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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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AVI BIOPHARMA, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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April 15, 2008
Dear
Shareholder:
You
are cordially invited to attend the Annual Meeting of the Shareholders of AVI BioPharma, Inc., which will be held on Tuesday, May 20, 2008, at 9:00 am, local time, at
the office of AVI BioPharma, Inc., 4575 SW Research Way, Corvallis, Oregon.
Details
of the business to be conducted at the Annual Meeting are given in the attached Proxy Statement. The Company's Annual Report on Form 10-K for the year ended
December 31, 2007 is also enclosed.
Whether
or not you plan to attend the meeting, it is important that your shares be represented and voted at the meeting. Therefore, I urge you to sign, date, and promptly return the
enclosed proxy in the enclosed postage-paid envelope. If you decide to attend the Annual Meeting and vote in person, you will, of course, have that opportunity. If you receive more than
one proxy card because your shares are registered in different names or at different addresses, please sign and return each such proxy so that all of your shares will be represented at the Annual
Meeting.
On
behalf of the Board of Directors, I would like to express our appreciation for your support of the Company.
Sincerely,
Leslie
Hudson, Ph.D.
Chief Executive Officer
AVI BIOPHARMA, INC.
NOTICE OF ANNUAL MEETING
To Be Held on May 20, 2008
To
the Shareholders of AVI BioPharma, Inc.:
NOTICE
IS HEREBY GIVEN that the Annual Meeting of the shareholders of AVI BioPharma, Inc. (the "Company" or "AVI") will be held on May 20, 2008 at 9:00 a.m. local
time, at the offices of AVI BioPharma, Inc., 4575 SW Research Way, Corvallis, Oregon, for the following purposes:
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1.
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To
consider and vote upon a proposal to elect three (3) Group I Directors, each for a two-year term;
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2.
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To
consider and vote upon a proposal to ratify the appointment of KPMG LLP as independent registered public accounting firm for the Company for the year ending
December 31, 2008; and
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3.
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To
transact such other business as may properly come before the meeting.
The
Board of Directors has fixed March 24, 2008 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. Only shareholders
of record at the close of business on that date will be entitled to notice of and to vote at the Annual Meeting or any adjournments thereof.
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By Order of the Board of Directors
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Leslie Hudson, Ph.D.
Chief Executive Officer
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Portland,
Oregon
April 15, 2008
TABLE OF CONTENTS
Item
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Page
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General
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1
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Solicitation, Voting and Revocability of Proxies
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AVI BIOPHARMA, INC. DIRECTORS AND EXECUTIVE OFFICERS
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2
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Executive Officers and Directors
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2
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Board of Directors Meetings and Committees
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5
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Code of Business Conduct and Ethics
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6
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Communications to the Board of Directors
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6
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Section 16(a) Beneficial Ownership Reporting Compliance
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6
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Compensation Committee Interlocks and Insider Participation in Compensation Decisions
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6
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Executive Compensation
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7
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Compensation Discussion and Analysis
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7
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Introduction
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7
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Significant Management Changes in Fiscal Year 2007 and Early 2008
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7
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The Compensation Committee
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7
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Compensation Philosophy and Objectives
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8
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Role of Executive Officers in Compensation Decisions
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9
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Use of Compensation Consultants and Reports
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9
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Tax and Accounting Implications of the Executive Compensation Program
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16
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Repricing of Stock Options
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16
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Employment Agreements with Named Executive Officers
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16
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Post-Employment Benefits and Change in Control Arrangements
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Compensation Committee Report
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Summary Compensation Table
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Grants of Plan Based Awards in Fiscal Year 2007
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2007 Outstanding Equity Awards at Fiscal Year End
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2007 Option Exercises and Stock Vested
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2007 Pension Benefits
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2007 Nonqualified Deferred Compensation
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Potential Payments Upon Termination or a Change in Control
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2007 Director Compensation
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Director Compensation for Fiscal 2007
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AUDIT COMMITTEE REPORT
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PERFORMANCE GRAPH
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STOCK OWNED BY AVI BIOPHARMA, INC. MANAGEMENT AND PRINCIPAL SHAREHOLDERS
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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ELECTION OF AVI BIOPHARMA, INC. DIRECTORS (Proposal I)
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INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
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RATIFICATION OF APPOINTMENT OF AVI BIOPHARMA INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Proposal II)
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OTHER BUSINESS
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SHAREHOLDER PROPOSALS AND SHAREHOLDER NOMINATIONS OF DIRECTORS
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COST OF SOLICITATION
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ADDITIONAL INFORMATION
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AVI BIOPHARMA, INC.
One S.W. Columbia Street, Suite 1105
Portland, Oregon 97258
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 2008
General
This Proxy Statement is furnished to shareholders of AVI BioPharma, Inc. (the "Company" or "AVI") in connection with the solicitation by the Board of
Directors of proxies from the shareholders of record of the Company's outstanding shares of Common Stock, $0.0001 par value (the "Common Stock"), for use at the Company's Annual Meeting of
Shareholders to be held on May 20, 2008, at 9:00 a.m. local time, at AVI BioPharma, Inc., 4575 SW Research Way, Corvallis, Oregon, and at any adjournments or postponements
thereof (the "Annual Meeting").
At
the Annual Meeting, shareholders will be asked to consider and vote upon proposals to (i) elect three members to Group I of the Board of Directors, each for a
two-year term, (ii) ratify the appointment of KPMG LLP as independent registered public accounting firm for the Company for the year ending December 31, 2008, and
(iii) transact such other business as may properly come before the meeting. This Proxy Statement, together with the enclosed proxy card, is first being mailed to the Company's shareholders on
or about April 15, 2008.
Solicitation, Voting and Revocability of Proxies
The Board of Directors has fixed March 24, 2008, as the record date for the determination of the shareholders entitled to notice of and to vote at the
Annual Meeting. Accordingly, only holders of record of shares of Common Stock at the close of business on such date will be entitled to notice of and to vote at the Annual Meeting, with each such
share entitling its owner to one vote on all matters properly presented at the Annual Meeting. On the record date, there were approximately 17,436 beneficial owners of the 70,429,110 shares of Common
Stock then outstanding. The presence, in person or by proxy, of a majority of the total number of outstanding shares of Common Stock entitled to vote at the Annual Meeting is necessary to constitute a
quorum at the Annual Meeting.
If
the enclosed form of proxy is properly executed and returned in time to be voted at the Annual Meeting, the shares represented thereby will be voted in accordance with the
instructions marked therein.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR (i) THE ELECTION OF THE DIRECTORS NAMED IN THE PROXY AND (ii) RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2008.
The Board of Directors does not know of any matters other
than those described in the Notice of Annual Meeting that are to come before the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons named in the proxy
will vote the shares represented by such proxy in their discretion upon such matters.
The
presence of a shareholder at the Annual Meeting will not automatically revoke such shareholder's proxy. A shareholder may, however, revoke a proxy at any time prior to its exercise
by (i) filing a written notice of revocation, (ii) delivering a duly executed proxy bearing a later date to, Assistant Secretary, AVI BioPharma, Inc., One S.W. Columbia Street,
Suite 1105, Portland, Oregon 97258, or (iii) attending the Annual Meeting and voting in person. In order to be effective, all revocations or later-filed proxies must be delivered to the
Company at the Portland, Oregon address not later than May 20, 2008, 8:00 a.m. local time. All valid, unrevoked proxies will be voted at the Annual Meeting. Under Oregon law,
shareholders are not entitled to dissenter's rights with respect to any of the proposals set forth in this proxy statement.
1
AVI BIOPHARMA, INC. DIRECTORS AND EXECUTIVE OFFICERS
Executive Officers and Directors
The following table sets forth certain information with respect to the current directors and executive officers of AVI:
Name
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Age
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Position(5)
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Leslie Hudson, Ph.D.
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62
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Chief Executive Officer and Director(4)
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Alan P. Timmins
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President and Chief Operating Officer
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Mark M. Webber
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Chief Financial Officer and Chief Information Officer
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Patrick L. Iversen, Ph.D.
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52
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Senior Vice President of Research and Development
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Peter D. O'Hanley, Ph.D., M.D.
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57
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Senior Vice President of Clinical Development and
Regulatory Affairs
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Dwight D. Weller, Ph.D.
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57
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Senior Vice President of Chemistry and
Manufacturing
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Michael D. Casey(1)(3)
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62
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Chairman of the Board
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John W. Fara, Ph.D.(2)(3)
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65
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Director
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K. Michael Forrest(1)
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Director
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William A. Goolsbee(1)(3)
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54
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Director
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John C. Hodgman(1)(2)
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53
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Director
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Gil Price, M.D.(2)
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52
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Director
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(1)
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Member
of the Compensation Committee.
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(2)
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Member
of the Audit Committee.
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(3)
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Member
of the Nominating and Corporate Governance Committee.
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(4)
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On
March 27, 2007, Denis R. Burger, Ph.D. resigned as the Company's Chief Executive Officer and Chairman of the Board. Following Dr. Burger's resignation, the Board of
Directors elected Jack L. Bowman as Chairman of the Board and K. Michael Forrest as Interim Chief Executive Officer. On March 27, 2007, in connection with becoming Chief Executive Officer,
Mr. Forrest resigned from the Compensation Committee.
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(5)
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As
of December 31, 2007, other than K. Michael Forrest, all directors are independent under the independence standards applicable to the Company. Leslie Hudson, Ph.D., who
joined the Board of Directors in February 2008, is not an independent director.
Leslie Hudson, Ph.D.
, has served as Chief Executive Officer and a director of AVI since February 11, 2008. Dr. Hudson served
as the interim President and Chief Executive Officer of Nabi Biopharmaceuticals from February 2007 to January 2008. Dr. Hudson served as Chief Executive Officer and President of DOV
Pharmaceutical, Inc., a biopharmaceutical company, from June 2005 to July 2006 and served as Vice Provost for Strategic Initiatives at the University of Pennsylvania from 2003 to June 2005.
From 1995 to 2003 he served in several positions at Pharmacia Corp., including senior vice president of research & exploratory development, senior vice president of emerging technology &
commercial development and general manager & group vice president of ophthalmology. From 1988 to 1994, he worked at GlaxoWellcome (now GlaxoSmithKline plc) in several senior research
positions including vice president for discovery research. Dr. Hudson serves on the boards of directors of Nabi Biopharmaceuticals and Hooper Holmes, Inc.
Alan P. Timmins
has served as President of AVI since May 2000, Chief Operating Officer of AVI since October 1996, and as a director of AVI
between 1997 and October 2007. From 1992 to May 2000, he was Executive Vice President and Chief Financial Officer of AVI. Mr. Timmins received a B.B.A. in
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Accounting
and Management from the University of Portland and an M.B.A. from Stanford University. He is a Certified Public Accountant (inactive).
Mark M. Webber
has served as Chief Financial Officer and Chief Information Officer of AVI since May 2000 and as Controller since October
1997. From 1993 to 1997, he was Director of Finance for Pacific Rehabilitation and Sports Medicine, Inc., a physical therapy services company. Mr. Webber holds a B.S. in accounting from
the University of Oregon.
Patrick L. Iversen, Ph.D.
, has served as Senior Vice President of Research and Development from 1997 and as a director of AVI from 1997
through May 2005. From 1987 through 1997, Dr. Iversen was on staff at the University of Nebraska Medical Center, most recently as a Professor in the College of Medicine. Dr. Iversen, who
has published extensively on antisense research and development, additionally served as a consultant to various pharmaceutical and biotechnology companies, including
GLAXO Inc., Innovir Pharmaceuticals, Lynx Therapeutics, and Isis Pharmaceuticals, as well as to AVI. He is a former member of the Leukemia Society of America Board of Directors.
Dr. Iversen holds a B.S. in Biology from Westminster College and a Ph.D. in Biochemical Pharmacology and Toxicology from the University of Utah, followed by post-doctoral work at
the Eppley Institute for Research in Cancer and Allied Diseases. Current services activities include being a member of the ALTX-1 study section of the National Institutes of Health and
Scientific Advisory Board for the Linus Pauling Institute.
Peter D. O'Hanley, Ph.D., M.D.
, has served as Senior Vice President of Clinical Development and Regulatory Affairs since March 2004. From
2002 to 2003 he served as the Vice President Clinical Development for Maxygen, Inc., and was the Chief Scientific Officer for Preventis, Inc. from 2000 to 2003. Prior to that,
Dr. O'Hanley was with Quintiles, Inc. from 1998 to 2000, most recently as the Vice President and Chief Scientific Officer of the Anti-Infective Therapeutic &
Immunology Therapeutic Groups. Prior to that, he was with Shaman Pharmaceuticals as a Visiting Clinical Scientist from 1996 to 1997 while on sabbatical from the Stanford University School of Medicine,
where he served from 1985 through 1998, most recently an Associate Professor. Dr. O'Hanley holds a B.A. in Zoology from Pomona College, a Ph.D. in Anatomy and an M.D. from the Medical
University of South Carolina. Dr. O'Hanley also holds an M.P.H. in Epidemiology from the University of California, Berkeley.
Dwight D. Weller, Ph.D.
, has served as Senior Vice President of Chemistry and Manufacturing of AVI since 1997, as Vice President of
Research and Development of AVI from 1992 to 1997, and as a director of AVI from 1991 through May 2006. Dr. Weller received a B.S. in Chemistry from Lafayette College and a Ph.D. in Chemistry
from the University of California at Berkeley, followed by postdoctoral work in Bio-Organic Chemistry at the University of Illinois.
Michael D. Casey
has served as a director of AVI since May 2006 and was appointed the Chairman effective March 10, 2008. Since
February 2002, Mr. Casey has been a self-employed consultant to the pharmaceutical industry. Previously, Mr. Casey served four years as President, Chief Executive Officer and
Chairman of Matrix Pharmaceutical, Inc., a biopharmaceutical company, until Chiron Corporation acquired the company. Prior to joining Matrix, Mr. Casey was President of two divisions of
Schein Pharmaceutical, Inc. from 1995 to 1997, and President and Chief Operating Officer of Genetic Therapy, Inc. from 1993 to 1995 until it was sold to Sandoz (Novartis).
Mr. Casey also spent 25 years with Johnson & Johnson, including serving as Vice President of Sales and Marketing of Ortho Pharmaceutical Corporation and President of McNeil
Pharmaceuticals. Mr. Casey is a director of Allos Therapeutics, Inc., Celgene Corp., and Durect Corporation.
John W. Fara, Ph.D.
, has served as a director of AVI since May 2000. He has served as the President and Chief Executive Officer of
DepoMed, Inc. a biopharmaceutical company, between 1996 and 2007, and as its Chairman of the Board between April 2000 and 2007. Between 1990 and 1996, he served as President and Chief Executive
Officer of Anergen, Inc., a biotechnology company, and previously was President of Prototek, Inc., an early stage pharmaceutical development company. He
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currently
serves as a director and member of the Compensation Committee of Iomed, Inc. Dr. Fara holds a B.S. from the University of Wisconsin and a Ph.D. from the University of
California at Los Angeles.
K. Michael Forrest
has served as a director of AVI since March 2005. On March 27, 2007 Mr. Forrest was elected Interim Chief
Executive Officer and he served in that position until February 11, 2008. Mr. Forrest has more than 35 years of biotech and large pharmaceutical experience in executive
management, research oversight, clinical and product development, strategic planning, mergers and acquisitions, business development, marketing and sales positions in U.S. and international markets.
Mr. Forrest is currently chairman of Apex Bioventures, LLC, a public investment and consulting company focusing on emerging companies in the healthcare sector. Mr. Forrest served
as the president, chief executive officer, and a director of Cellegy Pharmaceuticals, Inc., a biopharmaceutical company, from 1996 to 2005. He previously served as president and chief executive
officer of Mercator Genetics, a private biotechnology company, and as president and chief executive officer of Transkaryotic Therapies, Inc., a public biotechnology company. Previously,
Mr. Forrest occupied senior line management and marketing positions with Pfizer and Lederle. He currently serves as a director of Tekimira Pharmaceuticals, a public company developing
proprietary drugs and drug delivery systems for the treatment of cancer and other conditions using siRNA and immunostimulatory oligonucleotides. Mr. Forrest holds a B.S. in Business
Administration from Georgetown University, with a concentration in marketing, finance and economics.
William Goolsbee
has served as a director of AVI since October 30, 2007. With a 30-year career in the medical device
and biopharmaceutical industries, William A. Goolsbee was founder, chairman and Chief Executive Officer of Horizon Medical Inc. from 1987 until its acquisition by a unit of UBS Private Equity
in 2002. Mr. Goolsbee was a founding director of ImmunoTherapy Corporation in 1993, becoming chairman of the board in 1995, a position he held until overseeing the successful acquisition of the
company by AVI in 1998. Experience prior to 1987 responsible executive positions with CooperVision Inc. and Cooper Laboratories Inc. Mr. Goolsbee holds a bachelor of arts degree
from the University of California at Santa Barbara. Mr. Goolsbee serves as chairman of privately held BMG Pharma LLC, a product development and licensing company.
John C. Hodgman
has served as a director of AVI since March 2004. He has served as the Senior Vice President of Finance, Chief Executive
Officer of InterMune, Inc., a biotechnology company, since August 2006. He has served as the Chairman of Cygnus, Inc., a biopharmaceutical company, since 1999 and President and Chief
Executive Officer of that company between 1998 and 2006. Mr. Hodgman joined Cygnus in 1994 as Vice President of Finance and Chief Financial Officer and between 1995 and 1998, he also served as
President of Cygnus Diagnostics. He was President and Chief Executive Officer of Aerogen, Inc., a biopharmaceutical company, from June 2005 to October 2005 when the company was sold to
Nektar, Inc. Mr. Hodgman also serves on the boards of Immersion Corporation, Inflazyme
Pharmaceuticals, Ltd., and Alpha Innotech Corporation. Mr. Hodgman holds a bachelor of science degree from Brigham Young University and an M.B.A. from the University of Utah.
Mr. Hodgman serves on the Company's Audit Committee as its Chairman and financial expert.
Gil Price
has served as a director of AVI since October 30, 2007. Dr. Price is a clinical physician trained in internal
medicine with a long-standing interest in the study of drug development, adverse drug reactions, drug utilization and regulation. Since 2002, he has been the Chief Executive Officer and
Chief Medical Officer of Drug Safety Solutions. From 1997 to 2002, Dr. Price was the director of clinical development for oncology at MedImmune Inc. Prior to joining MedImmune,
Dr. Price worked in the CRO sector. Dr. Price began his pharmaceutical career at Glaxo Inc., where he worked for nearly nine years on both the commercial and research sides of the
company. Dr. Price is a member of the American Medical Association, the Academy of Pharmaceutical Physicians and a past member of the American Society for Microbiology.
4
Board of Directors Meetings and Committees
During 2007, AVI's Board of Directors held six meetings, one of which was solely of independent directors. Each incumbent director attended all meetings of the
Board of Directors and all meetings of the committees of the Board of Directors on which he served, except that Mr. Fara was unable to attend two of the six meetings.
The
Board of Directors also has a standing Audit Committee, which conducted four meetings during the fiscal year ended December 31, 2007. The members of the Audit Committee are
Mr. John C. Hodgman, Dr. John W. Fara, and Gil Price, M.D. Mr. Hodgman serves as the Audit Committee's Chairman and the Audit Committee's designated financial expert.
The
Audit Committee oversees the annual and quarterly financial reporting process, retains and replaces the Company's independent auditors, discusses with the auditors their independence
from management and reviews the scope of the independent annual audit. The Audit Committee operates under an amended and restated written charter adopted by the Board of Directors on March 30,
2004, a copy of which is posted on the Company's website
(www.avibio.com)
. The Audit Committee reviewed and reassessed the charter for effectiveness
during 2007.
The
Board of Directors also has a standing Compensation Committee, which reviews and makes recommendations to the full Board of Directors regarding compensation for the Company's
executive
officers and directors and administers the Company's stock option and employee stock purchase plans. During the fiscal year ended December 31, 2007, the Compensation Committee held one meeting.
During the fiscal year ended December 31, 2007, the Compensation Committee was composed of three directors, Messrs. Jack L. Bowman, K. Michael Forrest and John C. Hodgman. As of
March 27, 2007, in connection with his appointment as the Interim Chief Executive Officer, Mr. Forrest resigned as a member of the Compensation Committee and Michael Casey was appointed
as his replacement. On March 10, 2008, Jack L. Bowman resigned as a member of our Board of Directors, which included his resignation from the Compensation Committee. On March 10, 2008,
Michael Casey was appointed as Chairman of the Board of Directors and Mr. Forrest was again appointed to the Compensation Committee, joining Michael Casey and John Hodgman. Mr. Hodgman
was appointed interim Chair of the Compensation Committee. Effective April 1, 2008, William Goolsbee replaced Mr. Hodgman as a member of the Compensation Committee, and Mr. Casey
was appointed Chairman of the Compensation Committee. A copy of the Compensation Committee charter is posted on the Company's website
(www.avibio.com)
.
The
Board of Directors also has a standing Nominating and Corporate Governance Committee, which is responsible for considering and making recommendations to the Board of Directors
concerning the appropriate size, functions and needs of the Board of Directors and to ensure compliance with the Company's Code of Ethics and other corporate governance policies. The members of the
Nominating and Corporate Governance Committee for the fiscal year ended December 31, 2007 were John W. Fara, Jack L. Bowman, and Michael D. Casey. As of March 25, 2008, the members of
the Nominating and Corporate Governance Committee included William Goolsbee (Chair), Michael D. Casey, and John W. Fara. The Nominating and Corporate Governance Committee operates under an amended and
restated written charter adopted by the Board of Directors on February 16, 2006, a copy of which is posted on the Company's website
(www.avibio.com)
.
The
members of the Audit, Nominating and Corporate Governance, and Compensation Committees, other than K. Michael Forrest, are independent as defined under applicable listing
requirements of the Nasdaq Stock Market, and all members of the Audit Committee have the requisite financial experience.
All
directors attended the Company's 2007 annual meeting of shareholders.
5
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics (the "Code"). The Code applies to all directors and employees, including all officers, managers and
supervisors, and is intended to better ensure full, fair, accurate, timely and understandable disclosures in our public documents and reports,
compliance with applicable laws, prompt internal reporting of violations of these standards and accountability for adherence to standards. The Company has contracted with Ethicspoint to provide a
method for employees and others to report violations of the Code anonymously. A copy of the Code is posted on the Company's website
(www.avibio.com)
.
Communications to the Board of Directors
The Board of Directors welcomes and encourages shareholders to share their thoughts regarding the Company. While the Board of Directors encourages such
communication, for a variety of reasons, including compliance with securities laws, fiduciary duties of the directors, and good business practices relating to corporate communications, the Company's
preference is that shareholders communicate with the Board of Directors in compliance with its communications policy. The Company's communications policy, as adopted by the Board of Directors,
provides that all communications should first be directed to the Company's Investor Relations Department. Investor Relations will then distribute a copy of the communication to the Chairman of the
Board, the Chairman of the Audit Committee and the Company's outside counsel. Based on the input and decision of these persons, along with the entire Board of Directors if it is deemed necessary, the
Company, through its Investor Relations Department, will respond to the communication.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires AVI's directors and officers, and persons who own more than ten percent (10%) of a registered class of AVI's
equity securities, to file initial reports of ownership and report of changes in ownership with the Commission. Such persons also are required to furnish AVI with copies of all Section 16(a)
reports they file.
Based
solely on its review of the copies of such reports received by it with respect to fiscal year 2007, or written representations from certain reporting persons, AVI believes that all
filing requirements applicable to its directors, officers and persons who own more than ten percent (10%) of a registered class of AVI's equity securities have been complied with for fiscal 2007,
except that as a result of miscommunications between the Company and its filing agent a Form 4 was not timely filed in connection with the appointments of each of Gil Price, M.D. and William
Goolsbee to our Board of Directors.
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
During the fiscal year ended December 31, 2007, the members of the Compensation Committee were Messrs. Jack L. Bowman, K. Michael Forrest, Michael
D. Casey, and John C. Hodgman. As of March 23, 2007, in connection with his appointment as the Company's Interim Chief Executive Officer, Mr. Forrest resigned from the Compensation
Committee. On March 10, 2008 Jack L. Bowman resigned from the Board of Directors, including his committee positions. There were no employee directors on the Compensation Committee and no
interlocks.
6
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
The Company is a biopharmaceutical company developing therapeutic products principally based on third-generation NeuGene antisense technology. Our principal
products in development target life-threatening diseases, including cardiovascular, infectious, and genetic diseases. We operate in a highly complex business environment and believe that a
competitive compensation program is an important tool to help attract, retain and reward the talented employees we need to achieve our mission and deliver value to our shareholders.
Throughout
this section of the proxy statement, the individuals who served as the Company's Chief Executive Officer and Chief Financial Officer during fiscal year 2007, as well as the
other individuals included in the Summary Compensation Table included in this proxy statement, are referred to as the "named executive officers."
Significant Management Changes in Fiscal Year 2007 and Early 2008
In 2007, the Company underwent several senior management changes. On March 27, 2007, the Company's then Chairman and Chief Executive Officer, Denis R.
Burger, Ph.D. resigned. In connection
with his resignation, the Company entered into a Separation and Release Agreement with Dr. Burger, discussed in more detail below, and the Board of Directors appointed K. Michael Forrest as
Interim Chief Executive Officer. On February 8, 2008, the Board of Directors appointed Leslie Hudson, Ph.D. as the Company's Chief Executive Officer and as a member of the Board of Directors.
Effective with Dr. Hudson's appointment as the Company's Chief Executive Officer, Mr. Forrest ceased to serve as an officer of the Company, but continued as a member of the Board of
Directors.
The Compensation Committee
The Company's executive compensation program is administered by the Company's Compensation Committee. During the fiscal year ended December 31, 2007, the
Compensation Committee was composed of three independent directors, Messrs. Jack L. Bowman, K. Michael Forrest and John C. Hodgman. As of March 27, 2007, in connection with his
appointment as the Interim Chief Executive Officer, Mr. Forrest resigned as a member of the Compensation Committee and Michael Casey was appointed as his replacement. On March 3, 2008,
Jack L. Bowman resigned as a member of our Board of Directors, which included his resignation from the Compensation Committee. On March 10, 2008, Michael Casey was appointed as Chairman of the
Board of Directors and Mr. Forrest was again appointed to the Compensation Committee, joining Michael Casey and John Hodgman. Mr. Hodgman was appointed interim Chair of the Committee.
Effective April 1, 2008, William Goolsbee replaced Mr. Hodgman as a member of the Compensation Committee, and Mr. Casey was appointed Chairman of the Compensation Committee.
The
Compensation Committee is responsible for reviewing, assessing, and approving all elements of compensation for our named executive officers. More specifically, the Compensation
Committee is directly responsible for establishing annual and long-term performance goals and objectives for our elected officers. This responsibility includes, among other things:
(a) evaluating the performance of our Chief Executive Officer and other executives as determined by the Compensation Committee in light of the approved performance goals and objectives;
(b) setting the compensation of the Chief Executive Officer and other executives as determined by the Compensation Committee based upon the evaluation of the performance of the Chief Executive
Officer and the other executives, respectively; (c) making recommendations to the Board of Directors with respect to new cash-based incentive compensation
7
plans
and equity-based compensation plans; and (d) preparing an annual performance self-evaluation of the Compensation Committee.
The
Compensation Committee has independent authority to make compensation decisions for our named executive officers. In 2007, in light of the changes discussed above, the Compensation
Committee sought and obtained full Board of Director approval of the Compensation Committee's recommendations. In the future, the Compensation Committee expects, as a matter of good practice, to only
seek ratification of its decisions regarding the compensation of the Chief Executive Officer and to set the compensation for the other named executive officers on its own.
The
Compensation Committee may employ a compensation consultant to assist in the evaluation of the compensation of the Company's executive officers. The Compensation Committee has the
authority to approve the fees and other retention terms with respect to such a compensation consultant. The Compensation Committee also has the authority, as necessary and appropriate, to consult with
other outside advisors to assist in its duties to the Company.
Compensation Philosophy and Objectives
The purpose of the Company's executive compensation program is to attract, motivate, and retain key executive employees in order to promote the success of the
Company. The Company seeks to reward and to provide incentives to named executive officers for their performance. Over the past few years, the Company has seen significantly increased demand for
executives with industry-specific skills and experience and a highly competitive market. Additionally, given the small size of the Company relative to certain other members of our industry group, we
face increased risk of potential operational disruptions and heightened hiring expenses upon the departure of any of our executive officers. Therefore, the attraction and retention of executives is
one of the key purposes of the Company's executive compensation program.
The
Company's executive compensation program is based on a philosophy of pay-for-performance. In that respect, the compensation program is designed to reward
named executive officers for meeting specific goals that are established and reviewed by the Compensation Committee for each named executive officer and for the Company as a whole. In addition, the
compensation program is used to attract and retain highly qualified individuals as named executive officers of the Company. At the end of each fiscal year, the Chief Executive Officer and the
Compensation Committee assess how each named executive officer has performed with respect to these goals. The Compensation Committee makes an independent assessment with respect to the Chief Executive
Officer. The compensation package for each named executive officer, including base salary for the following year, cash bonus for the current year, and stock options, is determined primarily on the
basis of how that named executive officer performed in meeting his or her goals. Compensation decisions are also based on market factors that require the Company to remain competitive in its
compensation package in order to attract and retain qualified individuals.
In
addition to the foregoing, the following executive compensation principles guided the Compensation Committee during 2007 in fulfilling its roles and responsibilities:
-
-
Compensation
levels and opportunities should be sufficiently competitive to facilitate recruitment and retention of experienced executives in the Company's highly
competitive talent market;
-
-
Compensation
should reinforce the Company's business strategy by integrating and communicating key metrics and operational performance objectives and by emphasizing
incentives in the total compensation mix;
-
-
Compensation
programs should align executives' long-term financial interests with those of the shareholders by providing equity-based incentives;
8
-
-
Compensation
programs should be flexible, giving the Compensation Committee and our Board of Directors discretion to make adjustments on an as-needed basis; and
-
-
Compensation
should be transparent and easily understandable to both our executives and our shareholders.
Role of Executive Officers in Compensation Decisions
Our named executive officers, and particularly our Chief Executive Officer, play a pivotal role in determining executive compensation. No less than annually, the
Company's Chief Executive Officer assesses the performance of the named executive officers. He then recommends to the Compensation Committee a base salary, performance-based cash bonus, and a grant of
stock options for each named executive officer based on that assessment. The Compensation Committee considers the information provided by the Chief Executive Officer, together with other information
available to the Compensation Committee and determines the compensation for each named executive officer other than the Chief Executive Officer. With respect to the compensation of our Chief Executive
Officer, the Compensation Committee meets without the Chief Executive Officer to discuss its recommendation and makes a recommendation to the full Board of Directors.
Use of Compensation Consultants and Reports
During 2007, the Compensation Committee did not retain a compensation consultant. As has been the usual practice in recent years, however, the Compensation
Committee reviewed the results of the Radford Biotechnology Compensation Survey, or Radford Survey, as part of the Compensation Committee's deliberations regarding executive compensation. When making
compensation decisions, the Compensation Committee reviewed competitive market data contained in the Radford Survey to determine how our executive pay levels and overall mix of compensation compare to
other companies. The Compensation Committee does not, however, use formulas or rigidly set the compensation of our executives based on this data.
In
early 2008, the Company commissioned Radford, the company that prepares the Radford Survey, to prepare an executive compensation and equity program assessment specific to the Company.
In March 2008 Radford presented its assessment to the Compensation Committee.
Setting Executive Compensation
In setting compensation for the named executive officers, other than the Chief Executive Officer, and in developing its recommendations to the Board of Directors
regarding compensation for the Chief Executive Officer, the Compensation Committee considers a number of factors, including analyses of compensation in similarly-sized companies in the
biopharmaceutical industry, analyses of compensation levels in similar companies in the Company's local geographic area, the satisfaction of (or failure to satisfy) previously-developed performance
measurements for the named executive officer and the Company, and the total vested and unvested equity grants owned by the executive. The Company competes for executive talent across a broad range of
business segments. Consequently, the Company's management collects and analyzes competitive salary data from the Radford Survey, on which the committee places significant weight in determining whether
the Company's executive compensation levels are comparable with the Company's peer group. In particular, in setting compensation for fiscal year 2007, the Compensation Committee focused heavily on the
biotechnology companies in the Radford Survey that employ between 50 and 149 employees, which is the range in which the Company would fall in the Radford Survey.
The
Compensation Committee believes it is important when making its compensation-related decisions to be informed as to current practices of similarly situated companies in the
biotechnology industry. In addition to benchmarking studies, such as the Radford Survey, the Compensation
9
Committee
has historically taken into account input from other sources, including input from members of the Compensation Committee based on their roles as executive officers and directors of other
public companies, as well as other members of the Board of Directors and publicly available data relating to the compensation practices and policies of other companies within and outside of our
industry, including non-biotechnology companies in the same geographic area of the Company. During the compensation-setting process for fiscal year 2007, in addition to the peer group
companies listed in the Radford Survey, the Compensation Committee placed particular emphasis on the compensation of executive officers of DepoMed, Dendreon Corporation, ISIS Pharmaceuticals, and
Genta. ISIS Pharmaceuticals and Genta are biopharmaceutical companies focused on developing products in the antisense field. For fiscal 2007 determinations of compensation the Compensation Committee
compared the compensation of our named executive officers against the compensation of our peer group companies.
Once
the Compensation Committee gathered and analyzed the data it believed necessary to make compensation decisions, and received the recommendation of the Company's Chief Executive
Officer on compensation decisions, the Compensation Committee determined the compensation for the named executive officers other than the Chief Executive Officer and determined its recommendation with
respect to the Chief Executive Officer's compensation. In 2007, in light of the substantial changes in senior management as described above, the Compensation Committee chose to share all of its
recommendations with the Board of Directors and sought approval of the Board of Directors on all executive compensation. The Board of Directors considered the recommendation of the Compensation
Committee and then approved a compensation package for each named executive officer. In 2008, in accordance with the authority set forth in its charter, the Compensation Committee determined the
compensation for all named executive officers other than the Chief Executive Officer. The compensation for the Chief Executive Officer for 2008 and going forward was determined based on negotiation
between the Company and Dr. Hudson in connection with his hiring as the Chief Executive Officer in February 2008. Going forward, the Compensation Committee will make recommendations to the
Board of Directors regarding the bonus to be paid to Dr. Hudson under his employment agreement, as well as other elements of his compensation.
When
the Compensation Committee and Board of Directors determine that option grants are appropriate, the named executive officers are granted incentive stock options. However, in some
cases the number of stock options treated as incentive stock options is limited by applicable laws, and in such cases any stock options granted in excess of that limit are treated as
non-qualified stock options. The exercise price of the stock options is equal to 100% of the closing market price on the day of the February meeting at which the grants are approved. With
respect to new executive officers, stock options are generally granted following the first Compensation Committee meeting after the starting date of their employment.
The
Compensation Committee believes that the total compensation package provided to the Company's executives, combining both short-term and long-term incentives,
some of
which are at risk based on individual and Company performance, is competitive without being excessive and is at an appropriate level to assure the retention and motivation of this highly skilled and
experienced segment of the Company's workforce, and at the same time would be attractive to any additional talent that might be needed in the changing workplace.
Performance Factors in 2007
The Compensation Committee, together with the Chief Executive Officer and full Board of Directors, establishes performance criteria for the named executive
officers, both in terms of individual performance and the performance of the Company as a whole, and generally assigns a weight to the
10
performance
goals. Generally stated, the primary factors that drove the Compensation Committee's executive compensation decisions for fiscal year 2007 were:
-
-
The
progress of the Company's research and clinical trial development programs;
-
-
Management
of the Company's assets;
-
-
Generation
and protection of intellectual property assets;
-
-
Corporate
development activities; and
-
-
Success
in securing capital sufficient to allow the Company to achieve its objectives.
During
2007, the primary performance factors relevant to compensation of our Chief Executive Officer, who was Denis Burger at the time performance factors were determined, included the status of
research coverage and analyst upgrades, the success of maintenance of relationships with the investment banking community, the successful management of investor relations and institutional
support, and the quality of senior management oversight. With respect to Mr. Forrest, the Company's Interim Chief Executive Officer, the primary goal established by the Compensation Committee
was his continuing operation of the Company during the search for a new Chief Executive Officer and in the recruitment of a new Chief Executive Officer. Given his anticipated short tenure as the Chief
Executive Officer, his compensation was not heavily performance-based.
Determining the Total Mix of Compensation
Our compensation-setting process consists of establishing a targeted overall compensation for each executive and then allocating that compensation between base
salary and incentive compensation (annual performance-based cash bonuses and equity incentive awards), based appropriately on publicly available industry and salary survey data. The Compensation
Committee does not have a pre-established policy for allocating total compensation between cash and non-cash compensation, between long-term and currently
paid-out compensation, or between fixed and variable compensation. Rather, based on the competitive market assessments and the Compensation Committee's review of existing outstanding
equity incentives on an individual named executive officer basis, the Compensation Committee determines the appropriate level and mix of total compensation, keeping in mind the Company's compensation
philosophy.
The
total amount and mix of compensation payable to our named executive officers is premised upon, among other items, the degree to which the executive has a role in determining the
strategic direction of the Company, the mix of compensation payable to executives in similar roles by companies of a similar size, geographic location, and industry, and the quantity and value of
unvested equity awards held by each named executive officer and the vesting date of such awards. As one of the Company's primary focuses is on the retention of its executives, the Company seeks to
ensure its named executive officers receive a base salary reflective of the Company's size and competitive marketplace.
During
its evaluation of the appropriate mix of compensation, the Compensation Committee typically determines what portion of each executive's compensation will be "at risk," with the at
risk portion increasing as the Company gives executives greater levels of responsibility. As the Company believes that many of its named executive officers could command higher salaries in similar
roles with larger companies, including with the Company's competitors, the Company's combined cash-based and equity-based bonuses have historically been large relative to base salaries,
with the goal of ensuring compensation serves the dual purpose of retention and awarding exceptional performance.
11
Analysis of Executive Compensation Components
For the fiscal year ended December 31, 2007, the principal components of compensation for named executive officers were identical to the components in the
prior fiscal year, and included:
-
-
Base
salary;
-
-
Performance-based
cash bonuses;
-
-
Equity
Incentive Plan;
-
-
Employee
Stock Purchase Plan; and
-
-
401(k)
Plan
Base Salaries.
The base salaries of the Company's executive officers are established as part of an annual compensation
adjustment cycle, and we also assess salaries at the time of hire, promotion or other change in responsibilities. In establishing those salaries, the Compensation Committee considers information about
base salaries paid by companies of comparable size in the biopharmaceutical industry (including data from the Radford Survey), individual performance, position and tenure of the executive officer, how
the salary compares to the salaries of other executives in the Company, and internal comparability considerations. Consistent with the philosophy discussed above, our executive base salaries, other
than for Leslie Hudson, the Company's Chief Executive Officer appointed in March 2007, were issued based on performance of the officers and the Company as a whole, and the need of the Company to
remain competitive. Fiscal 2007 executive base salaries remained relatively unchanged from fiscal 2006 levels because we believed fiscal 2006 levels remained competitive and no unusual or other
factors warranted an increase. The base salary levels, effective January 1, 2007, for the Company's named executive officers for 2007 were set as follows:
Name
|
|
Title
|
|
2007 Base Salary
|
|
2006 Base Salary
|
|
% Change 2006 to 2007 Base Salary
|
|
Denis R. Burger, Ph.D.
|
|
Chief Executive Officer
|
|
$
|
375,000
|
(1)
|
$
|
375,000
|
|
0.0
|
%
|
Alan P. Timmins (2)
|
|
President and Chief Operating Officer
|
|
$
|
300,000
|
|
$
|
300,000
|
|
0.0
|
%
|
Patrick L. Iversen, Ph.D.
|
|
Senior Vice President of Research and Development
|
|
$
|
260,000
|
|
$
|
250,000
|
|
4.0
|
%
|
Peter D. O'Hanley, Ph.D, M.D.,
|
|
Senior Vice President of Clinical Development and Regulatory Affairs
|
|
$
|
260,000
|
|
$
|
250,000
|
|
4.0
|
%
|
Mark M. Webber
|
|
Chief Financial Officer
|
|
$
|
235,000
|
|
$
|
225,000
|
|
4.4
|
%
|
-
(1)
-
Represents
an annualized salary. Dr. Burger resigned as the Company's Chief Executive Officer on March 27, 2007.
-
(2)
-
Mr. Timmins'
base salary was increased to $310,000 on March 27, 2007, effective January 1, 2007.
On
March 27, 2007, after consideration of presentations and recommendations of management and the Compensation Committee, the Board of Directors of the Company accepted and
ratified the conclusions and recommendations of the Company's Compensation Committee to provide for K.
12
Michael
Forrest's compensation as the Company's Interim Chief Executive Officer and to increase the salary payable to Alan P. Timmins, the Company's President and Chief Operating Officer, as follows:
Name
|
|
Title
|
|
2007 Base Salary
|
|
2006 Base Salary
|
Alan P. Timmins(2)
|
|
President and Chief Operating Officer
|
|
$
|
310,000
|
|
$
|
300,000
|
K. Michael Forrest
|
|
Interim Chief Executive Officer
|
|
$
|
385,000
|
(1)
|
$
|
N/A
|
-
(1)
-
Represents
an annualized salary. Mr. Forrest was appointed as the Company's Interim Chief Executive Officer on March 27, 2007.
-
(2)
-
Mr.
Timmins' salary increase approved on March 27, 2007 was effective as of January 1, 2007.
Mr. Forrest's
base salary was increased by approximately 2.7% over that of Denis R. Burger, the Company's former Chief Executive Officer, and Mr. Timmins' base salary
increased by approximately 3.3% over his former base salary. The Compensation Committee believes the increase in base salary for Mr. Timmins was appropriate based on a recommendation of Denis
Burger, in his role as the Chief Executive Officer.
While
Mr. Forrest resigned as the Company's Interim Chief Executive Officer commensurate with Dr. Hudson's appointment as the Chief Executive Officer in February 2008, due
to his substantial and continuing participation in negotiations regarding the Company's acquisition of Ercole Biotech, Inc., the Board of Directors elected to continue Mr. Forrest's base
salary until the completion of the Company's merger with Ercole, which was effected on March 20, 2008, and continue his medical insurance coverage for a period of one year.
On
February 25, 2008, the Compensation Committee established the base salary levels, effective January 1, 2008, of the Company's named executive officers, as follows:
Name
|
|
Title
|
|
2008 Base Salary
|
|
% Change Over 2007 Base Salary
|
|
Alan P. Timmins
|
|
President and Chief Operating Officer
|
|
$
|
316,000
|
|
1.9
|
%
|
Patrick L. Iversen, Ph.D.
|
|
Senior Vice President of Research and Development
|
|
$
|
265,000
|
|
1.9
|
%
|
Peter D. O'Hanley, Ph.D, M.D.,
|
|
Senior Vice President of Clinical Development and Regulatory Affairs
|
|
$
|
270,400
|
|
4.0
|
%
|
Mark M. Webber
|
|
Chief Financial Officer
|
|
$
|
242,520
|
|
3.2
|
%
|
In
connection with the negotiation attendant to his appointment as the Company's Chief Executive Officer, the Compensation Committee established a base salary for Dr. Hudson of
$480,000 per year, beginning in 2008.
Performance-Based Cash Bonuses.
The Company typically grants cash bonuses to executive officers as part of their annual
overall compensation. Such cash bonuses are in recognition of achievement of performance milestones for the individual named executive officers and of milestones achieved by the Company as a whole.
Cash bonuses for a particular fiscal year are generally determined at the meeting of the Compensation Committee in the subsequent fiscal year. The Compensation Committee takes into account the
Company's cash resources and the need of the Company to deploy those resources to advance its business plan, and assesses this objective against the need to maintain compensation levels that are
competitive within the biotechnology industry. As a result, during 2007 the Compensation Committee maintained cash bonus levels of between 10.7% and 16.2% of the named executive officers' 2007 base
compensation. These levels are lower than the Compensation Committee believes are typical relative to the Company's peer group, but reflect the need of the Company to deploy its cash in 2007
13
for
use in its research and development activities. As shown in the chart below, cash bonuses payable for 2007, relative to 2006, decreased significantly, by between 16.0% and 63.1%.
Name
|
|
Title
|
|
2007 Bonus
|
|
2006 Bonus
|
|
% Change (2006 to 2007)
|
|
2007 Bonus as a % of 2007 Base Salary
|
|
Alan P. Timmins
|
|
President and Chief Operating Officer
|
|
$
|
43,500
|
|
$
|
110,000
|
|
(60.5
|
%)
|
14.0
|
%
|
Patrick L. Iversen, Ph.D.
|
|
Senior Vice President of Research and Development
|
|
$
|
27,700
|
|
$
|
75,000
|
|
(63.1
|
%)
|
10.7
|
%
|
Peter D. O'Hanley, Ph.D., M.D.
|
|
Senior Vice President of Clinical Development and Regulatory Affairs
|
|
$
|
42,000
|
|
$
|
50,000
|
|
(16.0
|
%)
|
16.2
|
%
|
Mark M. Webber
|
|
Chief Financial Officer
|
|
$
|
27,500
|
|
$
|
50,000
|
|
(45.0
|
%)
|
11.7
|
%
|
For
fiscal year 2007, the Compensation Committee determined that, while base salaries were relatively consistent with base salaries of its peer group, the 2007 bonuses were significantly
lower than bonuses paid to executive officers at peer group companies. While important progress was made in many areas, the Compensation Committee believed the decrease in bonus compensation was
warranted given the lack of progress in several areas, based on performance of both individual and Company objectives, and based on the Compensation Committee's consideration of the Company's market
valuation.
Equity Incentive Plan Compensation.
The long-term compensation of named executive officers takes the form of
stock option awards under the Company's 2002 Equity Incentive Plan, or "2002 Plan." The 2002 Plan is designed to align a significant portion of the executive compensation program with
long-term shareholder interests. The 2002 Plan permits the granting of several different types of stock-based awards. The Compensation Committee believes that equity-based compensation
helps ensure that the Company's named executive officers have a continuing stake in the long-term success of the Company, and preserves the Company's cash resources. The 2002 Plan provides
incentives to continue in the service of the Company and to create in such executives a more direct interest in the future success of the operations of the Company by relating incentive compensation
to the achievement of long-term corporate economic objectives. All options granted by the Company have been granted with an exercise price equal to the closing market price of the
Company's Common Stock on the date of grant and, accordingly, will only have value if the Company's stock price increases subsequent to the date of grant. In granting options under the 2002 Plan, the
Compensation Committee generally takes into account each named executive officer's responsibilities, relative position in the Company, past grants, the total number of vested and unvested equity
incentives held by each named executive officer, and approximate grants to individuals in similar positions for companies of comparable size in the biopharmaceutical industry. The 2002 Plan is
administered by the Compensation Committee. Beginning on January 1, 2006, the Company began
accounting for stock options granted under the 2002 Plan in accordance with the requirements of FASB 123R.
14
The
following table shows the stock options granted to named executive officers for fiscal year 2007, which options were granted in February and March of 2008:
Name
|
|
Title
|
|
FY 2007 Shares Subject to Option Grant
|
|
FY 2006 Shares Subject to Option Grant
|
|
% Increase 2006 to 2007
|
|
K. Michael Forrest
|
|
Interim Chief Executive Officer
|
|
300,000
|
|
|
|
N/A
|
|
Alan P. Timmins
|
|
President and Chief Operating Officer
|
|
150,000
|
|
175,000
|
|
(14.3
|
%)
|
Patrick L. Iversen, Ph.D.
|
|
Senior Vice President of Research and Development
|
|
125,000
|
|
75,000
|
|
67.0
|
%
|
Peter D. O'Hanley, Ph.D., M.D
|
|
Senior Vice President of Clinical Development and Regulatory Affairs
|
|
75,000
|
|
82,500
|
|
(9.1
|
%)
|
Mark M. Webber
|
|
Chief Financial Officer
|
|
75,000
|
|
75,000
|
|
0.0
|
%
|
The
Company increased substantially the equity grants for Mr. Iversen in 2007 for retention purposes while the Company sought and transitioned to a new Chief Executive Officer.
Employee Stock Purchase Plan.
The purpose of the Employee Stock Purchase Plan, or "ESPP," is to attract and retain qualified
employees essential to the success of the Company and, like the 2002 Plan, to provide such persons with an incentive to perform in the best interests of the Company. The ESPP is administered by the
Compensation Committee, which has the power to make and interpret all rules and regulations it deems necessary to administer the ESPP and has broad authority to amend the ESPP, subject to certain
amendments requiring shareholder approval. All employees of the Company and its subsidiaries, including the Company's named executive officers, may participate in the ESPP if they: (i) are
employed in a position with regular hours of 20 or more hours a week and (ii) are employed more than five months in any calendar year. Eligible employees may elect to contribute from 1% to 10%
of their cash compensation during each pay period. The ESPP provides for two annual six-month offering periods, beginning on May 1 and November 1 each year (the "Enrollment
Dates"). During the offering periods, participants accumulate funds in an account through payroll deduction. At the end of each six-month offering period, the purchase price is determined
and the accumulated funds are used to automatically purchase shares of Common Stock from the Company. The purchase price per share is equal to 85% of the lower of the fair market value of the Common
Stock (i) on the beginning date of the offering period or (ii) the end of the Offering Period. Unless a participant files a withdrawal notice before the beginning of the next
offering period, such participant will automatically be re-enrolled for the next offering period. Beginning on January 1, 2006, the Company began accounting for stock issued under
the ESPP in accordance with the requirements of FAS 123R.
In
2007, we issued 5,692 shares of Common Stock to named executive officers, and 39,559 shares to other employees under the ESPP.
401(k) Plan.
The Company's 401(k) Plan is a defined contribution profit sharing plan with a 401(k) option. The plan year is
January 1 to December 31, and was created on November 1, 1992. Employees who are at least twenty-one years of age and who have provided at least thirty days of service
are eligible to participate in the 401(k) Plan. Employees who are union employees, non-resident alien employees with no US-source income and non-common law
employees are not eligible to participate. Participants may defer up to the maximum allowed by law. At the discretion of the Company, participants may receive a match on the first 4% of compensation
that the participant contributes to the 401(k) Plan. As of the fiscal year ended December 31, 2007, the named executive officers received a 401(k) contribution match of up to 4% of their 401(k)
Plan contribution subject to the maximum amount permitted by law.
15
Tax and Accounting Implications of the Executive Compensation Program
A significant portion of the compensation paid to the Company's named executive officers is considered "performance-based compensation" for purposes of
Section 162(m) of the Internal Revenue Code and, therefore, is fully deductible by the Company for federal income tax purposes. In addition, the long-term incentive compensation
awarded to the named executive officers is based on a fixed value at grant and therefore is not subject to variable accounting treatment under SFAS 123(R). The Company views preserving tax
deductibility as an important objective, but not the sole objective, in establishing executive compensation. In specific instances the Company has and in the future will authorize compensation
arrangements that are not fully tax deductible but which promote other important objectives of the Company.
Repricing of Stock Options
The Company maintains an informal policy against repricing stock options. The Company believes this is a critical element in maintaining the integrity of the
equity compensation program and ensuring alignment of senior executives' interests with the interests of shareholders.
Employment Agreements with Named Executive Officers
On March 27, 2007, the Company's then Chairman and Chief Executive Officer, Denis Burger, resigned. In connection with his resignation, the Company entered
into a Separation and Release Agreement,
pursuant to which Dr. Burger is entitled to receive his base compensation for eighteen months ($562,500 in the aggregate) and medical insurance for the same eighteen month period and may
exercise his previously granted options until the earlier of the termination date of the respective stock option grant agreements or March 28, 2010.
Also
on March 27, 2007, in connection with Denis Burger's resignation, the Board of Directors appointed K. Michael Forrest as Interim Chief Executive Officer. In connection with
his appointment as our Interim Chief Executive Officer, on March 27, 2007 the Compensation Committee approved an annual salary of $385,000 and a grant of options to purchase 300,000 shares of
the Company's stock. The stock options granted to Mr. Forrest became exercisable starting one month after the grant date, with one-twelfth of the options becoming exercisable at
that time and an additional one-twelfth of the options becoming exercisable each subsequent month thereafter.
Leslie Hudson, Ph.D.Chief Executive Officer
On February 8, 2008, the Board of Directors appointed Leslie Hudson, Ph.D. as the Company's Chief Executive Officer. In connection with his appointment,
the Company and Dr. Hudson entered into an Employment Agreement providing for Dr. Hudson's at will employment by the Company. Under the terms of the Employment Agreement,
Dr. Hudson is entitled to an initial annual salary of $480,000, which amount is subject to review for potential increase, but not decrease, on an annual basis. In addition to his base salary,
Dr. Hudson is entitled to an annual bonus based upon the Company's and Dr. Hudson's achievement of performance objectives established by the Company's Board of Directors, with the target
bonus level being equal to 60% of Dr. Hudson's base salary. Dr. Hudson's compensation package was extensively negotiated, and Dr. Hudson's compensation is high relative to the
compensation payable to other executive officers of the Company, including the Company's Interim Chief Executive Officer who served during 2007. The Radford Survey showed that Dr. Hudson's base
compensation was in excess of the Company's targeted 60
th
percentile. In determining Dr. Hudson's compensation, the Board of Directors took into account, among other
things, the fact that Dr. Hudson would be required to relocate from his home in New Jersey, Dr. Hudson's
16
extensive
experience in the Company's industry, and the salaries and potential bonuses commanded by principal executive officers at other companies in the Company's industry.
In
connection with his employment as the Company's Chief Executive Officer, the Company granted to Dr. Hudson options to purchase 667,000 shares of the Company's common stock
under the Company's 2002 Plan, with an exercise price equal to the fair market value of the Company's common stock on February 8, 2008, which was $1.09 per share. Subject to certain exceptions,
the options vest in equal annual installments over a period of four years. In addition, on that same date the Company granted to Dr. Hudson 333,000 restricted shares of the Company's common
stock. A portion of the shares of common stock are subject to forfeiture, with 100,000 shares vesting on February 8, 2008 and 233,000 shares vesting in equal annual installments over four years
commencing on February 8, 2008. The
Company is also required to reimburse Dr. Hudson for all expenses reasonably incurred by him in discharging his duties for the Company.
In
addition to the compensation described above, under the Employment Agreement Dr. Hudson is entitled to receive (i) health care benefits for him and his spouse,
(ii) reimbursement of up to $25,000 in legal fees incurred by Dr. Hudson in connection with the negotiation of the Employment Agreement, (iii) a monthly living allowance of $4,500
for a period of twelve months, subject to extension in certain circumstances, (iv) a car allowance of $1,000 per month, (v) reimbursement of moving expenses and reasonable and customary
costs of selling a residence in Princeton, New Jersey, as well as two round-trip economy fare airplane tickets for relocation purposes for each of Dr. Hudson and his spouse,
(vi) during the first year of employment, reimbursement for up to four round trip economy airplane tickets per month for travel actually incurred between Portland, Oregon and his home in Bend,
Oregon, (vii) four weeks of paid vacation per year, as well as paid holidays generally available to senior executives, (viii) $9,500 per year for reasonable expenses incurred in
connection with Dr. Hudson's federal and state income tax returns and investment advice, and (ix) subject to eligibility requirements, participation in benefits and programs generally
available to all employees or executives. Further, the Company is required to provide Dr. Hudson with the Company's standard directors and officers insurance policy, and indemnify and hold
Dr. Hudson harmless from liability arising out of his services to the fullest extent permitted by Oregon law. The Employment Agreement further provides that Dr. Hudson is entitled to
receive certain tax gross-up payments.
The
Employment Agreement provides that, for a period of two years following Dr. Hudson's termination of employment with the Company, Dr. Hudson may not engage in certain
activities in competition with the Company's business activities, to the extent those competitive activities relate to five competitors specified by the Company prior to Dr. Hudson's
termination. Dr. Hudson is further prohibited, for a period of two years following termination of employment with the Company, from recruiting, hiring, or assisting a third party in hiring any
person then employed by the Company.
During
the first year of employment, Dr. Hudson's Employment Agreement provides that Dr. Hudson may voluntarily terminate his employment with the Company, with or without
"Good Reason" (as defined in the Employment Agreement), upon 90 days' written notice to the Company. Thereafter, written notice will be reduced to not less than 30 days. The Company may
terminate Dr. Hudson's employment without "Cause" (as defined in the Employment Agreement) and other than in connection with a "Change in Control" (as defined in the Employment Agreement) upon
30 days' written notice. Dr. Hudson's employment is terminated upon death, disability, or upon the effective date of a notice sent by the Company to Dr. Hudson terminating him for
Cause.
The Company has entered into employment contracts with each of its other named executive officers that provide for a base annual compensation. The employment
contracts are cancelable by the employee on sixty days' notice and by the Company on thirty days' notice or for cause. Cause is
17
defined
in the employment agreement as the named executive officer's willful or repeated failure to comply with the Company's policies, standards or regulations, or the named executive officer engages
in conduct that is dishonest, fraudulent or detrimental to the Company. The employment agreements provide that the named executive officers may not compete with the Company or solicit the employment
of other individuals employed by the Company during their employment and for a period of two years thereafter. Under the employment agreements, the named executive officers may not disclose the
Company's confidential information to outsiders during employment and for a period of two years thereafter and must assign inventions conceived by them to the Company. The respective employment
agreements provide that each named executive officer is entitled to severance benefits and change in control payments in certain circumstances, as discussed below under "Post-Employment
Benefits and Change in Control Arrangements."
Effective
October 26, 2007, the Company entered into an Amended and Restated Employment Agreement with Alan Timmins, the Company's President and Chief Operating Officer. Under the
terms of the Employment Agreement, Mr. Timmins is entitled to a salary of $310,000 (which was increased to $316,000 for fiscal year 2008, by action of the Board of Directors), continues to be
eligible for bonuses awarded at the discretion of the Board of Directors, and continues to be eligible for benefits provided by the Company to its executive officers. The employment agreement with
Mr. Timmins is substantially similar to the employment agreements with the Company's other named executive officers, other than Dr. Hudson, except for Mr. Timmins' severance
compensation, as described below under "Post-Employment Benefits and Change in Control Arrangements."
Post-Employment Benefits and Change in Control Arrangements
The Company does not generally provide special post-employment benefits to its named executive officers, other than those available to its employees
generally. However, the Company has entered into agreements with certain named executive officers relating to post-employment benefits and change in control arrangements.
Upon Dr. Hudson's voluntary termination of employment (other than with Good Reason) or termination of his employment for Cause, the Company must pay to him
all base compensation, unpaid reimbursements, gross-up payments, and other unpaid expenses due through the effective date of termination, and any unused vacation accrued according to the
Company's policies. However, Dr. Hudson would not be entitled to any other compensation, including the right to receive any bonus relating to the year in which such termination is effective.
Upon
Dr. Hudson's death or "Disability" (as defined in the Employment Agreement), the Company must pay to his estate all base compensation, earned but unpaid bonuses, unpaid
reimbursements, gross-up payments and other unpaid expenses due at the date of death, plus a continuation of base compensation and benefits at the rate set forth in the Employment
Agreement for six months following the end of the month in which the death occurs. Dr. Hudson's estate will also have six months to exercise all vested stock options.
Upon
termination of Dr. Hudson's employment by the Company without Cause or by Dr. Hudson for Good Reason where no Change of Control has occurred, the Company is required
to pay to Dr. Hudson (i) all base compensation and earned but unpaid bonuses, and unpaid reimbursements, gross-up payments and other unpaid expenses due at the effective date
of termination, (ii) the sum of (x) two years of base compensation, (y) two years of bonus compensation based on the average of the past two years' bonuses actually paid or, if
only one year's bonus has been paid, such bonus, or if no bonus has been paid, 50% of the target bonus for the current year, and (z) two times the then current annual cost of health benefits.
If termination occurs before February 8, 2010, fifty percent of unvested
18
options
and fifty percent of unvested shares of common stock granted pursuant to the Employment Agreement will immediately become fully vested and exercisable. If termination occurs on or after
February 8, 2010, all unvested options and all shares of common stock will immediately become fully vested and exercisable. The exercise period of all vested options granted to
Dr. Hudson pursuant to the Company's 2002 Equity Incentive Plan will be the earlier of their original expiration date or six months from the effective date of termination.
Upon
a termination of Dr. Hudson's employment by the Company without Cause or by Dr. Hudson for Good Reason that occurs within twelve months of a Change of Control, the
Company is required to pay to Dr. Hudson (i) all base compensation, earned but unpaid bonuses, and unpaid reimbursements, gross-up payments and other unpaid expenses due at
the effective date of termination, (ii) the sum of (x) two years of base compensation, (y) two times the target annual bonus at the effective time of termination, and
(z) two times the then current annual cost of health benefits, car allowance, expenses incurred in connection with tax preparation and investment advice, and continued participation in benefits
available to other senior executives generally, as well as the amount of
remaining living allowance payments. In addition, all unvested options and all shares of common stock granted pursuant to the Employment Agreement would immediately become fully vested and exercisable
and all options exercisable for a period of the earlier of their original expiration date or six months from the effective day of termination.
Pursuant to Mr. Timmins' Amended and Restated Employment Agreement entered into on October 26, 2007, Mr. Timmins' severance compensation was
modified to provide that upon termination of his employment by the Company other than for Cause (as such term is defined in his employment agreement), or upon his voluntary termination of employment
for Good Reason (as defined in his employment agreement), (a) the Company must pay to Mr. Timmins $630,000, without interest, payable as follows: one-third paid on the
effective date of termination with the balance to be paid in equal installments over the 12 months following such effective date in accordance with the Company's standard payroll procedures;
(b) all outstanding options granted to Mr. Timmins pursuant to the Company's 1992 Stock Incentive Plan, or successor plan, which vest with the passage of time (and are not performance
related) shall be immediately fully vested and (c) the exercise period of all such options will be extended to the earlier of their original expiration date or eighteen months from the date of
termination. The Board of Directors believed this severance provision was necessary to retain Mr. Timmins in light of the significant changes in senior management and the Board of Directors
during 2007.
Under the employment agreements for our other named executive officers, each named executive officer is entitled to receive severance pay of one year's base
salary following either termination without cause or, following a change in control followed by voluntary termination by the employee. A change in control is defined in the employment agreement as any
one of the following events; (1) any person becomes the beneficial owner of twenty-five percent or more of the total number of voting shares of the Company; (2) any person
(other than a person named in a proxy solicited on behalf of the Board of Directors of the Company) holds revocable or irrevocable proxies representing twenty-five percent or more of the
total number of shares of the Company; (3) any person has commenced a tender or exchange offer, or entered into an agreement or received an option, to acquire beneficial ownership of
twenty-five percent or more of the total voting shares of the Company; and (4) as the result of, or in connection with, any cash tender or exchange offer, merger, or other business
combination, sale of assets, or any combination of the foregoing transactions, the persons who were directors of the Company before such transactions cease to constitute at least
two-thirds of the Board of Directors of
19
the
Company or any successor entity. Further, upon termination other than for cause, the employment agreements provide for full vesting of all outstanding stock options, other than performance-based
options.
Compensation Committee Report
The Compensation Committee of AVI BioPharma, Inc. has reviewed and discussed with management the Compensation Discussion and Analysis contained in this
Proxy Statement as required under Item 402(b) of Regulation S-K. Based on their review and discussions with management, the Compensation Committee recommended to the
Company's full Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
|
|
|
|
|
COMPENSATION COMMITTEE
|
|
|
Michael D. Casey (Chair)
K. Michael Forrest
William Goolsbee
John C. Hodgman
|
20
Summary Compensation Table
The table below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal year ended December 31, 2007. Based
on the fair value of equity awards granted to named executive officers in 2007 and the base salary of the named executive officers, "Salary" accounted for, on average, approximately 32% of the total
compensation of the named executive officers, incentive compensation including cash bonus and stock option grants, accounted for approximately 67% of the total compensation of the named executive
officers and benefits accounted for approximately 1% of the total compensation of named executive officers:
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)(1)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)(2)
|
|
Total
($)
|
|
K. Michael Forrest Interim Chief Executive Officer
|
|
2007
2006
|
|
293,192
|
|
|
|
|
|
503,710
|
|
|
|
|
|
9,000
|
|
805,902
|
|
Denis R. Burger, Ph.D.
Chief Executive Officer
|
|
2007
2006
|
|
91,226
375,000
|
|
|
|
|
|
1,057,372
807,757(3)
|
|
|
|
|
|
8,800
|
|
1,148,598
1,191,557
|
|
Mark M. Webber
Chief Financial Officer
|
|
2007
2006
|
|
235,000
225,000
|
|
27,500
50,000
|
|
|
|
261,372
280,073
|
|
|
|
|
|
9,000
8,800
|
|
532,872
563,873
|
|
Alan P. Timmins
President and Chief Operating Officer
|
|
2007
2006
|
|
310,000
300,000
|
|
43,500
110,000
|
|
|
|
556,267
632,273(4)
|
|
|
|
|
|
9,000
8,800
|
|
918,767
1,051,073
|
|
Patrick L. Iversen, Ph.D.
SVP of Research and Development
|
|
2007
2006
|
|
260,000
250,000
|
|
27,700
75,000
|
|
|
|
305,165(5)
296,206(6)
|
|
|
|
|
|
9,000
8,800
|
|
601,865
630,006
|
|
Peter D. O'Hanley, Ph.D.,
M.D. SVP of Clinical Development and Regulatory Affairs
|
|
2007
2006
|
|
260,000
250,000
|
|
42,000
50,000
|
|
|
|
305,228
237,185
|
|
|
|
|
|
9,000
8,800
|
|
616,228
545,985
|
|
-
(1)
-
The
amounts in the option awards column reflect the dollar amount recognized for financial statement reporting purposes calculated in accordance with FAS 123R and, thus,
include amounts from awards granted in and prior to 2007. Assumptions used in the calculation of this amount are included in Note 2 to the financial statements set forth in our annual report on
Form 10-K, filed March 17, 2008 (Commission File No. 001-14895).
-
(2)
-
Represents
funds contributed to the 401(k) Company match.
-
(3)
-
Includes
$9,678 attributable to the Company's Employee Stock Purchase Plan.
-
(4)
-
Includes
$9,054 attributable to the Company's Employee Stock Purchase Plan.
-
(5)
-
Includes
$6,185 attributable to the Company's Employee Stock Purchase Plan.
-
(6)
-
Includes
$5,723 attributable to the Company's Employee Stock Purchase Plan.
See the discussion above under the heading "Employment Agreements with Named Executive Officers" for a discussion of our employment arrangements
with our named executive officers.
21
Grants of Plan Based Awards in Fiscal Year 2007
|
|
|
|
|
Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards
|
|
Estimated Future
Payouts
Under Equity
Incentive Plan Awards
|
|
|
|
All Other
Option Awards:
No. of
Securities
Underlying
Options
(#)
|
|
|
|
Grant Date
Fair Value
of Stock
and
Option
Awards
($)
|
|
|
|
|
All Other
Stock Awards:
No. of Shares
of Stock or
Units
(#)
|
|
Exercise
or Base
Price of
Option
Awards
($/ Sh)
|
|
|
|
|
|
Name
|
|
Grant
Date(1)
|
|
Threshold
($)
|
|
Target
($)
|
|
Max
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Max
(#)
|
|
K. Michael Forrest
|
|
3/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
2.45
|
|
627,002
|
|
Mark M. Webber
|
|
2/6/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
3.00
|
|
192,170
|
|
Alan P. Timmins
|
|
3/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
2.45
|
|
312,484
|
|
Patrick L. Iversen, Ph.D.
|
|
2/6/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
3.00
|
|
320,284
|
|
Peter D. O'Hanley, Ph.D., M.D.
|
|
2/6/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
3.00
|
|
192,170
|
|
-
(1)
-
Subject
to acceleration of vesting in accordance with the named executive officers' employment agreement, all options granted in 2007 for Drs. Iversen and O'Hanley and
Messrs. Timmins and Webber become exercisable starting twelve months after the grant date, with one-third of the options becoming exercisable at that time with an additional
one-third of the options becoming exercisable on the second and third anniversary dates of the option grant, respectively. All options granted in 2007 for Mr. Forrest become
exercisable starting one month after the grant date, with one-twelfth of the options becoming exercisable at that time with an addition one-twelfth of the options becoming
exercisable each month thereafter.
22
2007 Outstanding Equity Awards at Fiscal Year End
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
|
|
K. Michael Forrest(1)
|
|
16,500
10,000
10,000
225,000
|
|
16,500
75,000
|
|
|
|
2.64
2.24
4.64
2.45
|
|
03/04/15
05/18/15
05/24/16
03/27/17
|
|
|
|
|
|
|
|
|
|
Denis R. Burger, Ph.D.(2)
|
|
200,000
200,000
330,000
175,000
175,000
|
|
|
|
|
|
6.63
5.75
5.35
2.53
7.35
|
|
02/02/08
01/03/10
03/27/10
03/27/10
03/27/10
|
|
|
|
|
|
|
|
|
|
Mark M. Webber(3)
|
|
2,500
132,000
82,500
50,000
25,000
|
|
25,000
50,000
75,000
|
|
|
|
6.63
6.88
5.35
2.53
7.35
3.00
|
|
02/02/08
08/15/10
12/05/12
02/22/15
02/16/16
02/06/17
|
|
|
|
|
|
|
|
|
|
Alan P. Timmins(4)
|
|
135,000
135,000
148,500
25,000
116,667
58,334
|
|
58,333
116,666
150,000
|
|
|
|
6.63
5.75
5.35
5.88
2.53
7.35
2.45
|
|
02/02/08
01/03/10
12/05/12
05/19/13
02/22/15
02/16/16
03/27/17
|
|
|
|
|
|
|
|
|
|
Patrick L. Iversen, Ph.D.(5)
|
|
56,000
28,000
84,000
92,400
50,000
25,000
|
|
25,000
50,000
125,000
|
|
|
|
6.63
3.69
5.75
5.35
2.53
7.35
3.00
|
|
02/02/08
01/21/09
01/03/10
12/05/12
02/22/15
02/16/16
02/06/17
|
|
|
|
|
|
|
|
|
|
Peter D. O'Hanley, Ph.D., M.D.(6)
|
|
75,000
33,334
25,000
|
|
25,000
16,666
50,000
75,000
|
|
|
|
2.89
2.53
7.35
3.00
|
|
03/29/14
02/22/15
02/16/16
02/06/17
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Mr. Forrest's
33,000 options granted on March 4, 2005 at $2.64 per share became exercisable starting March 4, 2006 with one-fourth being exercisable
on this date and another one-fourth being exercisable on March 4, 2007, 2008 and 2009, respectively. Mr. Forrest's 300,000 options granted on March 27, 2007 at $2.45
per share became exercisable starting June 27, 2007 with one-twelfth being exercisable on this date and another one-twelfth being exercisable each month thereafter.
-
(2)
-
All
of Dr. Burger's stock options became fully exercisable on March 27, 2007 in connection with his resignation as Chief Executive Officer.
-
(3)
-
Mr. Webber's
75,000 options granted on February 22, 2005 at $2.53 per share became exercisable starting February 22, 2006 with one-third being
exercisable on this date and another one-third being exercisable on February 22, 2007 and 2008, respectively. Mr. Webber's 75,000 options granted on February 16, 2006
at $7.35 per share become exercisable starting February 16, 2007 with one-third being exercisable on this date and another one-third being exercisable on
February 16, 2008 and 2009, respectively. Mr. Webber's 75,000 options granted on February 6, 2007 at $3.00 per share become exercisable starting February 6, 2008 with
one-third being exercisable on this date and another one-third being exercisable on February 6, 2009 and 2010, respectively.
-
(4)
-
Mr. Timmins'
175,000 options granted on February 22, 2005 at $2.53 per share became exercisable starting February 22, 2006 with one-third being
exercisable on this date and another one-third being exercisable on February 22, 2007 and 2008, respectively. Mr. Timmins' 175,000 options granted on February 16, 2006
at $7.35 per share become exercisable starting February 16, 2007 with one-third being exercisable on this date and another one-third being exercisable on
February 16, 2008 and 2009, respectively. Mr. Timmins' 150,000 options granted on
23
March 27,
2007 at $2.45 per share become exercisable starting March 27, 2008 with one-third being exercisable on this date and another one-third being exercisable
on March 27, 2009 and 2010, respectively.
-
(5)
-
Dr. Iversen's
75,000 options granted on February 22, 2005 at $2.53 per share became exercisable starting February 22, 2006 with one-third being
exercisable on this date and another one-third being exercisable on February 22, 2007 and 2008, respectively. Dr. Iversen's 75,000 options granted on February 16, 2006
at $7.35 per share become exercisable starting February 16, 2007 with one-third being exercisable on this date and another one-third being exercisable on
February 16, 2008 and 2009, respectively. Dr. Iversen's 125,000 options granted on February 6, 2007 at $3.00 per share become exercisable starting February 6, 2008 with
one-third being exercisable on this date and another one-third being exercisable on February 6, 2009 and 2010, respectively.
-
(6)
-
Dr. O'Hanley's
100,000 options granted on March 29, 2004 at $2.89 per share became exercisable starting March 29, 2005 with one-fourth being
exercisable on this date and another one-fourth being exercisable on March 29, 2006, 2007 and 2008, respectively. Dr. O'Hanley's 50,000 options granted on February 22,
2005 at $2.53 per share became exercisable starting February 22, 2006 with one-third being exercisable on this date and another one-third being exercisable on
February 22, 2007 and 2008, respectively. Dr. O'Hanley's 75,000 options granted on February 16, 2006 at $7.35 per share become exercisable starting February 16, 2007 with
one-third being exercisable on this date and another one-third being exercisable on February 16, 2008 and 2009, respectively. Dr. O'Hanley's 75,000 options
granted on February 6, 2007 at $3.00 per share become exercisable starting February 6, 2008 with one-third being exercisable on this date and another one-third
being exercisable on February 6, 2009 and 2010, respectively.
2007 Option Exercises and Stock Vested
None of our named executive officers exercised any stock options or had any stock based awards vest during fiscal year 2007. On March 27, 2007, all of
Dr. Burger's stock options vested under his employment agreement in connection with his resignation as Chief Executive Officer.
2007 Pension Benefits
None of our named executive officers are entitled to pension benefits or other payments of benefits pursuant to any established plan following retirement.
2007 Nonqualified Deferred Compensation
None of our named executive officers are entitled to benefits under any nonqualified defined contribution or nonqualified deferred compensation plans.
24
Potential Payments Upon Termination or a Change in Control
The table below reflects the amount of compensation payable to each of the named executive officers of the Company in the event of termination of such executive's
employment. The amount of compensation payable to each named executive officer upon termination without cause or before and after a change in control, and for termination following a change of
control, is shown below. The amounts shown assume that such termination was effective as of December 31, 2007, and thus includes amounts earned through such time and are estimates of the
amounts which would be paid out to the executives upon their termination.
|
Name
|
|
Benefit
|
|
Before Change
in Control,
Termination
w/o Cause
($)
|
|
After Change
in Control,
Termination
w/o Cause
($)
|
|
Voluntary
Termination
($)(5)
|
|
Death
($)(6)
|
|
Disability
($)(7)
|
|
Change in
Control
($)
|
|
K. Michael Forrest
|
|
Cash Severance
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denis R. Burger, Ph.D.(4)
|
|
Cash Severance
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark M. Webber
|
|
Cash Severance(1)
Stock Options(3)
|
|
235,000
261,372
|
|
235,000
570,595
|
|
570,595
|
|
|
|
570,595
|
|
235,000
570,595
|
|
Alan P. Timmins
|
|
Cash Severance(2)
Stock Options(3)
|
|
630,000
556,267
|
|
630,000
1,198,194
|
|
1,198,194
|
|
|
|
1,198,194
|
|
1,198,194
|
|
Patrick L. Iversen, Ph.D.
|
|
Cash Severance(1)
Stock Options(3)
|
|
260,000
298,980
|
|
260,000
696,146
|
|
696,146
|
|
|
|
696,146
|
|
260,000
696,146
|
|
Peter D. O'Hanley, Ph.D., M.D.
|
|
Cash Severance(1)
Stock Options(3)
|
|
260,000
305,228
|
|
260,000
626,780
|
|
626,780
|
|
|
|
626,780
|
|
260,000
626,780
|
|
-
(1)
-
Cash
severance is payable as a lump sum equal to one year's base salary for the respective named executive officers.
-
(2)
-
Cash
severance is payable as a lump sum of $210,000 at the date of termination and an additional $420,000 payable over twelve equal monthly payments for the respective named executive
officer.
-
(3)
-
In
the event of a change in control of the Company, all stock options held by the executive will automatically vest and become exercisable. The dollar amount reflects the fair value
computed in accordance with FAS 123R. Assumptions used in the calculation of this amount are included in Note 2 to the financial statements set forth in our annual report on
Form 10-K, filed March 17, 2008 (Commission File No. 0-22613).
-
(4)
-
In
connection with his resignation as Chief Executive Officer on March 27, 2007, Dr. Burger received severance pay of $562,500, to be paid in equal monthly installments
over eighteen (18) months, all of his stock options vested, and the exercise date of all his stock options was extended to the earlier of the expiration date of the option or March 27,
2010. The Company also agreed to reimburse Dr. Burger for his health insurance benefits for eighteen (18) months.
-
(5)
-
In
the event of a termination other than for cause, all options granted up to the date of termination become 100% vested.
-
(6)
-
In
the event of death, the named executive officer will receive all salary compensation due as of the last day of the month following the month in which the death occurs. In addition,
the named executive officer will receive an unused paid time off. The stock options will cease vesting as of the date of death, but the exercise period is automatically extended to one year from the
date of death.
-
(7)
-
In
the event of disability, the named executive officer would receive one-half of a month's salary and any unused paid time off. The named executive officer's employment
agreement provides that all options granted up to the date of termination other than for cause be 100% vested.
For a further discussion of the Company's obligations on a change of control or termination of a named executive officer, see also the discussion
above under "Post-Employment Benefits and Change in Control Arrangements."
25
2007 Director Compensation
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board of Directors. In
setting director compensation, the Company considers the significant amount of time that Directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company
of members of the Board of Directors.
The
Company's non-employee directors received the following compensation during fiscal year 2007:
-
-
annual
compensation of $30,000 for services as a director, other than the Chairman of the Board of Directors;
-
-
annual
compensation of $75,000 payable to the Chairman of the Board of Directors;
-
-
an
additional $12,000 to the Chairman of the Audit Committee;
-
-
an
additional $8,000 to each member of the Audit Committee;
-
-
an
additional $5,000 to the Chairman of the Compensation Committee;
-
-
an
additional $3,000 to each member of the Compensation Committee;
-
-
an
additional $5,000 to the Chairman of the Nominating and Corporate Governance Committee;
-
-
an
additional $3,000 to each member of the Nominating and Corporate Governance Committee;
-
-
an
additional $7,500 paid to John W. Fara, Ph.D. in connection with his acting as the Chairman of a Special Committee of the Board of Directors during 2007;
-
-
an
additional $5,000 paid to the non-employee directors, other than Mr. Fara, in connection with their service on a Special Committee of the Board of Directors during
2007; and
-
-
each
year, at the meeting of the Board of Directors held immediately following the Annual Meeting, each non-employee director receives a nonqualified option to
purchase 10,000 shares of Common Stock with an exercise price equal to the fair market value of the Common Stock on the date of the grant pursuant to AVI's 2002 Equity Incentive Plan. These options
vest ratably on each monthly anniversary date of the grant over twelve months of continued service as a director.
In
addition to the foregoing, new non-employee directors received:
-
-
a
nonqualified option upon joining the Board of Directors, to purchase 33,000 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock
on the date of the grant pursuant to AVI's 2002 Equity Incentive Plan. These options vest ratably on each anniversary date of the grant over four years of continued service to the Board of Directors;
26
The
following table sets forth a summary of the compensation we paid to our non-employee directors in 2007:
Director Compensation for Fiscal 2007
Name
|
|
Fees Earned or Paid in Cash
($)
|
|
Stock Awards
($)
|
|
Option Awards
($)(1)(2)
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
|
All Other Compensation
($)
|
|
Total
($)
|
Jack L. Bowman
|
|
81,625
|
|
|
|
67,694
|
|
|
|
|
|
|
|
149,319
|
Michael D. Casey
|
|
41,750
|
|
|
|
47,051
|
|
|
|
|
|
|
|
88,801
|
John W. Fara, Ph.D.
|
|
50,500
|
|
|
|
30,573
|
|
|
|
|
|
|
|
81,073
|
K. Michael Forrest(3)
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
William Goolsbee
|
|
|
|
|
|
3,383
|
|
|
|
|
|
|
|
3,383
|
James B. Hicks, Ph.D.
|
|
43,000
|
|
|
|
30,573
|
|
|
|
|
|
|
|
73,573
|
John C. Hodgman
|
|
50,750
|
|
|
|
51,521
|
|
|
|
|
|
|
|
120,271
|
Gil Price, M.D.
|
|
|
|
|
|
3,383
|
|
|
|
|
|
|
|
3,383
|
-
(1)
-
The
amounts listed in the option awards column reflect the dollar amount recognized for financial statement reporting purposes calculated in accordance with FAS 123R, and thus
include amounts from awards granted in and prior to 2007. Assumptions used in the calculation of this amount are included in Note 2 to the financial statements set forth in our annual report on
Form 10-K, filed March 17, 2008 (Commission File No. 001-14895).
-
(2)
-
As
of December 31, 2007, each director had the following number of options outstanding: Jack L. Bowman: 56,667; Michael D. Casey: 14,083; John W. Fara: 69,167; K. Michael
Forrest; 261,500, James B. Hicks; 55,833; and John C. Hodgman; 50,834.
-
(3)
-
Mr. Forrest
was an employee-member of the Board of Directors while serving as the Company's Interim Chief Executive Officer during a portion of fiscal year 2007.
27
AUDIT COMMITTEE REPORT
Under
the Amended and Restated Audit Committee Charter ("Charter"), a copy of which is posted on the Company's website (www.avibio.com), the general purpose of the Audit Committee is to
assist the Board of Directors in the exercise of its fiduciary responsibility of providing oversight of the Company's financial statements and the financial reporting processes, internal accounting
and financial controls, the annual independent audit of the Company's financial statements, and other aspects of the financial management of the Company. The Audit Committee is appointed by the Board
of Directors and is to be comprised of at least three directors, each of whom shall be independent, as such term is defined under the listing standards of the Nasdaq Stock Market. All committee
members must be financially literate, or shall become financially literate within a reasonable period of time after appointment to the Committee.
Audit and Other Fees.
KPMG LLP has been the Company's auditors since 2002. During fiscal years 2007 and 2006, the fees
for audit and other services performed by KPMG LLP for the Company were as follows:
|
|
Amount and Percentage of Fees
|
|
Nature of Services
|
|
|
2007
|
|
2006
|
|
Audit
|
|
$
|
391,700 (100
|
%)
|
$
|
239,400 (100
|
%)
|
Audit Related
|
|
$
|
|
|
$
|
|
|
Financial Information System Design and Implementation Fees
|
|
$
|
|
|
$
|
|
|
All other fees
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
391,700 (100
|
%)
|
$
|
239,400 (100
|
%)
|
Responsibilities and Duties of the Audit Committee.
The Company's management is responsible for preparing the Company's
financial statements and the independent auditors are responsible for auditing those financial statements. The Committee is responsible for overseeing the conduct of these activities by the Company's
management and the independent auditors. The financial management and the independent auditors of the Company have more time, knowledge and more detailed information on the Company than do Committee
members. Consequently, in carrying out its oversight responsibilities, the Committee does not provide any expert or special assurance as to the Company's financial statements or any professional
certification as to the independent auditors' work.
As
further described in the Charter, the specific duties of the Audit Committee include the following:
-
-
Select,
retain (subject to approval by the Company's stockholders, if required), and, when appropriate, terminate the engagement of the independent auditor and set the
independent auditors' compensation;
-
-
Select,
retain (subject to approval by the Company's stockholders, if required), and, when appropriate, terminate the engagement of financial consultants and set such
consultants' compensation;
-
-
Pre-approve
all permitted non-audit services to be performed by the independent auditors and/or financial consultants and establish policies and
procedures for the engagement of the independent auditors and/or financial consultants to provide permitted non-audit services;
-
-
Periodically
discuss and review with the independent auditors' their independence from management and the Company and the matters included in the written disclosures
required by the Independence Standards Board, including whether the provision by the independent auditors of permitted non-audit services is compatible with independence and obtain and
review a report
28
29
-
-
Review
(a) the status of compliance with laws, regulations, and internal procedures, including, without limitation, the Company's policies on ethical business
practices; and (b) the scope and status of systems designed to promote Company compliance with laws, regulations and internal procedures, through receiving reports from management, legal
counsel and third parties as determined by the Committee and report on the same to the Board of Directors;
-
-
Establish
procedures for the confidential and anonymous receipt, retention and treatment of complaints regarding the Company's accounting, internal controls, auditing
matters and compliance with the Company's ethical business policies;
-
-
Establish
policies for the hiring of employees and former employees of the independent auditor;
-
-
Prepare
a report of the Committee each year for inclusion in the Company's proxy statement in accordance with SEC rules;
-
-
Review
and assess the adequacy of this Charter annually with the Board of Directors as a whole and report to the Board of Directors any significant matters as they occur
during the year; and
-
-
Conduct
such other duties and undertake such other tasks as may be appropriate to the overall purposes for the Committee and as may be assigned from time to time by the
Board of Directors consistent with such purposes
Specific Audit Committee Actions Related to Review of the Company's Audited Financial Statements.
In discharging its duties,
the Audit Committee, among other actions, has (i) reviewed and discussed the audited financial statements to be included in the company's Annual Report on Form 10-K for the
twelve months ended December 31, 2007 with management, (ii) discussed with the Company's independent auditors the matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standard, AU380) related to such financial statements, (iii) received the written disclosures and the letter from the Company's independent accountants required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees
) and has
discussed with the independent accountant the independent accountant's independence, and (iv) considered whether the provision of service represented under the headings on "Financial
Information Systems Design and Implementation Fees" and "All Other Fees" as set forth in the table of fees on page 29 is compatible with maintaining KPMG LLP's independence, and based on such
reviews and discussions, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the company's Annual Report on Form 10-K
for the twelve months ended December 31, 2007. The Audit Committee also discussed with KPMG LLP the audit of management's assessment that the Company maintained effective internal
control over financial reporting as of December 31, 2007. Please see "Management's Annual Report on Internal Control over Financial Reporting" and "Report of Independent Registered Public
Accounting Firm" in the company's Annual Report on Form 10-K for the twelve months ended December 31, 2007.
|
|
|
|
|
AUDIT COMMITTEE
|
|
|
John C. Hodgman, Chairman
John W. Fara, Ph.D.
Gil Price, M.D.
|
30
PERFORMANCE GRAPH
The following graph compares the cumulative total shareowner return on the Company's Common Stock for the period beginning December 31, 2002 and ending
December 31, 2007, as compared with the total return of the NASDAQ Composite Index and the Amex Biotech Index. This graph assumes an investment of $100 on December 31, 2002 in each of
the Company's common stock, the NASDAQ Composite Index and the Amex Biotech Index, and assumes reinvestment of dividends, if any. The stock price performance shown on the graph below is not
necessarily indicative of future stock price performance.
31
STOCK OWNED BY AVI BIOPHARMA, INC. MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership of AVI Common Stock as of March 24, 2008, with respect to: (i) each
person known by AVI to beneficially own more than five percent (5%) of the outstanding shares of AVI Common Stock, (ii) each of AVI's directors, (iii) each of AVI's named executive
officers and (iv) all directors and executive officers as a group.
|
|
Shares Beneficially Owned
|
Name and Address of Beneficial Owner
|
|
Number(1)
|
|
Percent(1)
|
|
|
|
|
|
Officers and Directors
|
|
|
|
|
Denis R. Burger, Ph.D.(2)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
1,051,024
|
|
1.5%
|
Alan P. Timmins(3)
AVI BioPharma, Inc.
4575 S.W. Research Way, Suite 200
Corvallis, OR 97333
|
|
721,549
|
|
1.0%
|
Dwight D. Weller, Ph.D.(4)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
667,093
|
|
*
|
Patrick L. Iversen, Ph.D.(5)
AVI BioPharma, Inc.
4575 S.W. Research Way, Suite 200
Corvallis, OR 97333
|
|
434,825
|
|
*
|
Mark M. Webber(6)
AVI BioPharma, Inc.
4575 S.W. Research Way, Suite 200
Corvallis, OR 97333
|
|
379,946
|
|
*
|
K. Michael Forrest(7)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
354,750
|
|
*
|
Peter D. O'Hanley, Ph.D., M.D.(8)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
225,000
|
|
*
|
Leslie Hudson, Ph.D.
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
100,000
|
|
*
|
John W. Fara, Ph.D.(9)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
73,834
|
|
*
|
32
John C. Hodgman(10)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
63,334
|
|
*
|
William A. Goolsbee(11)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
55,000
|
|
*
|
Gil Price, M.D.
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
25,000
|
|
*
|
Michael D. Casey(12)
AVI BioPharma, Inc.
1 S.W. Columbia, Suite 1105
Portland, OR 97258
|
|
18,250
|
|
*
|
All directors and officers as a group (15 persons)
|
|
4,313,939
|
|
5.8%
|
5% Shareholders
|
|
|
|
|
George W. Haywood(13)
c/o Cronin & Vris, LLP
380 Madison Ave., 24
th
floor
New York, NY 10017
|
|
8,505,000
|
|
12.1%
|
-
*
-
Less
than one percent
-
(1)
-
Beneficial
ownership is determined in accordance with rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.
Shares of Common Stock subject to options and warrants currently exercisable or convertible, or exercisable or convertible within sixty (60) days of March 24, 2008, are deemed
beneficially owned and outstanding for computing the percentage of the person holding such securities, but are not considered outstanding for computing the percentage of any other person.
-
(2)
-
As
of March 27, 2007, Dr. Burger resigned from his position as Chief Executive Officer. Includes 34,434 shares held by Sovereign Ventures, LLC, a limited
liability company in which Dr. Burger is a general partner. Also includes 880,000 shares subject to options exercisable within sixty (60) days of March 24, 2008. Dr. Burger
disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
-
(3)
-
Includes
650,167 shares subject to options exercisable within sixty (60) days of March 24, 2008.
-
(4)
-
Includes
252,936 shares held jointly or by others over which Dr. Weller exercises voting and investment power, 326,400 shares subject to options exercisable by
Dr. Weller and 29,935 shares subject to options exercisable by Dr. Weller's spouse within sixty (60) days of March 24, 2008. Dr. Weller disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest therein.
-
(5)
-
Includes
371,067 shares subject to options exercisable within sixty (60) days of March 24, 2008.
-
(6)
-
Includes
364,500 shares subject to options exercisable within sixty (60) days of March 24, 2008.
33
-
(7)
-
Includes
344,750 shares subject to options exercisable within sixty (60) days of March 24, 2008.
-
(8)
-
Includes
225,000 shares subject to options exercisable within sixty (60) days of March 24, 2008.
-
(9)
-
Includes
73,334 shares subject to options exercisable within sixty (60) days of March 24, 2008.
-
(10)
-
Includes
63,334 shares subject to options exercisable within sixty (60) days of March 24, 2008.
-
(11)
-
Includes
options to purchase 50,000 shares of common stock pursuant to call option contracts exercisable prior to January 2009.
-
(12)
-
Includes
18,250 shares subject to options exercisable within sixty (60) days of March 24, 2008.
-
(13)
-
George
W. Haywood reported owning 8,505,000 shares as of February 13, 2008. Includes 960,000 shares held by others over which Mr. Haywood exercises voting and
investment power.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
The Company is not aware of any related party transactions that would require disclosure.
Review, Approval or Ratification of Transactions with Related Persons
Pursuant to the Code of Business Conduct and Ethics, authorization from the Audit Committee is required for a director or officer to enter into a related party
transaction or a similar transaction which
could result in a conflict of interest. Conflicts of interest are prohibited unless specifically authorized in accordance with the Code of Business Conduct and Ethics.
ELECTION OF AVI BIOPHARMA, INC. DIRECTORS
(Proposal I)
At the Annual Meeting, three (3) directors will be elected, each for a two-year term. Unless otherwise specified on the proxy, it is the
intention of the persons named in the proxy to vote the shares represented by each properly executed proxy for the election as directors of the persons named below as nominees. The Board of Directors
believes that the nominees will stand for election and will serve if elected as directors. However, if any of the persons nominated by the Board of Directors fails to stand for election or is unable
to accept election, the persons named in the enclosed proxy form will vote in their discretion upon such matters.
Under
AVI's bylaws, the directors are divided into two groups, with Group I consisting of three (3) directors and Group II consisting of four (4) directors. The term of
office of one group of directors expires in each year, and their successors are elected for terms of two years and until their successors are elected and qualified. There is no cumulative voting for
election of directors. On March 10, 2008, the Board of Directors approved a decrease in the number of directors from eight (8) to seven (7).
34
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of each of the Board of Director's nominees for election as a Group I director and those directors who will continue to
serve after the Annual Meeting. Also set forth is certain other information with respect to each such person's age, the periods during which he has served as a director of AVI and positions currently
held with AVI. Each nominee was selected by the Nominating and Corporate Governance Committee in accordance with its stated procedures and policies.
|
|
Age
|
|
Director Since
|
|
Expiration Of Term
|
|
Position Held With AVI
|
Nominees:
|
|
|
|
|
|
|
|
|
William Goolsbee
|
|
54
|
|
2007
|
|
2008
|
|
Director
|
Michael D. Casey
|
|
62
|
|
2006
|
|
2008
|
|
Chairman of the Board
|
Gil Price, M.D.
|
|
52
|
|
2007
|
|
2008
|
|
Director
|
Continuing Directors:
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John C. Hodgman
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53
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2004
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2009
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Director
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John W. Fara, Ph.D.
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65
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2000
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2009
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Director
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K. Michael Forrest
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64
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2005
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2009
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Director
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Leslie Hudson, Ph.D.
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62
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2008
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2009
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Director
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See
"AVI BIOPHARMA, INC. DIRECTORS AND EXECUTIVE OFFICERS" for biographical information with respect to the Nominees and Continuing Directors and "Director Compensation" for
certain information regarding compensation of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF ITS NOMINEES FOR DIRECTOR.
If a quorum is
present, AVI's Bylaws provide that directors are elected by a plurality of the votes cast by the shares entitled to vote. Abstentions and broker non-votes are counted for purposes of
determining whether a quorum exists at the AVI Annual Meeting, but are not counted and have no effect on the determination of whether a plurality exists with respect to a given nominee.
RATIFICATION OF APPOINTMENT OF AVI BIOPHARMA INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal II)
The Audit Committee has appointed KPMG, LLP ("KPMG") as independent auditors for the 2008 fiscal year. KPMG will audit the Company's consolidated financial
statements for the 2008 fiscal year and perform other services. While shareholder ratification is not required by the Company's by-laws or otherwise, the Board of Directors is submitting
the selection of KPMG to the shareholders for ratification as a good corporate governance practice. If the shareholders fail to ratify the selection, the Audit Committee may, but is not required to,
reconsider whether to retain KPMG. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a
different independent public accountant or auditor at any time during the year if it determines that such a change would be in the best interest of the Company and its shareholders.
Unless
otherwise indicated, properly executed proxies will be voted in favor of ratifying the appointment of KPMG LLP to audit the Company's books and accounts for the fiscal year
ending December 31, 2008.
A
representative of KPMG LLP is expected to be present at the AVI Annual Meeting and will be given an opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
35
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
The proposal will be approved if assuming the
existence of a quorum at least a majority of the shares of the Company's Common Stock cast on the proposal vote in favor of approval. Abstentions and broker non-votes are counted for
purposes of determining whether a quorum exists at the Annual Meeting but will not be counted and will have no effect on the determination of the outcome of the proposal. The proxies will be voted for
or against the proposal, or as an abstention, in accordance with the instructions specified on the proxy form. If no instructions are given, proxies will be voted for approval of the ratification of
KPMG LLP.
OTHER BUSINESS
As of the date of this Proxy Statement, the Company knows of no other business that will be presented for action at the meeting. If any other business requiring a
vote of the shareholders should properly come before the meeting, the persons named in the enclosed proxy form will vote in their discretion upon such other matters.
SHAREHOLDER PROPOSALS AND SHAREHOLDER NOMINATIONS OF DIRECTORS
The Nominating and Corporate Governance Committee considers, selects and recommends to the Board of Directors for approval nominees for director and committee
member positions. The Board then considers the recommendation of the Nominating and Corporate Governance Committee and
decides which nominees to present to the Company's shareholders for election to the Board of Directors.
The
Company's First Amended and Restated Bylaws, or the "Bylaws," establish procedures governing the eligibility of nominees for election to the Board of the Company and the proposal of
business to be considered by the shareholders at an annual meeting of shareholders. For nominations or other business to be properly brought before an annual meeting of shareholders by a shareholder,
the shareholder must have given timely notice thereof in writing to the Secretary of the Company. Effective for all annual meetings held on or after June 1, 2008, to be timely a shareholder's
notice must be delivered to the Secretary of the Company at the principal executive offices of the Company not less than 90 days nor more than 120 days prior to the first anniversary of
the preceding year's annual meeting of shareholders; provided, however, that in the event the date of the annual meeting of shareholders is advanced by more than 30 days or delayed by more than
30 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the later of (i) the 90th day prior to
such annual meeting or (ii) the 15th day following the day on which public announcement of the date of such meeting is first made.
Such
shareholder's notice described in the paragraph above must set forth: (i) the name and address of the shareholder who intends to make the nomination(s) or propose the
business, (ii) a representation that the shareholder is a holder of record of stock of the Company, that the shareholder intends to vote such stock at such meeting and, in the case of
nomination of a director or directors, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or to submit the business specified in the
notice, (iii) in the case of nomination of a director or directors, the name and address of such nominee or nominees and a description of all arrangements or understandings between the
shareholder and each nominee or any other person or persons(naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder, (iv) a brief
description of the business desired to be submitted at the meeting and the reasons for proposing such business at the meeting, (v) such other information regarding each nominee or each matter
of business to be proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to Regulation 14A promulgated by the Securities and Exchange Commission
pursuant to the Exchange Act, had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed, by the Board of Directors of the
36
Company,
(vi) in the case of nomination of a director or directors, the consent of each nominee to serve as a director of the Company if so elected, and (vii) such other information
reasonably requested by the Company.
The
chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the
procedures set forth in the Bylaws and, if any proposed nomination or business is not in compliance with the Bylaws, to declare that such defective proposal shall be disregarded.
The
applicable time period for timely shareholder submissions pursuant to the above provisions for the 2009 Annual Meeting of Shareholders is January 20, 2009 (the
120
th
day preceding the anniversary of the 2008 Annual Meeting) to February 19, 2009 (the 90
th
day preceding such anniversary). Proposals by
shareholders intended to be presented for action, including proposed nominees for election to the Board of Directors, at the 2009 annual meeting of shareholders must be received by the Company at its
principal executive offices, One S.W. Columbia St., Suite 1105, Portland, Oregon 97258. It is suggested that such proposals be submitted by Certified Mail-Return Receipt Requested.
Such notification should set forth all information relating to the proposed nominee, as is required to be disclosed in solicitations of proxies for election of directors pursuant to
Regulation 14A under the Exchange Act and as required by the Company's Bylaws. The Nominating and Corporate Governance Committee will consider shareholder nominees on the same terms as nominees
selected by the Nominating and Corporate Governance Committee.
In
addition to the foregoing, the Company will comply with Rule 14a-8 of the Exchange Act with respect to any shareholder proposal that meets its requirements. The
Company will review shareholder proposals intended to be included in the Company's proxy materials for the 2009 Annual Meeting of Shareholders which are received by the Company at its principal
executive offices no later than December 16, 2008. Such proposals must be submitted in writing and should be sent to the attention of the Corporate Secretary of the Company.
The
Nominating and Corporate Governance Committee has not established specific minimum age, education, years of business experience or specific types of skills for potential candidates,
but, in general, expects qualified candidates will have ample experience and a proven record of business success and leadership. In general, each director will have the highest personal and
professional ethics, integrity and values and will consistently exercise sound and objective business judgment. It is expected that the Board of Directors as a whole will have individuals with
significant appropriate senior management and leadership experience, a long-term and strategic perspective, the ability to advance constructive debate, and a global perspective. These
qualifications and attributes are not the only factors the Nominating and Corporate Governance Committee will consider in evaluating a candidate for nomination to the Board of Directors, and the
Nominating and Corporate Governance Committee may reevaluate these qualifications and attributes at any time.
Except
as set forth above, the Nominating and Corporate Governance Committee does not currently have a formal policy regarding the handling or consideration of director candidate
recommendations received from shareholders, nor does the Nominating and Corporate Governance Committee have a formal process for identifying and evaluating nominees for director (including nominees
recommended by shareholders). The Nominating and Corporate Governance Committee does not currently engage any third party director search firms but may do so in the future if it deems appropriate and
in the best interests of the Company. These issues will be considered by the Nominating and Corporate Governance Committee in due course, and, if appropriate, the Nominating and Corporate Governance
Committee will make a recommendation to the Board of Directors addressing the nomination process.
37
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to use of the mails, proxies may be solicited personally or by telephone by directors,
officers and employees of the Company, who will not be additionally compensated for such activities. Such solicitations may be made personally, or by mail, facsimile, telephone, telegraph or
messenger. The Company will also request persons, firms and companies holding shares in their names or in the name of their nominees, which are beneficially owned by others, to send proxy materials to
and obtain proxies from such beneficial owners. The Company will reimburse such persons for their reasonable expenses incurred in that connection.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007 accompanies this Proxy Statement. The Company is required
to file an Annual Report on Form 10-K for its fiscal year ended December 31, 2007 with the Securities and Exchange Commission (the "SEC"). The SEC maintains a web site,
www.sec.gov
, that
contains reports, proxy statements, and certain other information filed electronically by the Company with the SEC.
Shareholders may obtain, free of charge, a copy of the Form 10-K and all other documents of the Company incorporated by reference herein by writing to
Investor Relations, AVI BioPharma, Inc., One S.W. Columbia Street, Portland, Oregon 97258, calling Investor Relations at (503) 227-0554, or visiting the Company's web
site at
www.avibio.com
. Requested documents will be sent by first class mail (or other equally prompt means) within one business day of receipt of such
request.
38
AVI BIOPHARMA, INC.
PROXY FOR
THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20,
2008
THIS PROXY
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Leslie Hudson,
Ph.D., and Alan P. Timmins, and each of them, as Proxies, with full power of
substitution, and hereby authorizes them to represent and vote, as designated
below, all shares of Common Stock of AVI BioPharma, Inc. held of record by
the undersigned on March 24, 2008 at the Annual Meeting of Shareholders to
be held on May 20, 2008 (and any adjournments thereof).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 1.
1.
Election of Directors.
Elect three Group I directors for two-year
terms or until their respective successors are elected and qualified. Directors
nominated are Michael D. Casey, William Goolsbee, and Gil Price, M.D.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 2.
2.
Ratification of Independent Registered Public
Accounting Firm for 2008.
Ratify the selection of KPMG LLP as the Companys independent registered
public accounting firm for the fiscal year ending December 31, 2008.
For
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Against
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Abstain
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o
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o
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o
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In
their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting. This proxy, when properly executed,
will be voted in the manner directed herein by the undersigned.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES IN ITEM 1 AND FOR ITEMS 2.
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD TODAY IN
THE ENCLOSED, PRE-ADDRESSED ENVELOPE.
Please
sign below exactly as your name appears on this Proxy Card. If shares are
registered in more than one name, all such persons should sign. A corporation
should sign in its full corporate name by a duly authorized officer, stating
his/her title. Trustees, guardians, executors and administrators should sign in
their official capacity, giving their full title as such. If a partnership,
please sign in the partnership name by authorized person(s).
If
you receive more than one Proxy Card, please sign and return all such cards in
the accompanying envelope.
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Typed
or Printed Name(s)
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Authorized
Signature
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Title
or authority, if applicable
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Date
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Please return promptly in the enclosed envelope,
which requires no postage if mailed in the U.S.A.
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o
|
I
PLAN TO ATTEND THE ANNUAL MEETING.
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o
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I
DO NOT PLAN TO ATTEND THE ANNUAL MEETING.
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QuickLinks
AVI BIOPHARMA, INC. NOTICE OF ANNUAL MEETING To Be Held on May 20, 2008
TABLE OF CONTENTS
AVI BIOPHARMA, INC. One S.W. Columbia Street, Suite 1105 Portland, Oregon 97258 PROXY STATEMENT for ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 2008
AVI BIOPHARMA, INC. DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
Director Compensation for Fiscal 2007
AUDIT COMMITTEE REPORT
PERFORMANCE GRAPH
STOCK OWNED BY AVI BIOPHARMA, INC. MANAGEMENT AND PRINCIPAL SHAREHOLDERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ELECTION OF AVI BIOPHARMA, INC. DIRECTORS (Proposal I)
RATIFICATION OF APPOINTMENT OF AVI BIOPHARMA INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Proposal II)
OTHER BUSINESS
SHAREHOLDER PROPOSALS AND SHAREHOLDER NOMINATIONS OF DIRECTORS
COST OF SOLICITATION
ADDITIONAL INFORMATION
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