approved in June, 2000. Between January and July 2002, the Audit Committee members were Messrs. Fletcher (Chair), Brown and Martin. During the period between May 2000 and September 2000, Mr. Fletcher served without compensation in the Office of the Chief Executive Officer of the Company as part of the Company’s interim management team and, as a result, may be deemed not to be an independent director, as defined by the Audit Committee’s charter and the rules of the NASDAQ Stock Market. Notwithstanding this, the Board of Directors determined that Mr. Fletcher’s membership on the Audit Committee is required by the best interests of the Company and its stockholders. Messrs. Schult and Martin are independent directors, as defined by the Audit Committee’s charter and the rules of the NASDAQ Stock Market.

The Audit Committee assists the Board of Directors in fulfilling its responsibilities to stockholders concerning the Company’s accounting and reporting practices, and facilitates open communication between the Audit Committee, Board of Directors, outside auditors, and management. The Audit Committee is responsible for reviewing the Company’s annual audited financial statements as well as quarterly reviews of the Company’s interim unaudited financial statements. The Company’s independent public accountants during the fiscal year ended December 31, 2002, Ernst & Young, were responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted accounting principles and for issuing a report on those financial statements. The Audit Committee’s responsibility is to monitor and review those processes.

The Audit Committee reviewed the Company’s audited financial statements for the year ended December 31, 2002 and discussed these financial statements with the Company’s management. The Audit Committee also reviewed and discussed the audited financial statements and the matters required by Statement on Auditing Standards 61 (Communication with Audit Committees) with Ernst & Young.

Ernst & Young also provided the Audit Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). The Audit Committee discussed with Ernst & Young the matters disclosed in this letter and their independence from the Company. The Audit Committee also considered and determined that the provision by Ernst & Young of other, non-audit related services to the Company which are referred to under “Independent Public Accountants” is compatible with maintaining Ernst & Young’s independence.

Based on its discussions with management and the independent public accountants, and its review of the representations and information provided by management and the independent public accountants, the Audit Committee recommended to the Company’s Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Proxy Statement, in whole or in part, the foregoing report shall not be deemed to be incorporated by reference into any such filing.

Audit Committee

Harry A. Schult, Chair

R. John Fletcher

Francis J. Martin

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Independent Public Accountants

On June 28, 2002, the Board of Directors, through the audit committee, decided to no longer engage Arthur Andersen LLP (“Arthur Andersen”) as the Company’s independent public accountants and to engage Ernst & Young as the Company’s independent public accountants. At such time, the Company provided Arthur Andersen with a copy of the following disclosures.

Arthur Andersen’s reports on the Company’s consolidated financial statements for each of the years ended 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the years ended December 31, 2001 and 2000 and the subsequent interim period preceding the change in the Company’s independent public accountant, (i) there were no disagreements with Arthur Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to Arthur Andersen’s satisfaction, would have caused them to make reference to the subject matter of the disagreement in connection with their report on the Company’s consolidated financial statements for such years; and (ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

During the years ended December 31, 2001 and 2000 and the subsequent interim period preceding the change in the Company’s independent public accountant, neither the Company nor anyone acting on behalf of the Company consulted Ernst & Young regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or any reportable event as defined in Item 304(a)(1)(v) of Regulation S-K.

Audit Fees

The following table discloses the fees that Arthur Andersen and Ernst & Young billed the Company for professional services rendered in each of the last two fiscal years. The Company’s 2002 sale of its neurosciences business unit, as a discontinued operation, required restatement of the Company’s consolidated financial statements and a re-issuance of its prior auditor’s report. Because Arthur Andersen ceased operations, the Company’s new auditor, Ernst & Young, was required to re-audit those years. Included among those audit fees listed below billed by Ernst & Young in 2002 are approximately $210,000 of fees incurred in connection with this re-audit.

	Fiscal Year 2002		Fiscal Year 2001
Type of Fee	Arthur Andersen	Ernst & Young	Arthur Andersen
Audit Fees(1)	$ 15,000	$351,000	$207,000
Audit Related Fees(2)	—	—	—
Tax Fees(3)	101,000	130,000	290,000
All Other Fees(4)	—	—	—

1. Audit fees consist of fees in connection with the audit of the Company’s financial statements, the review of the financial statements included in each of the Company’s quarterly reports, and the required re-audit discussed above.

2. Audit related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under Audit Fees.

3. Tax fees consist of fees for tax compliance, tax advice and tax planning.

4. All other fees are fees not already described in (1) through (3) above.

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Stock Performance Graph

The following graph compares the cumulative total stockholder return on the Common Stock from December 31, 1997 (the last trading day before the beginning of the Company’s fifth preceding fiscal year) through December 31, 2002 with the cumulative total return during this period of (i) The NASDAQ Stock Market—U.S. Index and (ii) The S&P Health Care Equipment Index. This graph assumes the investment of $100 on December 31, 1997 in the Common Stock and in each of the indices listed above, and assumes dividends are reinvested.

CUMULATIVE TOTAL RETURN

	12/1997		12/1998		12/1999		12/2000		12/2001		12/2002
NMT Medical, Inc.	$	100	$	46.88	$	35.94	$	14.45	$	105.63	$	37.88
NASDAQ Stock Market-U.S. Index	$	100	$	140.99	$	261.48	$	157.77	$	125.16	$	86.53
S&P Health Care Equipment Index	$	100	$	141.59	$	130.52	$	191.60	$	181.88	$	158.86

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PROPOSAL 2—APPROVAL OF AMENDMENT TO 2001 STOCK INCENTIVE PLAN

On February 20, 2003, the Board of Directors adopted resolutions, subject to stockholder approval, approving an amendment (the “Stock Incentive Plan Amendment”) to the Company’s 2001 Stock Incentive Plan (the “Stock Incentive Plan”), to increase the number of shares of Common Stock authorized for issuance thereunder from 500,000 shares to 700,000 shares.

On March 31, 2003, 27,500 shares remained available for issuance under the Stock Incentive Plan. The Stock Incentive Plan was adopted to supplement the Company’s 1996 Stock Option Plan, as amended, and 1998 Stock Incentive Plan (the “Prior Plans”). As of March 31, 2003, an aggregate of 124,932 shares were available for grant under the Prior Plans.

The Board of Directors believes that the future success of the Company depends, in large part, upon the ability of the Company to maintain a competitive position in attracting, retaining and motivating key personnel, consultants and advisors. The Board of Directors believes that the issuance of stock options is a key element underlying the Company’s ability to attract, retain and motivate key personnel, consultants and advisors, and better aligns the interests of such persons with those of the Company’s stockholders. Therefore, the Board of Directors believes that the approval of the Stock Incentive Plan Amendment is in the best interests of the Company and its stockholders and recommends a vote in favor of this proposal.

Description of the Stock Incentive Plan

The following is a brief summary of the Stock Incentive Plan. The following summary is qualified in its entirety by reference to the Stock Incentive Plan, a copy of which, as proposed to be amended, is attached to the electronic copy of this Proxy Statement filed with the Commission and may be accessed from the Commission’s home page (www.sec.gov). In addition, a copy of the Stock Incentive Plan may be obtained from the Secretary of the Company.

Types of Awards

The Stock Incentive Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Code, non-statutory stock options, and restricted stock awards (collectively, “Awards”).

Incentive Stock Options and Nonstatutory Stock Options.    Optionees receive the right to purchase a specified number of shares of Common Stock at a specified option price and subject to such other terms and conditions as are specified in connection with the option grant. Options may be granted at an exercise price which may be less than, equal to or greater than the fair market value of the Common Stock on the date of grant. Under present law, however, incentive stock options and options intended to qualify as performance-based compensation under Section 162(m) of the Code may not be granted at an exercise price less than 100% of the fair market value of the Common Stock on the date of grant (or less than 110% of the fair market value in the case of incentive stock options granted to optionees holding more than 10% of the voting power of the Company). The Stock Incentive Plan permits the following forms of payment of the exercise price of options: (i) payment by cash, check or in connection with a “cashless exercise” through a broker, (ii) surrender to the Company of shares of Common Stock, (iii) delivery to the Company of a promissory note, (iv) any other lawful means, or (v) any combination of these forms of payment.

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Restricted Stock Awards.    Restricted stock Awards entitle recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares from the recipient in the event that the conditions specified in the applicable Award are not satisfied prior to the end of the applicable restriction period established for such Award.

Eligibility to Receive Awards

Employees, officers, directors, consultants and advisors of the Company and its present and future corporate subsidiaries are eligible to be granted Awards under the Stock Incentive Plan. Under present law, however, incentive stock options may only be granted to employees of the Company and its present and future corporate subsidiaries. The maximum number of shares with respect to which Awards may be granted to any participant under the Stock Incentive Plan may not exceed 200,000 shares per calendar year.

Plan Benefits

As of March 31, 2003, approximately 110 persons were eligible to receive Awards under the Stock Incentive Plan, including the Company’s two executive officers and six non-employee directors.

On March 31, 2003, the last reported sale price of the Common Stock on The NASDAQ National Market was $3.20.

Administration

The Stock Incentive Plan is administered by the Board of Directors. The Board of Directors has the authority to adopt, amend and repeal the administrative rules, guidelines and practices relating to the Stock Incentive Plan and to interpret the provisions of the Stock Incentive Plan. Pursuant to the terms of the Stock Incentive Plan, the Board of Directors may delegate authority under the Stock Incentive Plan to one or more committees or subcommittees of the Board of Directors. The Board of Directors has authorized the Joint Compensation and Options Committee to administer certain aspects of the Stock Incentive Plan, including the granting of options to executive officers and newly hired employees.

Subject to any applicable limitations contained in the Stock Incentive Plan, the Board of Directors, the Joint Compensation and Options Committee, or any other committee to whom the Board of Directors delegates authority, as the case may be, selects the recipients of Awards and determines:

· the number of shares of Common Stock covered by options and the dates upon which such options become exercisable,

· the exercise price of options,

· the duration of options, and

· the number of shares of Common Stock subject to any restricted stock or other stock-based Awards and the terms and conditions of such Awards, including conditions for repurchase, issue price and repurchase price.

The Board of Directors is required to make appropriate adjustments in connection with the Stock Incentive Plan and any outstanding Awards to reflect stock splits, stock dividends, recapitalizations, spin-offs and other

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similar changes in capitalization. The Stock Incentive Plan also contains provisions addressing the consequences of any Reorganization Event, which is defined as:

· any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property, or

· any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction.

Upon the occurrence of a Reorganization Event, all outstanding options are to be assumed, or substituted for, by the acquiring or succeeding corporation. However, if the acquiring or succeeding corporation does not agree to assume, or substitute for, outstanding options, then the Board of Directors must either accelerate the options to make them fully exercisable prior to consummation of the Reorganization Event or provide for a cash out of the value of any outstanding options. Upon the occurrence of a Reorganization Event, the repurchase and other rights of the Company under each outstanding restricted stock Award will inure to the benefit of the acquiring or succeeding corporation. The Board of Directors will specify the effect of a Reorganization Event on any other Award at the time the Award is granted.

If any Award expires or is terminated, surrendered, canceled or forfeited, the unused shares of Common Stock covered by such Award will again be available for grant under the Stock Incentive Plan, subject, however, in the case of incentive stock options, to any limitations under the Code.

Amendment or Termination

No Award may be made under the Stock Incentive Plan after April 26, 2011, but Awards previously granted may extend beyond that date. The Board of Directors may at any time amend, suspend or terminate the Stock Incentive Plan, except that no Award designated as subject to Section 162(m) of the Code by the Board of Directors after the date of such amendment shall become exercisable, realizable or vested (to the extent such amendment was required to grant such Award) unless and until such amendment shall have been approved by the Company’s stockholders.

Federal Income Tax Consequences

The following generally summarizes the United States federal income tax consequences that generally will arise with respect to awards granted under the Stock Incentive Plan. This summary is based on the tax laws in effect as of the date of this proxy statement. Changes to these laws could alter the tax consequences described below.

Incentive Stock Options.    A participant will not have income upon the grant of an incentive stock option. Also, except as described below, a participant will not have income upon exercise of an incentive stock option if the participant has been employed by the Company or its corporate parent or 50% or more-owned corporate subsidiary at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under “Nonstatutory Stock Options.” The exercise of an incentive stock option may subject the participant to the alternative minimum tax.

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A participant will have income upon the sale of the stock acquired under an incentive stock option at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the stock. If a participant sells the stock more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the stock prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be ordinary income and a portion may be capital gain. This capital gain will be long-term if the participant has held the stock for more than one year and otherwise will be short-term. If a participant sells the stock at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.

Nonstatutory Stock Options.    A participant will not have income upon the grant of a nonstatutory stock option. A participant will have compensation income upon the exercise of a nonstatutory stock option equal to the value of the stock on the day the participant exercised the option less the exercise price. Upon sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.

Restricted Stock.    A participant will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Code is made within 30 days of the date of grant. If a timely 83(b) election is made, then a participant will have compensation income equal to the value of the stock less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the date of grant. If the participant does not make an 83(b) election, then when the stock vests the participant will have compensation income equal to the value of the stock on the vesting date less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.

Tax Consequences to the Company.    There will be no tax consequences to the Company except that the Company will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Code.

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PROPOSAL 3—APPROVAL OF AMENDMENT TO

2001 EMPLOYEE STOCK PURCHASE PLAN

On February 20, 2003, the Board of Directors adopted resolutions, subject to stockholder approval, approving an amendment (the “ESPP Amendment”) to the Company’s 2001 Employee Stock Purchase Plan (the “ESPP”), to increase the number of shares of Common Stock authorized for issuance thereunder from 125,000 shares to 275,000 shares.

The Employee Stock Purchase Plan permits eligible employees to purchase common stock at a discount from fair market value through payroll deductions. On March 31, 2003, only two shares remained available for issuance under the ESPP. The Board of Directors believes that the future success of the Company depends, in large part, upon the ability of the Company to maintain a competitive position in attracting, retaining and motivating key personnel. The Board of Directors believes that the granting of awards under the ESPP is a key element underlying the Company’s ability to attract, retain and motivate key personnel, and better aligns the interests of such personnel with those of the Company’s stockholders. Therefore, the Board of Directors believes that the approval of the ESPP Amendment is in the best interests of the Company and its stockholders and recommends a vote in favor of this proposal.

Summary of the ESPP

The following is a brief summary of the ESPP. The following summary is qualified in its entirety by reference to the ESPP, a copy of which, as proposed to be amended, is attached to the electronic copy of this Proxy Statement filed with the Commission and may be accessed from the Commission’s home page (www.sec.gov). In addition, a copy of the ESPP may be obtained from the Secretary of the Company.

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. The Board of Directors or a committee appointed by the Board of Directors (the “Committee”) administers the ESPP. The Board of Directors or the Committee has authority to make rules and regulations for the administration of the ESPP and its interpretation and decisions regarding the ESPP are final and conclusive. Subject to the provisions of the ESPP, the Board of Directors may amend or terminate the ESPP at any time.

All of the Company’s employees, including directors who are also employees and the employees of any subsidiaries of the Company designated by the Board of Directors or the Committee (“Designated Subsidiary”) are eligible to participate in the ESPP, provided that they are customarily employed by the Company or Designated Subsidiary for more than 20 hours per week and more than five months in a calendar year, have been employed by the Company or a Designated Subsidiary for at least three months, and are employees of the Company or Designated Subsidiary on the first day of the Plan Period (as defined below). Employees who would own immediately after the grant 5% or more of the total combined voting power or value of the stock of the Company or any subsidiary are not eligible to participate in the ESPP. As of March 31, 2003, approximately 100 of the Company’s employees were eligible to participate in the ESPP.

The Company makes offerings to eligible employees to purchase stock under the ESPP. Offerings begin April 1st and/or October 1st, or the first business day thereafter (the “Commencement Date”), and commence a six-month period (a “Plan Period”), during which payroll deductions are made and held for the purchase of Common Stock on the last business day of the Plan Period (the “Exercise Date”). The Board of Directors or the Committee may, in its discretion, choose a different Plan Period of 12 months or less for subsequent offerings. Notwithstanding anything to the contrary, the next Plan Period following the Plan Period ended on March 31, 2003 will begin on June 19, 2003 and end on September 30, 2003.

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An eligible employee may participate in the offering by completing and forwarding a payroll deduction authorization form to the Company’s payroll office, authorizing the Company to deduct from his or her regular pay a dollar amount not to exceed 12% of such pay during the Plan Period. Unless the employee files a new form or withdraws from the Plan, his or her deductions will continue at the same rate for future offerings as long as the ESPP remains in effect. No employee may be granted an option under the ESPP that permits him or her to accrue rights to purchase stock under this plan (and other such plans of the Company and its subsidiaries) at a rate that exceeds $25,000 of the fair market value of the Company’s stock (based on the fair market value of such stock on the Commencement Date of the Plan Period) in any calendar year in which such option is outstanding at any time.

An employee may decrease or discontinue, but may not increase, the payroll deduction one time during any Plan Period. If an employee discontinues his or her payroll deductions during a Plan Period, but does not elect to withdraw his or her funds, funds deducted prior to his or her election to discontinue will be applied to the purchase of Common Stock on the Exercise Date. An employee may, during a Plan Period, withdraw all of the employee’s balance accumulated in his or her payroll deduction account. Partial withdrawals are not permitted. If an employee withdraws all of such balance, then he or she may not participate again during the remainder of the Plan Period.

On the Commencement Date, the Company grants each eligible employee who is then a participant in the ESPP an option to purchase on the Exercise Date, at the Option Price (defined below), the largest number of whole shares of Common Stock of the Company that does not exceed the number determined by multiplying $2,083 by the number of full months in the Plan Period and dividing the result by the closing price on the Commencement Date of such Plan Period. Under the terms of the ESPP, the purchase price of each share is an amount equal to 85% of the closing price of the Common Stock on either the first business day of the Plan Period or the Exercise Date, whichever is less (the “Option Price”). The closing price is the closing price per share on The NASDAQ National Market, the closing price on any national securities exchange on which the Common Stock is listed, or the average of the closing bid and asked prices in the over-the-counter market, whichever is applicable, as published in The Wall Street Journal. If no sales were made on that day, the price is the reported price for the preceding day on which sales were made.

On the Exercise Date, each employee who continues to be a participant in the ESPP is deemed to have exercised the option, at the Option Price, to the extent of accumulated payroll deductions. Any balance remaining in the employee’s payroll deduction account at the end of the Plan Period is automatically refunded to the employee, except that any balance that is less than the purchase price of one share of Common Stock will carry over to the payroll deduction account for the next Plan Period, unless the employee decides not to participate in the next Plan Period, in which case it will be refunded. In the event of such employee’s death, the refund is paid to the employee’s designated beneficiary, the executor or administrator of such employee’s estate, or, in the absence of a designated beneficiary, executor or administrator, to such other persons as the Company may designate.

In the event of a subdivision of outstanding shares of Common Stock or payment of a dividend in Common Stock, the Board of Directors is required to make appropriate adjustments to the number of shares approved for the ESPP and the limitations on purchase of shares, as well as other adjustments that the Board of Directors or Committee deems equitable. In the event of a merger or consolidation in which the holders of the capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 80% of the voting power of the capital stock of the surviving corporation (“Continuity of Control”), each participant holding an

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outstanding option under the ESPP will be entitled to receive, at the end of the Plan Period, the equivalent number of securities or property which holders of the Common Stock were entitled to receive upon consummation of such merger or consolidation. In the event of a merger or consolidation of the Company not involving a Continuity of Control, the Board of Directors may

· provide that participants will receive such stock or securities as holders of shares of the Company Common Stock received pursuant to the terms of the transaction;

· cancel all outstanding options under the ESPP and refund all payroll deductions prior to the effective date of such transaction; or

· cancel all outstanding options under the ESPP as of the effective date of such transaction, provided that notice of the cancellation is given to all participants and participants have the right to exercise any outstanding option as of a date, at least ten days prior to the effective date of such transaction, determined by the Board of Directors.

Federal Income Tax Consequences

The following generally summarizes the United States federal income tax consequences that will arise with respect to participation in the ESPP and with respect to the sale of Common Stock acquired under the ESPP. This summary is based on the tax laws in effect as of the date of this proxy statement. Changes to these laws could alter the tax consequences described below.

Tax Consequences to Participants.    A participant will not have income upon enrolling in the plan or upon purchasing stock at the end of an offering.

A participant may have both compensation income and capital gain income if the participant sells stock that was acquired under the ESPP at a profit (if sales proceeds exceed the purchase price). The amount of each type of income will depend on when the participant sells the stock. If the participant sells the stock more than two years after the commencement of the offering during which the stock was purchased and more than one year after the date that the participant purchased the stock, then the participant will have compensation income equal to the lesser of:

· 15% of the value of the stock on the day the offering commenced; and

· the participant’s profit.

Any excess profit will be long-term capital gain.

If the participant sells the stock prior to satisfying these waiting periods, then he or she will have engaged in a disqualifying disposition. Upon a disqualifying disposition, the participant will have compensation income equal to the value of the stock on the day he or she purchased the stock less the purchase price. If the participant’s profit exceeds the compensation income, then the excess profit will be capital gain. This capital gain will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.

If the participant sells the stock at a loss (if sales proceeds are less than the purchase price), then the loss will be a capital loss. This capital loss will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.

Tax Consequences to the Company.    There will be no tax consequences to the Company except that the Company will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Code.

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PROPOSAL 4—APPROVAL OF AMENDMENT TO

1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

On February 20, 2003, the Board of Directors adopted resolutions, subject to stockholder approval, approving an amendment (the “Directors Plan Amendment”) to the Company’s 1996 Stock Option Plan for Non-Employee Directors, as amended (the “Directors Plan”), to increase the number of shares of Common Stock authorized for issuance thereunder from 225,000 shares to 325,000 shares.

On March 31, 2003, 95,000 shares remained available for issuance under the Directors Plan, approximately two-thirds of which will be awarded to directors in connection with the Annual Meeting. The Board of Directors believes that it is beneficial to the Company to encourage ownership in the Company by non-employee directors of the Company and to provide them with a further incentive to remain directors of the Company. Therefore, the Board of Directors believes that the approval of the Directors Plan Amendment is in the best interests of the Company and its stockholders and recommends a vote in favor of this proposal.

Summary of the Directors Plan

The following is a brief summary of the Directors Plan. The following summary is qualified in its entirety by reference to the Directors Plan, a copy of which, as proposed to be amended, is attached to the electronic copy of this Proxy Statement filed with the Commission and may be accessed from the Commission’s home page (www.sec.gov). In addition, a copy of the Directors Plan may be obtained from the Secretary of the Company.

The Board of Directors administers the Directors Plan. The Board of Directors has no discretion with respect to the selection of Directors to receive options, the number of shares subject to any such options, the purchase price thereunder, or the timing of grants of options under the Directors Plan. However, the Board of Directors resolves all questions concerning interpretation of the Directors Plan or any options granted thereunder.

Members of the Company’s Board who are not employees of the Company or its affiliates, who do not otherwise receive compensation from the Company or its affiliates (other than compensation received solely for services rendered as a director of the Company) and who have not, within one year immediately preceding the determination of such director’s eligibility, received any award under any other plan of the Company or its affiliates that entitles the participants therein to acquire stock, stock options or stock appreciation rights of the Company or its affiliates, are eligible to receive grants of options under the Directors Plan.

Upon his or her initial election to the Board of Directors, each eligible director is entitled to receive an option to purchase 20,000 shares of Common Stock under the Directors Plan. The options granted are subject to vesting in equal monthly installments over a period of three years commencing with the date of the election or appointment of such director. In addition, immediately following each annual stockholders meeting, each eligible director, other than an eligible director first elected to the Board of Directors within the 12 months immediately preceding and including such meeting, is granted an option to purchase 5,000 shares of Common Stock as of the date of such meeting. In addition, immediately following each annual stockholders meeting, each eligible director who served as a member of a committee of the Board of Directors during the preceding fiscal year is also granted an additional option to purchase (i) 2,000 shares of Common Stock if such director served as a chairperson of such committee or (ii) 1,000 shares of Common Stock if such director did not serve as a chairperson of such committee. The foregoing types of grants made in connection with an annual meeting of stockholders are fully vested six months after the date of grant.

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All options granted under the Directors Plan are non-statutory stock options not intended to qualify under Section 422 of the Code. Each option granted under the Directors Plan is evidenced by an agreement with the Company which contains terms and provisions consistent with the Directors Plan. The purchase price per share upon the exercise of each option granted under the Directors Plan is the fair market value per share on the date the option is granted, which equals the closing sales price as reported on The NASDAQ National Market on the date of grant, or, if the shares did not trade on that date, the closing sales price on the first date prior thereto on which the shares were so traded. The closing sales price of the Common Stock on March 31, 2003 was $3.20, as reported on The NASDAQ National Market.

Upon termination of the service of a non-employee director for any reason, all outstanding options which have become vested as of the date of termination will be exercisable in whole or in part for one year from the date of termination, provided that in no event may the options be exercised beyond ten years from the date of grant. Participants generally may not transfer options under the Directors Plan, except by will or by the laws of descent and distribution, or pursuant to a qualified domestic relations order.

The Board of Directors is required to make appropriate adjustments in connection with the Directors Plan and any outstanding grants to reflect stock dividends, stock splits, subdivisions, or combinations of the shares or other change in corporate structure affecting the shares. Subject to the provisions of the Directors Plan, the Board of Directors may amend the Directors Plan. The Directors Plan will terminate in June 2006. The amendment or termination of the Directors Plan may not, without the consent of the option holder, alter or impair any rights or obligations under any option previously granted under the Directors Plan.

As of March 31, 2003, the Company had six non-employee directors who were eligible to participate in the Directors Plan. From the initial adoption of the Directors Plan through March 31, 2003, options to purchase an aggregate of 15,000 shares had been granted to Mr. Brown; 20,000 shares had been granted to Ms. Clarkson; 30,000 shares had been granted to Mr. Fletcher; 15,000 shares had been granted to Dr. Lock; 20,000 shares had been granted to Mr. Martin; and 15,000 shares had been granted to Mr. Schult. During the year ended December 31, 2002, the Company granted the following options under the Directors Plan:

Options to purchase 5,000 shares of Common Stock at an exercise price of $6.38 per share were granted to each of Mr. Fletcher, Ms. Clarkson, Mr. Martin, Mr. Brown and Dr. Lock on June 28, 2002, the date of the Company’s 2002 Annual Meeting of Stockholders; and an option to purchase 15,000 shares of Common Stock at an exercise price of $6.15 per share was granted to Mr. Schult on May 2, 2002, the date of his election to the Company’s Board of Directors.

Federal Income Tax Consequences

The following is a summary of the United States federal income tax consequences that generally will arise with respect to options granted under the Directors Plan and with respect to the sale of Common Stock acquired under the Directors Plan. This summary is based on the federal tax laws in effect as of the date of this proxy statement. Changes to these tax laws could alter the tax consequences described below.

Tax Consequences to Directors

A director generally will not recognize taxable income upon the grant of an option under the Director Plan. Nevertheless, a director generally will recognize ordinary compensation income upon the exercise of the option in an amount equal to the excess of the fair market value of the Common Stock acquired through the exercise of the option (the “Option Stock”) on the exercise date over the exercise price.

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A director will have a tax basis for any Option Stock equal to the exercise price plus any income recognized with respect to the option. Upon selling Option Stock, a director generally will recognize capital gain or loss in an amount equal to the difference between the sale price of the Option Stock and the director’s tax basis in the Option Stock. This capital gain or loss will be a long-term capital gain or loss if the director has held the Option Stock for more than one year before the date of the sale and will be a short-term capital gain or loss if the director has held the Option Stock for a shorter period.

Tax Consequences to the Company

The grant of an option under the Directors Plan will have no tax consequences to the Company. The Company generally will be entitled to a business expense deduction, however, with respect to any ordinary compensation income recognized by a director under the Directors Plan. Any such deduction will be subject to the limitations of Section 162(m) of the Code.

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PROPOSAL 5—RATIFICATION OF THE SELECTION

OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has selected the firm of Ernst & Young as the Company’s independent public accountants for the current year. Ernst & Young served as the Company’s independent public accountants for the year ended December 31, 2002, beginning in June of 2002. Although stockholder approval of the Board of Directors’ selection of Ernst & Young is not required by law, the Board of Directors believes that it is advisable to give stockholders an opportunity to ratify this selection. If this proposal is not approved, the Board of Directors may reconsider its selection.

A representative of Ernst & Young is expected to be present at the meeting and will have an opportunity to make a statement if he or she desires to do so and will also be available to respond to appropriate questions from stockholders.

The Board of Directors unanimously recommends a vote in favor of the ratification of this selection.

OTHER MATTERS

Matters to be Considered at the Meeting

The Board of Directors does not know of any other matters which may come before the Annual Meeting. However, if any other matters are properly presented at the Annual 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.

Solicitation of Proxies

The Company will bear the costs of soliciting proxies. In addition to solicitations by mail, the Company’s directors, officers and regular employees, without additional remuneration, may solicit proxies by telephone, telegraph, facsimile, e-mail and personal interviews. The Company will also request that brokerage houses, custodians, nominees and fiduciaries all forward copies of the proxy material to those persons for whom they hold shares and request instructions for voting such proxies. The Company will reimburse such brokerage houses and other persons for their reasonable expenses in connection with this distribution.

Householding of Annual Meeting Materials

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of the Company’s proxy statement or annual report may have been sent to multiple shareholders in your household. The Company will promptly deliver a separate copy of either document to you if you call or write the Company at the following address or phone number: Secretary, NMT Medical, Inc., 27 Wormwood Street, Boston, Massachusetts 02210-1625, (617) 737-0930. If you want to receive separate copies of the annual report and proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact the Company at the above address and phone number.

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Stockholder Proposals for 2004 Annual Meeting

Proposals of stockholders intended to be presented at the 2004 Annual Meeting of Stockholders must be received by the Company at its principal offices, 27 Wormwood Street, Boston, Massachusetts 02210-1625 no later than January 12, 2004 in order to be considered for inclusion in the proxy statement for that meeting.

If a stockholder of the Company wishes to present a proposal before the 2004 Annual Meeting of Stockholders, but does not wish to have the proposal considered for inclusion in the Company’s proxy statement and proxy card, such stockholder must give written notice to the Secretary of the Company at the address noted above. The Secretary must receive such notice by March 28, 2004. If a stockholder fails to provide timely notice of a proposal to be presented at the 2004 Annual Meeting of Stockholders, 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,

Richard E. Davis, Secretary

May 9, 2003

THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE ANNUAL 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 ANNUAL MEETING AND YOUR COOPERATION IS APPRECIATED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR STOCK PERSONALLY EVEN IF YOU HAVE SENT IN YOUR PROXIES.

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Appendix A

NMT MEDICAL, INC.

ANNUAL MEETING OF STOCKHOLDERS – JUNE 18, 2003

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, revoking all prior proxies, hereby appoints John E. Ahern and Richard E. Davis, and each of them, with power of substitution and revocation, as Proxies to represent and vote as designated hereon all the shares of stock of NMT MEDICAL, INC. (the “Company”) which the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders of the Company to be held at the Constitution Room at the Seaport Hotel, One Seaport Lane, Boston, Massachusetts 02210, on Wednesday, June 18, 2003 at 10:00 a.m., Boston, Massachusetts time, and at any adjournment thereof.

PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED

POSTAGE-PAID RETURN ENVELOPE.

Annual Meeting of Stockholders

NMT MEDICAL, INC.

June 18, 2003

Please date, sign and mail your

proxy card back as soon as possible.

Please detach and mail in the envelope provided

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE. x

PROPOSAL 1 – Election of Directors:

	NOMINEES
¨   FOR ALL NOMINEES	O   John E. Ahern
¨   WITHHOLD AUTHORITY       FOR ALL NOMINEES	O   Robert G. Brown O   Cheryl L. Clarkson
¨   FOR ALL EXCEPT       (See instructions below)	O   R. John Fletcher O   Daniel F. Hanley, M.D. O   James E. Lock, M.D. O   Francis J. Martin O   Harry A. Schult

INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: l

	FOR	AGAINST	ABSTAIN
PROPOSAL 2 –
To approve an amendment to the Company’s 2001 Stock Incentive Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder from 500,000 shares to 700,000 shares.	¨	¨	¨

2

	FOR	AGAINST	ABSTAIN
PROPOSAL 3 –
To approve an amendment to the Company’s 2001 Employee Stock Purchase Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder from 125,000 shares to 275,000 shares.	¨	¨	¨
	FOR	AGAINST	ABSTAIN
PROPOSAL 4 –
To approve an amendment to the Company’s 1996 Stock Option Plan for Non-Employee Directors to increase the number of shares of the Company’s common stock authorized for issuance thereunder from 225,000 shares to 325,000 shares.	¨	¨	¨
	FOR	AGAINST	ABSTAIN
PROPOSAL 5 –
To ratify the appointment of Ernst & Young LLP as the Company’s independent public accountants.	¨	¨	¨

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.

IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES AND FOR PROPOSALS 2, 3, 4 and 5.

To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. ¨

SIGNATURE OF STOCKHOLDER                                                                                               Date:                                                      

Note: This proxy must be signed exactly as the name appears hereon. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

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Appendix B

NMT Medical, Inc.

2001 STOCK INCENTIVE PLAN

1. Purpose

The purpose of this 2001 Stock Incentive Plan (the “Plan”) of NMT Medical, Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a significant interest, as determined by the Board of Directors of the Company (the “Board”).

2. Eligibility

All of the Company’s employees, officers, directors, consultants and advisors (and any individuals who have accepted an offer for employment) are eligible to be granted options or restricted stock awards (each, an “Award”) under the Plan. Each person who has been granted an Award under the Plan shall be deemed a “Participant”.

3. Administration and Delegation

(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.

(b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

4. Stock Available for Awards

(a) Number of Shares. Subject to adjustment under Section 7, Awards may be made under the Plan for up to 500,000 shares of common stock, $.001 par value per share, of the Company (the “Common Stock”). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan, subject, however, in the case of Incentive Stock Options (as hereinafter defined), to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(b) Per-Participant Limit. Subject to adjustment under Section 7, the maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 200,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code (“Section 162(m)”).

5. Stock Options

(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option”.

(b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) which is intended to be an Incentive Stock Option is not an Incentive Stock Option.

(c) Exercise Price. The Board shall establish the exercise price at the time each Option is granted and specify it in the applicable option agreement.

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(d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement.

(e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised.

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as the Board may, in its sole discretion, otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

(3) when the Common Stock is registered under the Securities Exchange Act of 1934 (the “Exchange Act”), by delivery of shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board in good faith (“Fair Market Value”), provided (i) such method of payment is then permitted under applicable law and (ii) such Common Stock, if acquired directly from the Company was owned by the Participant at least six months prior to such delivery;

(4) to the extent permitted by the Board, in its sole discretion by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

(5) by any combination of the above permitted forms of payment.

(g) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2.

6. Restricted Stock.

(a) Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at

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their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”).

(b) Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any.

(c) Stock Certificates. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

7. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(b), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, and (iv) the repurchase price per share subject to each outstanding Restricted Stock Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section 7(a) applies and Section 7(c) also applies to any event, Section 7(c) shall be applicable to such event, and this Section 7(a) shall not be applicable.

(b) Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date. The Board may specify the effect of a liquidation or dissolution on any Restricted Stock Award granted under the Plan at the time of the grant.

(c) Reorganization Events

(1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common

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Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction.

(2)    Consequences of a Reorganization Event on Options.    Upon the occurrence of a Reorganization Event, or the execution by the Company of any agreement with respect to a Reorganization Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.

Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by the Participants before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the “Acquisition Price”), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Reorganization Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. To the extent all or any portion of an Option becomes exercisable solely as a result of the first sentence of this paragraph, upon exercise of such Option the Participant shall receive shares subject to a right of repurchase by the Company or its successor at the Option exercise price. Such repurchase right (1) shall lapse at the same rate as the Option would have become exercisable under its terms and (2) shall not apply to any shares subject to the Option that were exercisable under its terms without regard to the first sentence of this paragraph.

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(3) Consequences of a Reorganization Event on Restricted Stock Awards. Upon the occurrence of a Reorganization Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.

8. General Provisions Applicable to Awards

(a) Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

(b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.

(c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award.

(e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, when the Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

(f) Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same

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or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.

(g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

9. Miscellaneous

(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(c) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Award granted to a Participant that is intended to comply with Section 162(m) shall become exercisable, vested or realizable, as applicable to such Award, unless and until the Plan has been approved by the Company’s stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m)

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(including the vote required under Section 162(m)). No Awards shall be granted under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)).

(e) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law.

Adopted by the Board of Directors on April 26, 2001.

Approved by the Stockholders of June 7, 2001.

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NMT MEDICAL, INC.

Amendment No. 1

to

2001 Stock Incentive Plan

The 2001 Stock Incentive Plan (the “Plan”) of NMT Medical, Inc. (the “Company”) is hereby amended as follows (capitalized terms used herein and not defined herein shall have the respective meaning ascribed to such terms in the Plan):

1.    The first sentence of Section 4(a) of the Plan shall be deleted in its entirety and replaced with the following:

“Subject to adjustment under Section 7, Awards may be made under the Plan for up to 700,000 shares of common stock, $.001 par value per share, of the Company (the “Common Stock”).”

Except as aforesaid, the Plan shall remain in full force and effect.

Adopted by the Board of Directors on February 20, 2003.

Approved by the Stockholders on                         .

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Appendix C

NMT Medical, Inc.

2001 EMPLOYEE STOCK PURCHASE PLAN

April 26, 2001

The purpose of this Plan is to provide eligible employees of NMT Medical, Inc. (the “Company”) and certain of its subsidiaries with opportunities to purchase shares of the Company’s common stock, $.001 par value (the “Common Stock”), commencing on June 7, 2001. One hundred and twenty-five thousand (125,000) shares of Common Stock in the aggregate have been approved for this purpose. This Plan is intended to qualify as an “employee stock purchase plan” as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder, and shall be interpreted consistent therewith.

1. Administration. The Plan will be administered by the Company’s Board of Directors (the “Board”) or by a Committee appointed by the Board (the “Committee”). The Board or the Committee has authority to make rules and regulations for the administration of the Plan and its interpretation and decisions with regard thereto shall be final and conclusive.

2. Eligibility. All employees of the Company, including Directors who are employees, and all employees of any subsidiary of the Company (as defined in Section 424(f) of the Code) designated by the Board or the Committee from time to time (a “Designated Subsidiary”), are eligible to participate in any one or more of the offerings of Options (as defined in Section 9) to purchase Common Stock under the Plan provided that:

(a) they are customarily employed by the Company or a Designated Subsidiary for more than 20 hours a week and for more than five months in a calendar year; and

(b) they have been employed by the Company or a Designated Subsidiary for at least three months prior to enrolling in the Plan; and

(c) they are employees of the Company or a Designated Subsidiary on the first day of the applicable Plan Period (as defined below).

No employee may be granted an option hereunder if such employee, immediately after the option is granted, owns 5% or more of the total combined voting power or value of the stock of the Company or any subsidiary. For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of an employee, and all stock which the employee has a contractual right to purchase shall be treated as stock owned by the employee.

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3. Offerings. The Company will make one or more offerings (“Offerings”) to employees to purchase stock under this Plan. Offerings will begin each April 1st and October 1st, or the first business day thereafter (the “Offering Commencement Dates”). Each Offering Commencement Date will begin a six month period (a “Plan Period”) during which payroll deductions will be made and held for the purchase of Common Stock at the end of the Plan Period. The Board or the Committee may, at its discretion, choose a different Plan Period of twelve (12) months or less for subsequent Offerings. Notwithstanding anything to the contrary, the first Plan Period shall begin on the first date following the approval of the Plan by the Company’s Stockholders and shall end on September 30, 2001.

4. Participation. An employee eligible on the Offering Commencement Date of any Offering may participate in such Offering by completing and forwarding a payroll deduction authorization form to the employee’s appropriate payroll office at least 10 days prior to the applicable Offering Commencement Date. The form will authorize a regular payroll deduction from the Compensation received by the employee during the Plan Period. Unless an employee files a new form or withdraws from the Plan, his deductions and purchases will continue at the same rate for future Offerings under the Plan as long as the Plan remains in effect. The term “Compensation” means the amount of money reportable on the employee’s Federal Income Tax Withholding Statement, excluding overtime, shift premium, incentive or bonus awards, allowances and reimbursements for expenses such as relocation allowances for travel expenses, income or gains on the exercise of Company stock options or stock appreciation rights, and similar items, whether or not shown on the employee’s Federal Income Tax Withholding Statement, but including, in the case of salespersons, sales commissions to the extent determined by the Board or the Committee.

5. Deductions. The Company will maintain payroll deduction accounts for all participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction in any dollar amount up to a maximum of 12% of the Compensation he or she receives during the Plan Period or such shorter period during which deductions from payroll are made. The minimum payroll deduction is such percentage of compensation as may be established from time to time by the Board or the Committee.

No employee may be granted an Option (as defined in Section 9) which permits his rights to purchase Common Stock under this Plan and any other employee stock purchase plan (as defined in Section 423(b) of the Code) of the Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value of such Common Stock (determined at the Offering Commencement Date of the Plan Period) for each calendar year in which the Option is outstanding at any time.

6. Deduction Changes. An employee may decrease or discontinue his payroll deduction once during any Plan Period, by filing a new payroll deduction authorization form. However, an employee may not increase his payroll deduction during a Plan Period. If an employee elects to discontinue his payroll deductions during a Plan Period, but does not elect to withdraw his funds pursuant to Section 8 hereof, funds deducted prior to his election to discontinue will be applied to the purchase of Common Stock on the Exercise Date (as defined below).

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7. Interest. Interest will not be paid on any employee accounts, except to the extent that the Board or the Committee, in its sole discretion, elects to credit employee accounts with interest at such per annum rate as it may from time to time determine.

8. Withdrawal of Funds. An employee may at any time prior to the close of business on the last business day in a Plan Period and for any reason permanently draw out the balance accumulated in the employee’s account and thereby withdraw from participation in an Offering. Partial withdrawals are not permitted. The employee may not begin participation again during the remainder of the Plan Period. The employee may participate in any subsequent Offering in accordance with terms and conditions established by the Board or the Committee.

9. Purchase of Shares. On the Offering Commencement Date of each Plan Period, the Company will grant to each eligible employee who is then a participant in the Plan an option (“Option”) to purchase on the last business day of such Plan Period (the “Exercise Date”), at the Option Price hereinafter provided for, the largest number of whole shares of Common Stock of the Company as does not exceed the number of shares determined by multiplying $2,083 by the number of full months in the Offering Period and dividing the result by the closing price (as defined below) on the Offering Commencement Date of such Plan Period.

The purchase price for each share purchased will be 85% of the closing price of the Common Stock on (i) the first business day of such Plan Period or (ii) the Exercise Date, whichever closing price shall be less. Such closing price shall be (a) the closing price on any national securities exchange on which the Common Stock is listed, (b) the closing price of the Common Stock on the Nasdaq National Market or (c) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in The Wall Street Journal. If no sales of Common Stock were made on such a day, the price of the Common Stock for purposes of clauses (a) and (b) above shall be the reported price for the next preceding day on which sales were made.

Each employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised his Option at the Option Price on such date and shall be deemed to have purchased from the Company the number of full shares of Common Stock reserved for the purpose of the Plan that his accumulated payroll deductions on such date will pay for, but not in excess of the maximum number determined in the manner set forth above.

Any balance remaining in an employee’s payroll deduction account at the end of a Plan Period will be automatically refunded to the employee, except that any balance which is less than the purchase price of one share of Common Stock will be carried forward into the employee’s payroll deduction account for the following Offering, unless the employee elects not to participate in the following Offering under the Plan, in which case the balance in the employee’s account shall be refunded.

10. Issuance of Certificates. Certificates representing shares of Common Stock purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or (in the Company’s sole discretion) in the name of a brokerage firm, bank or other nominee holder

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designated by the employee. The Company may, in its sole discretion and in compliance with applicable laws, authorize the use of book entry registration of shares in lieu of issuing stock certificates.

11. Rights on Retirement, Death or Termination of Employment. In the event of a participating employee’s termination of employment prior to the last business day of a Plan Period, no payroll deduction shall be taken from any pay due and owing to an employee and the balance in the employee’s account shall be paid to the employee or, in the event of the employee’s death, (a) to a beneficiary previously designated in a revocable notice signed by the employee (with any spousal consent required under state law) or (b) in the absence of such a designated beneficiary, to the executor or administrator of the employee’s estate or (c) if no such executor or administrator has been appointed to the knowledge of the Company, to such other person(s) as the Company may, in its discretion, designate. If, prior to the last business day of the Plan Period, the Designated Subsidiary by which an employee is employed shall cease to be a subsidiary of the Company, or if the employee is transferred to a subsidiary of the Company that is not a Designated Subsidiary, the employee shall be deemed to have terminated employment for the purposes of this Plan.

12. Optionees Not Stockholders. Neither the granting of an Option to an employee nor the deductions from his pay shall constitute such employee a stockholder of the shares of Common Stock covered by an Option under this Plan until such shares have been purchased by and issued to him.

13. Rights Not Transferable. Rights under this Plan are not transferable by a participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee’s lifetime only by the employee.

14. Application of Funds. All funds received or held by the Company under this Plan may be combined with other corporate funds and may be used for any corporate purpose.

15. Adjustment in Case of Changes Affecting Common Stock. In the event of a subdivision of outstanding shares of Common Stock, or the payment of a dividend in Common Stock, the number of shares approved for this Plan, and the share limitation set forth in Section 9, shall be increased proportionately, and such other adjustment shall be made as may be deemed equitable by the Board or the Committee. In the event of any other change affecting the Common Stock, such adjustment shall be made as may be deemed equitable by the Board or the Committee to give proper effect to such event.

16. Merger. If the Company shall at any time merge or consolidate with another corporation and the holders of the capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 80% by voting power of the capital stock of the surviving corporation (“Continuity of Control”), the holder of each Option then outstanding will thereafter be entitled to receive at the next Exercise Date upon the exercise of such Option for each share as to which such Option shall be exercised the securities or property which a holder of one share of the Common Stock was entitled to upon and at the time of such merger or consolidation, and the Board or the Committee shall take such steps in connection with such merger or consolidation as the Board or the Committee shall deem necessary to assure that the

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provisions of Section 15 shall thereafter be applicable, as nearly as reasonably may be, in relation to the said securities or property as to which such holder of such Option might thereafter be entitled to receive thereunder.

In the event of a merger or consolidation of the Company with or into another corporation which does not involve Continuity of Control, or of a sale of all or substantially all of the assets of the Company while unexercised Options remain outstanding under the Plan, (a) subject to the provisions of clauses (b) and (c), after the effective date of such transaction, each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive in lieu of shares of Common Stock, shares of such stock or other securities as the holders of shares of Common Stock received pursuant to the terms of such transaction; or (b) all outstanding Options may be cancelled by the Board or the Committee as of a date prior to the effective date of any such transaction and all payroll deductions shall be paid out to the participating employees; or (c) all outstanding Options may be cancelled by the Board or the Committee as of the effective date of any such transaction, provided that notice of such cancellation shall be given to each holder of an Option, and each holder of an Option shall have the right to exercise such Option in full based on payroll deductions then credited to his account as of a date determined by the Board or the Committee, which date shall not be less than ten (10) days preceding the effective date of such transaction.

17. Amendment of the Plan. The Board may at any time, and from time to time, amend this Plan in any respect, except that (a) if the approval of any such amendment by the shareholders of the Company is required by Section 423 of the Code, such amendment shall not be effected without such approval, and (b) in no event may any amendment be made which would cause the Plan to fail to comply with Section 423 of the Code.

18. Insufficient Shares. In the event that the total number of shares of Common Stock specified in elections to be purchased under any Offering plus the number of shares purchased under previous Offerings under this Plan exceeds the maximum number of shares issuable under this Plan, the Board or the Committee will allot the shares then available on a pro rata basis.

19. Termination of the Plan. This Plan may be terminated at any time by the Board. Upon termination of this Plan all amounts in the accounts of participating employees shall be promptly refunded.

20. Governmental Regulations. The Company’s obligation to sell and deliver Common Stock under this Plan is subject to listing on a national stock exchange or quotation on the Nasdaq National Market (to the extent the Common Stock is then so listed or quoted) and the approval of all governmental authorities required in connection with the authorization, issuance or sale of such stock.

21. Governing Law. The Plan shall be governed by Delaware law except to the extent that such law is preempted by federal law.

22. Issuance of Shares. Shares may be issued upon exercise of an Option from authorized but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source.

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23. Notification upon Sale of Shares. Each employee agrees, by entering the Plan, to promptly give the Company notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were purchased.

24. Effective Date and Approval of Shareholders. The Plan shall take effect on June 7, 2001, subject to approval by the shareholders of the Company as required by Section 423 of the Code, which approval must occur within twelve months of the adoption of the Plan by the Board.

Adopted by the Board of Directors

on April 26, 2001

Approved by the stockholders on June 7, 2001

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NMT MEDICAL, INC.

Amendment No. 1

to

2001 Employee Stock Purchase Plan

The 2001 Employee Stock Purchase Plan (the “Plan”) of NMT Medical, Inc. is hereby amended as follows (capitalized terms used herein and not defined herein shall have the respective meaning ascribed to such terms in the Plan):

1.    The first paragraph of the Plan shall be deleted in its entirety and replaced with the following:

“The purpose of this Plan is to provide eligible employees of NMT Medical, Inc. (the “Company”) and certain of its subsidiaries with opportunities to purchase shares of the Company’s common stock, $.001 par value (the “Common Stock”), commencing on June 7, 2001. Two hundred and seventy-five thousand (275,000) shares of Common Stock in the aggregate have been approved for this purpose. This Plan is intended to qualify as an “employee stock purchase plan” as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder, and shall be interpreted consistent therewith.”

Except as aforesaid, the Plan shall remain in full force and effect.

Adopted by the Board of Directors on February 20, 2003.

Approved by the Stockholders on                         .

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Appendix D

NITINOL MEDICAL TECHNOLOGIES, INC.

1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

1. PURPOSE

The purpose of the Nitinol Medical Technologies, Inc. 1996 Stock Option plan for Non-Employee Directors (the “Plan”) is to promote the interests of Nitinol Medical Technologies, Inc. (the “Company”) and its stockholders by increasing the proprietary and vested interest of non-employee directors in the growth and performance of the Company by granting such directors options to purchase shares of Common Stock, par value $.001 per share (the “Shares”), of the Company.

2. ADMINISTRATION

The Plan shall be administered by the Company’s Board of Directors (the “Board”). Subject to the provisions of the Plan, the Board shall be authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan and to make all other determinations necessary or advisable for the administration of the Plan; provided, however, that the Board shall have no discretion with respect to the selection of directors to receive options, the number of Shares subject to any such options, the purchase price thereunder or the timing of grants of options under the Plan. The determinations of the Board in the administration of the Plan, as described herein, shall be final and conclusive. The Secretary of the Company shall be authorized to implement the Plan in accordance with its terms and to take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes thereof. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware.

It is the intention of the Company that the Plan comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to the extent applicable, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. If any Plan provision is later found not to be in compliance with such Rule, such provision shall be deemed null and void. From and after the date that the Company first registers a class of equity securities under Section 12 of the Exchange Act, no director may or sell shares received upon the exercise of an option during the six month period immediately following the grant of the option.

3. ELIGIBILITY

The class of individuals eligible to receive grants of options under the Plan shall be directors of the Company who are not employees of the Company or its affiliates, who do not otherwise receive compensation from the Company or its affiliates (other than compensation received solely for services rendered as a director of the Company) and who have not, within one year immediately preceding the determination of such director’s eligibility, received any award under any other plan of the Company or its affiliates that entitles the participants therein to

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acquire stock, stock options or stock appreciation rights of the Company or its affiliates (other than any other plan under which participants’ entitlements are governed by provisions meeting the requirements of Rule 16b-3(c)(2)(ii) promulgated under the Securities Exchange Act of 1934) (“Eligible Directors”). Any holder of an option granted hereunder shall hereinafter be referred to as a “Participant.”

4. SHARES SUBJECT TO THE PLAN

Subject to adjustment as provided in Section 6, an aggregate of 150,000 Shares, as such Shares were constituted on the date of approval of the Plan by the Company’s Board of Directors, shall be available for issuance upon the exercise of options granted under the Plan. The Shares deliverable upon the exercise of options may be made available from authorized but unissued Shares or treasury Shares. If any option granted under the Plan shall terminate for any reason without having been exercised, the shares subject to, but not delivered under, such option shall be available for other options.

5. GRANT, TERMS AND CONDITIONS OF OPTIONS

(a) Subject to approval of the Plan by the stockholders of the Company as provided in Section 9 hereof, on the date that a registration statement (the “Registration Statement”) with respect to the Common Stock is declared effective by the Securities Exchange Commission (the “SEC”) each Eligible Director will be granted an option hereunder to purchase 10,000 Shares. The options granted to such Eligible Directors shall be subject to vesting in equal monthly installments over a period of three years commencing with the date of grant; provided, that only whole shares may be issued pursuant to the exercise of any option.

(b) Upon first election or appointment to the Board, each newly elected Eligible Director will be granted an option to purchase 10,000 Shares. Any such options granted to newly elected Eligible Directors shall be subject to vesting in equal monthly installments over a three year period commencing with the date of the election of such Eligible Director to the Board; provided, that only whole shares may be issued pursuant to the exercise of any option.

(c) Immediately following each Annual Stockholders Meeting, commencing with the meeting following the close of fiscal year 1996, each Eligible Director, other than an Eligible Director first elected to the Board within the 12 months immediately preceding and including such meeting, will be granted an option to purchase 2,500 Shares as of the date of such meeting. The options granted to such Eligible Directors shall be fully vested six months after the date of grant.

(d) The options granted will be nonstatutory stock options not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and shall have the following terms and conditions:

(i) PRICE. The purchase price per Share deliverable upon the exercise of each option shall be 100% of the Fair Market Value per Share on the date the option is granted. For purposes of this Plan, Fair Market Value of the options granted pursuant to Section 5(a) hereof shall be deemed to be the initial public offering price per share of Common Stock as set forth in the final Prospectus filed with the SEC in connection with the Registration Statement, and Fair

2

Market Value of all other options shall be the closing sales price as reported on the NASDAQ National Market on the date in question, or, if the Shares shall not have traded on such date, the closing sales price on the first date prior thereto on which the Shares were so traded.

(ii) PAYMENT. Payment of the purchase price shall be made in full at the time the notice of exercise of the option is delivered to the Company and shall be in cash, bank certified or cashier’s check for the Shares being purchased.

(iii) EXERCISABILITY AND TERM OF OPTIONS. Subject to any vesting requirements, options shall be exercisable in whole or in part at all times during the period beginning on the date of grant until the earlier of ten years from the date of grant and the expiration of the one year period provided in paragraph (iv) below.

(iv) TERMINATION OF SERVICE AS ELIGIBLE DIRECTOR. Upon termination of a participant’s service as a Director for any reason, all outstanding options which have become vested as of the date of termination shall be exercisable in whole or in part for a period of one year from the date upon which the participant ceases to be a Director, provided that in no event shall the options be exercisable beyond the period provided for in paragraph (iii) above.

(v) NONTRANSFERABILITY OF OPTIONS. No option may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a participant otherwise than by will or the laws of descent and distribution, and during the lifetime of the Participant to whom an option is granted it may be exercised only by the participant or by the Participant’s guardian or legal representative. Notwithstanding the foregoing, options may be transferred pursuant to a qualified domestic relations order.

(vi) LISTING AND REGISTRATION. Each option shall be subject to the requirement that if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the Shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or the issue or purchase of Shares thereunder, no such option may be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Board.

(vii) OPTION AGREEMENT. Each option granted hereunder shall be evidenced by an agreement with the Company which shall contain the terms and provisions set forth herein and shall otherwise be consistent with the provisions of the Plan.

6. ADJUSTMENT OF AND CHANGES IN SHARES

In the event of a stock split, stock dividend, subdivision or combination of the Shares or other change in corporate structure affecting the Shares, the number of Shares authorized by the Plan shall be increased or decreased proportionately, as the case may be, and the number of Shares subject to any outstanding option shall be increased or decreased proportionately, as the case may be, with appropriate corresponding adjustment in the purchase price per Share thereunder.

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7. NO RIGHTS OF STOCKHOLDERS

Neither a Participant nor a Participant’s legal representative shall be, or have any of the rights and privileges of, a shareholder of the Company in respect of any Shares purchasable upon the exercise of any option, in whole or in part, unless and until certificates for such Shares shall have been issued.

8. PLAN AMENDMENTS

The Plan may be amended by the Board, as it shall deem advisable or to conform to any change in any law or regulation applicable thereto; provided, that the Board may not, without the authorization and approval of stockholders of the Company: (i) increase the number of Shares which may be purchased pursuant to options hereunder, either individually or in the aggregate, except as permitted by Section 6, (ii) change the requirement of Section 5(d) that option grants be priced at Fair Market Value, except as permitted by Section 6, (iii) modify in any respect the class of individuals who constitute Eligible Directors or (iv) materially increase the benefits accruing to Participants hereunder. The provisions of Sections 3 and/or 5 may not be amended more often than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules under either such statute.

9. EFFECTIVE DATE AND DURATION OF PLAN

The Plan shall become effective on the date that the Registration Statement is declared effective by the SEC so long as it is approved by the holders of a majority of the Company’s outstanding shares of voting capital stock at any time within 12 months before or after the adoption of the Plan by the Board. Unless sooner terminated by the Board, the Plan shall terminate ten years from the earlier of (a) the date on which the Plan is adopted by the Board or (b) the date on which the Plan is approved by the stockholders of the Company. No option may be granted after such termination or during any suspension of the Plan. The amendment or termination of the Plan shall not, without the consent of the option holder, alter or impair any rights or obligations under any option theretofore granted under the Plan.

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NMT MEDICAL, INC.

Amendment No. 1

to

1996 Stock Option Plan for Non-Employee Directors

The 1996 Stock Option Plan for Non-Employee Directors (the “Plan”) of NMT Medical, Inc., is hereby amended as follows (capitalized terms used herein and not defined herein shall have the respective meaning ascribed to such terms in the Plan):

1. The first sentence of Section 4 of the Plan shall be deleted in its entirety and replaced with the following:

“Subject to adjustment as provided in Section 6, an aggregate of

225,000 Shares, as such Shares were constituted on the date of

approval of the Plan by the Company’s Board of Directors, shall be

available for issuance upon the exercise of options granted under

the Plan.”

2. The first sentence of Section 5(b) of the plan shall be deleted in its entirety and replaced with the following:

“Upon first election or appointment to the Board, each newly

elected Eligible Director will be granted an option to purchase

15,000 Shares.”

3. The first sentence of Section 5(c) of the Plan shall be deleted in its entirety and replaced with the following:

“Immediately following each Annual Stockholders Meeting,

commencing with the meeting following the close of fiscal year

1996, each Eligible Director, other than an Eligible Director first

elected to the Board within the 12 months immediately preceding

and including such meeting, will be granted an option to purchase

5,000 Shares as of the date of such meeting.”

Except as aforesaid, the Plan shall remain in full force and effect.

Adopted by the Board of Directors on April 26, 2001

Approved by the Stockholders on June 7, 2001.

5

NMT MEDICAL, INC.

Amendment No. 2

to

1996 Stock Option Plan for Non-Employee Directors, as Amended

WHEREAS, NMT Medical, Inc. (the “Company”) wishes to recognize the additional time commitments and responsibilities assumed by each member of the Board of Directors who serves on one or more committees of the Board of Directors of the Company, and

WHEREAS, the Board of Directors has adopted, and the Stockholders of the Company have approved, the following amendments:

NOW, THEREFORE, the 1996 Stock Option Plan for Non-Employee Directors, as amended (the “Plan”) of the Company, is hereby amended as follows (capitalized terms used herein and not defined herein shall have the respective meaning ascribed to such terms in the Plan):

1. The first sentence of Section 5(b) of the plan shall be deleted in its entirety and replaced with the following:

“Upon first election or appointment to the Board, each newly elected Eligible Director will be granted an option to purchase 20,000 Shares.”

2. Section 5(c) of the Plan shall be deleted in its entirety and replaced with the following:

“Immediately following each Annual Stockholders Meeting, each Eligible Director, other than an Eligible Director first elected to the Board within the 12 months immediately preceding and including such meeting, will be granted an option to purchase 5,000 Shares as of the date of such meeting. In addition, also following each Annual Stockholders Meeting, each Eligible Director who served as a member of a committee of the Board during the preceding fiscal year will be granted an additional option to purchase (i) 2,000 Shares if such Eligible Director served as chairperson of such committee or (ii) 1,000 Shares if such Eligible Director did not serve as a chairperson of such committee. The options granted to such Eligible Director shall be fully vested six months after the date of grant.”

Except as aforesaid, the Plan shall remain in full force and effect.

Adopted by the Board of Directors on March 7, 2002.

Approved by the Stockholders on June 28, 2002.

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NMT MEDICAL, INC.

Amendment No. 3

to

1996 Stock Option Plan for Non-Employee Directors, as Amended

The 1996 Stock Option Plan for Non-Employee Directors, as amended (the “Plan”), of NMT Medical, Inc. (the “Company”) is hereby amended as follows (capitalized terms used herein and not defined herein shall have the respective meaning ascribed to such terms in the Plan):

1.     The first sentence of Section 4 of the Plan shall be deleted in its entirety and replaced with the following:

“Subject to adjustment as provided in Section 6, an aggregate of 325,000 Shares, as such Shares were constituted on the date of approval of the Plan by the Company’s Board of Directors, shall be available for issuance upon the exercise of options granted under the Plan.”

Except as aforesaid, the Plan shall remain in full force and effect.

Adopted by the Board of Directors on February 20, 2003.

Approved by the Stockholders on _______________.

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