PROPOSAL 1
ELECTION OF DIRECTOR
Avigen’s
Board of Directors is divided into three classes. Each class generally consists,
as nearly as possible, of one-third of the total number of directors, with each
class having a three-year term. Vacancies on the Board of Directors may be
filled only by persons elected by a majority of the remaining directors. A
director elected by the Board of Directors to fill a vacancy in a class,
including a vacancy created by an increase in the number of directors, shall
serve for the remainder of the full term of that class and until the director’s
successor is elected and has qualified, or until such director’s earlier death,
resignation or removal.
The Board of
Directors presently has seven members. On February 12, 2008, Yuichi Iwaki, a
member of the Board of Directors, notified Avigen that he declines to stand for
re-election at the 2008 Annual Meeting of Stockholders. The term of office of
Dr. Horovitz, who was previously elected a director of Avigen by the
stockholders, expires at the 2008 Annual Meeting of Stockholders. The Board of
Directors has nominated Dr. Horovitz as a director. If re-elected at the Annual
Meeting, Dr. Horovitz would serve until the 2011 Annual Meeting of Stockholders
and until his successor is elected and has qualified, or, if sooner, until his
death, resignation or removal.
It is
Avigen’s policy to encourage directors and nominees for director to attend the
annual meeting. All of Avigen’s directors then in office, other than Dr. Iwaki,
attended the 2007 Annual Meeting of Stockholders.
A vacancy
currently exists on the Board of Directors as the Board has not yet taken formal
action to reduce the number of its members in response to Dr. Vapnek declining
to stand for re-election last year in 2007. The Board intends to reduce the size
of the Board to eliminate this vacancy, as well as to eliminate the vacancy that
will arise from Dr. Iwaki not standing for reelection effective on the opening
of the 2008 Annual Meeting of Stockholders. As a result, there will be no
vacancies at the time of the 2008 Annual Meeting of Stockholders.
Directors
are elected by a plurality of the votes of the holders of shares present in
person or represented by proxy and entitled to vote on the election of
directors. The nominee properly nominated and receiving the highest number of
affirmative votes will be elected. Shares represented by executed proxies will
be voted, if authority to do so is not withheld, for the election of the nominee
named below. If the nominee becomes unavailable for election as a result of an
unexpected occurrence, your shares will be voted for the election of a
substitute nominee proposed by Avigen’s Board of Directors. The person nominated
for election has agreed to serve if elected, and management has no reason to
believe that the nominee will be unable to serve.
NOMINEE
The
following is a brief biography of the nominee and each director whose term will
continue after the annual meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR
TERM EXPIRING AT THE 2011 ANNUAL MEETING
Class I Director
Zola Horovitz, Ph.D.
Zola
Horovitz, Ph.D., 73, has served as a director of Avigen since November 1994. In
December 2005, Dr. Horovitz was appointed Interim Chairman of the Board of
Directors of Avigen and Chairman of the Board of Directors on February 23, 2006.
Dr. Horovitz has been an independent consultant to pharmaceutical and
biotechnology companies since May 1994. From 1991 to May 1994, Dr. Horovitz
served as Vice President, Business Development and Planning and from 1990 to
1991 as Vice President, Licensing at Bristol-Myers Squibb Company, a
pharmaceutical and healthcare products company. Prior to this, Dr. Horovitz
served from 1959 through 1989 in various positions at the Squibb Institute for
Medical Research, including Vice President, Research, Planning & Scientific
Liaison, Vice President, Drug Development, and Vice President, Biological and
Pharmaceutical R&D. Dr. Horovitz currently serves on the board of directors
of BioCryst Pharmaceuticals, Inc., Genvec, Inc., Genaera Corporation, Palatin
Technologies, Inc., DOV Pharmaceutical Inc., NitroMed, Inc., and Immunicon
Corporation, all of which are biotechnology companies. From 1975 through 1993
Dr. Horovitz served
5.
on the Scientific Advisory Council at
Princeton University and from 1976 through 1989 he served on the Advisory Board
of Rutgers University College of Pharmacy. Dr. Horovitz received a Ph.D. and an
M.S. in Pharmacology and a B.S. in Pharmacy from the University of Pittsburgh.
T
HE
B
OARD OF
D
IRECTORS
R
ECOMMENDS
A
V
OTE IN
F
AVOR OF THE
N
AMED
N
OMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL
THE 2009 ANNUAL MEETING OF STOCKHOLDERS:
Class II Directors
John K. A. Prendergast, Ph.D.
John K. A.
Prendergast, Ph.D., 54, has served as a director of Avigen since December 1992.
Since September 2004, Dr. Prendergast has served as our Lead Independent
Director. Since 1993, he has served as President of SummerCloud Bay Inc., a
consulting firm providing services to the biotechnology industry. From December
1992 to March 1996, Dr. Prendergast served as a Vice President and as the
Treasurer of Avigen. Dr. Prendergast is currently chairman of the board of
directors of Palatin Technologies, Inc. and AVAX Technologies, Inc., both of
which are biopharmaceutical companies. Dr. Prendergast also serves as a director
of MediciNova, Inc., a biopharmaceutical company, and is currently serving as
the executive chairman of the board of directors of Antyra, Inc., a privately
held biopharmaceutical company. Dr. Prendergast received M.Sc. and Ph.D. degrees
from the University of New South Wales, Sydney, Australia and a C.S.S. in
Administration and Management from Harvard University.
Richard J.
Wallace
Richard J.
Wallace, 56, has served as a director of Avigen since March 2006. From 2004 to
January 2008, Mr. Wallace served as Senior Vice President of Global Commercial
Strategy at GlaxoSmithKline (GSK) and a member of GSK’s Research and Development
Executive, Commercial Operations Committee and Product Management Board. Since
joining GSK in 1992, Mr. Wallace performed a number of roles including Vice
President Commercial (Canadian Pharmaceuticals), Vice President US Business
Development, and Vice President Sales & Marketing (US Oncology and HIV). Mr.
Wallace’s experience prior to joining GSK included eight years with Bristol
Myers Squibb and seven years at Johnson & Johnson (in assignments spanning
marketing, sales, manufacturing and general management). Mr. Wallace currently
serves on the board of directors of ImmunoGen Inc., Clinical Data Inc., and
Bridgehead International Ltd. Mr. Wallace received B.Commerce and B.Com. Honors
degrees from Rhodes University, South Africa.
DIRECTORS CONTINUING IN OFFICE UNTIL
THE 2010 ANNUAL MEETING OF STOCKHOLDERS
Class III Directors
Kenneth G. Chahine, J.D., Ph.D.
Kenneth G.
Chahine, J.D., Ph.D., 43, was appointed President, Chief Executive Officer and
director of Avigen in March 2004. Dr. Chahine had previously served as Avigen’s
Chief Operating Officer since July 2002 and as Vice President, Business
Development and Intellectual Property since 1998. Prior to joining Avigen, Dr.
Chahine worked at the patent law firm of Madson & Metcalf, P.C. in Salt Lake
City, Utah from 1994 to 1998. From 1992 to 1993, he worked as a research
scientist at Parke-Davis Pharmaceuticals, a pharmaceutical company, and held
another research scientist post at the University of Utah Department of Human
Genetics from 1994 to 1996. Dr. Chahine served as western regional news and
legal correspondent for
Nature
Biotechnology
from 1996 to 2002. Dr. Chahine
serves on the board of directors of the Lassonde New Venture Development Center
at the University of Utah School of Business and is an Adjunct Professor at the
University of Utah College of Law. Dr. Chahine holds a J.D. from the University
of Utah and a Ph.D. in biochemistry and molecular biology from the University of
Michigan.
6.
Stephen Dilly, M.B.B.S.,
Ph.D.
Stephen
Dilly, M.B.B.S., Ph.D., 48, was appointed a director of Avigen in February 2007.
Dr. Dilly is currently Chief Executive Officer of APT Pharmaceuticals, Inc. From
October 2003 to April 2006 he was Senior Vice President, Chief Medical Officer
and Worldwide Head of Development of Chiron BioPharmaceuticals. From September
1998 to September 2003 he held positions as Vice President of Development
Sciences and Vice President of Medical Affairs at Genentech, Inc. Dr. Dilly
graduated as a physician from the University of London in 1982 and received his
Ph.D. in Cardiac Physiology from University of London in 1988. He began his
industry career with Pfizer Central Research in the United Kingdom in 1986 and
since then has held positions of increasing responsibility with Beecham,
SmithKline Beecham, Genentech, Inc. and Chiron.
Jan K. Öhrström,
M.D.
Jan K.
Öhrström, M.D., 51, was appointed a director of Avigen in February 2007. Dr.
Öhrström is Chief Clinical Officer and Executive Vice President of MediQuest
Therapeutics, Inc., a specialty pharmaceutical company. From 2000 to July 2007,
Dr. Öhrström held various positions at ZymoGenetics, Inc., a biotech company,
including Senior Vice President, Business Development from 2006 to 2007 and
prior to that, Senior Vice President of Development and Chief Medical Officer.
From 1990 to 1999, Dr. Öhrström held various positions at Novo Nordisk A/S,
based in Denmark, including Director, Worldwide Development Portfolio, Director,
Strategic Marketing, and Project Director and at Novo Nordisk Pharmaceuticals,
Inc., based in Princeton, New Jersey, the position of Medical Director. Dr.
Öhrström received an M.D. from the University of Copenhagen.
INFORMATION REGARDING THE BOARD OF
DIRECTORS AND CORPORATE GOVERNANCE
INDEPENDENCE OF THE BOARD OF
DIRECTORS
As required
under the Nasdaq Stock Market (“
Nasdaq
”) listing standards, a
majority of the members of a listed company’s board of directors must qualify as
“independent,” as affirmatively determined by the board of directors. Avigen’s
Board of Directors consults with Avigen’s counsel to ensure that the Board of
Directors’ determinations are consistent with relevant securities and other laws
and regulations regarding the definition of “independent,” including those set
forth in pertinent listing standards of the Nasdaq, as in effect from time to
time.
Consistent
with these considerations, after review of all relevant transactions or
relationships between each director, or any of his family members, and Avigen,
its senior management and its independent registered public accounting firm, the
Board of Directors has affirmatively determined that all of Avigen’s directors
are independent directors within the meaning of the applicable Nasdaq listing
standards, except for Dr. Chahine, Avigen’s President and Chief Executive
Officer. In making this determination, the Board of Directors found that none of
the directors or nominees for director, other than Dr. Chahine, have a material
or other disqualifying relationship with Avigen.
MEETINGS OF THE BOARD OF
DIRECTORS
The Board of
Directors met seven times during the last fiscal year. All directors except Dr.
Iwaki attended 75% or more of the aggregate of the meetings of the Board of
Directors and of the committees on which he served, held during the period for
which he was a director or committee member.
Avigen’s
independent directors met four times in regularly scheduled executive sessions
at which only independent directors were present. The Chairman of the Board of
Directors, or in his absence, the Lead Independent Director, presided over the
executive sessions.
7.
INFORMATION REGARDING COMMITTEES OF THE
BOARD OF DIRECTORS
The Board of Directors has three committees: an Audit Committee, a
Compensation Committee and a Corporate Governance and Nominating Committee. The
following table provides membership information for fiscal year 2007 for each of
the Board committees since May 30, 2007:
|
|
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Corporate
|
|
|
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|
|
|
|
Governance
and
|
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Name
|
|
Audit (1)
|
|
Compensation (2)
|
|
Nominating (3)
|
|
Zola Horovitz, Ph.D. – Chairman
|
|
X
|
|
|
|
X
|
|
John
Prendergast, Ph.D. – Lead Independent Director
|
|
X*
|
|
X*
|
|
X*
|
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Richard Wallace
|
|
|
|
X
|
|
X
|
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Yuichi Iwaki,
Ph.D.
|
|
|
|
X
|
|
X
|
|
Jan Öhrström, M.D.
|
|
X
|
|
|
|
X
|
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Stephen Dilly,
M.B.B.S., Ph.D.
|
|
|
|
|
|
X
|
____________________
|
*
|
Committee Chair
|
|
|
|
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(1)
|
Effective May 30, 2007, Dr.
Öhrström joined the Audit Committee and Dr. Iwaki and Mr. Wallace ceased
to be members of the Committee.
|
|
|
|
(2)
|
Effective May 30, 2007, Dr. Iwaki
and Mr. Wallace joined the Compensation Committee and Drs. Horovitz and
Vapnek ceased to be members of the Committee.
|
|
|
|
(3)
|
Effective May 30, 2007, Drs.
Öhrström and Dilly joined the Corporate Governance and Nominating
Committee and Dr. Vapnek ceased to be a member of the
Committee.
|
For fiscal year
2007, the Audit Committee met seven times, the Compensation Committee met five
times and the Corporate Governance and Nominating Committee met four times.
Below is a description of each committee of the Board of Directors. Each
of the committees has authority to engage legal counsel or other experts or
consultants, as it deems appropriate to carry out its responsibilities. The
Board of Directors has determined that each member of each committee meets the
applicable Nasdaq rules and regulations regarding “independence” and that each
member is free of any relationship that would impair his or her individual
exercise of independent judgment with regard to Avigen.
Audit Committee
The Audit Committee of the Board of Directors oversees Avigen’s corporate
accounting and financial reporting process and has the direct responsibility for
the appointment, compensation, retention and oversight of the work of Avigen’s
independent registered public accounting firm, which reports directly and is
accountable to the Audit Committee. For this purpose, the Audit Committee
performs several functions. The Audit Committee met seven times during the
fiscal year. The Audit Committee: has the sole authority to select, evaluate,
replace and determine the compensation for Avigen’s independent registered
public accounting firm; evaluates the independent registered public accounting
firm’s performance and assesses its qualifications; has the sole authority to
approve audit and permissible non-audit services to be performed by Avigen’s
independent registered public accounting firm; oversees the independence of
Avigen’s independent registered public accounting firm and is responsible for
receiving written statements from Avigen’s independent registered public
accounting firm delineating all relationships between Avigen’s independent
registered public accounting firm and Avigen consistent with Independence
Standards Board Standard No. 1; establishes and maintains procedures, as
required under applicable law, for the receipt, retention and treatment of
complaints received by Avigen regarding accounting, internal accounting controls
or auditing matters and the confidential and anonymous submission by employees
of concerns regarding questionable accounting or auditing matters; reviews with
Avigen’s independent registered public accounting firm the adequacy and
effectiveness of Avigen’s internal control over financial reporting; meets to
review Avigen’s annual audited financial statements and quarterly financial
statements with management and the independent registered public accounting
firm, including reviewing Avigen’s disclosures under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations;” and has the
specific responsibilities and authority necessary to comply with the Nasdaq
listing standards applicable to audit committees. The Audit Committee is
governed by a written Audit Committee Charter. A current copy is available on
our website at
www.avigen.com.
8.
The Board of
Directors annually reviews the Nasdaq listing standards’ definition of
independence for audit committee members and has determined that all members of
Avigen’s Audit Committee are independent (as independence is currently defined
in Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq listing standards). Pursuant to
applicable SEC rules, Avigen is required to disclose whether it has an “audit
committee financial expert” serving on its Audit Committee. Although each member
of the Audit Committee has been selected by the Board of Directors based on the
Board of Directors’ determination that they are fully qualified to monitor the
performance of management, the public disclosures by Avigen of its financial
condition and results of operations, Avigen’s internal control over financing
reporting and the performance of Avigen’s independent registered public
accounting firm, as well as to analyze and evaluate Avigen’s financial
statements, the Board of Directors has determined that none of the members of
the Audit Committee meet all of the criteria set forth in such rules qualifying
them as an “audit committee financial expert.” The Board of Directors has
determined that it is not inappropriate for the Audit Committee not to have an
“audit committee financial expert” because Avigen’s financial statements are not
overly complex, given the current stage of Avigen’s development, and the fact
that Avigen does not currently have any regular revenue from operations, such
that, in the judgment of the Board of Directors, the financial sophistication of
the current members of the Audit Committee, as proven by their service on the
Audit Committee over the years as well as in their occupations outside of
Avigen, is sufficient for the Audit Committee to ensure the integrity of
Avigen’s financial statements and to fully and completely fulfill its role under
its charter. In addition, the Audit Committee has the ability on its own to
retain and determine the compensation for, at Avigen’s expense, special legal,
accounting or other advisors or consultants whenever it deems necessary or
appropriate.
9.
REPORT OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
1
The Audit
Committee of the Board of Directors for the fiscal year ended December 31, 2007
consisted of Mr. Wallace and Drs. Horovitz, Iwaki and Prendergast until May 30,
2007, and Drs. Horovitz, Öhrström, and Prendergast thereafter. All members of
Avigen’s Audit Committee are independent (as independence is defined in Rules
4200(a)(15) and 4350(d)(2) of the Nasdaq listing standards). The Audit Committee
is governed by a written Audit Committee Charter adopted by the Board of
Directors.
The Audit
Committee oversees Avigen’s financial reporting process on behalf of the Board
of Directors. Management has primary responsibility for the financial statements
and the reporting process including the systems of internal controls and
disclosure controls and procedures. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the audited financial statements
in Avigen’s Annual Report on Form 10-K with management, including a discussion
of the quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements.
The Audit
Committee is responsible for reviewing, approving and managing the engagement of
Avigen’s independent registered public accounting firm, including the scope,
extent and procedures of the annual audit and compensation to be paid therefor,
and all other matters the Audit Committee deems appropriate, including the
independent registered public accounting firm’s accountability to the Board of
Directors and the Audit Committee. The Audit Committee reviewed with Avigen’s
independent registered public accounting firm, which is responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles in the United States, its
judgments as to the quality, not just the acceptability, of Avigen’s accounting
principles and such other matters as are required to be discussed with the Audit
Committee under generally accepted auditing standards and those matters required
to be discussed by the Statement on Auditing Standards No. 114,
The
Auditor’s Communication with those charged with Governance, which superseded
the Statement on Auditing Standards No. 61. In addition, the Audit
Committee has discussed with Avigen’s independent registered public accounting
firm its independence from management and Avigen, including the matters in the
written disclosures and letter received by the Audit Committee from Avigen’s
independent registered public accounting firm as required by the Independence
Standards Board Standard No. 1, and has considered the compatibility of
non-audit services, if any, with the independence of Avigen’s independent
registered public accounting firm.
The Audit
Committee discussed with Avigen’s independent registered public accounting firm
the overall scope and plans for its audits. The Audit Committee meets with the
independent registered public accounting firm, with and without management
present, to discuss the results of its examinations, its evaluation of Avigen’s
internal control over financial reporting, and the overall quality of Avigen’s
financial reporting.
In reliance
on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors, and the Board of Directors has approved,
that the audited financial statements be included in Avigen’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2007 for filing with the
Securities and Exchange Commission. The Audit Committee has also retained,
subject to stockholder ratification described in Proposal 2, Odenberg, Ullakko,
Muranishi & Co. LLP as Avigen’s independent registered public accounting
firm for the fiscal year ending December 31, 2008.
A
UDIT
C
OMMITTEE
J
OHN
K. A. P
RENDERGAST
, P
H
.D. (
C
HAIR
)
Z
OLA
H
OROVITZ
, P
H
.D.
J
AN
K.
Ö
HRSTRÖM
,
M.D.
____________________
|
1
|
The material in this report is not “soliciting material,” is not
deemed “filed” with the SEC and is not to be incorporated by reference
into any filing of Avigen under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made before or
after the date hereof and irrespective of any general incorporation
language in any such filing.
|
10.
Compensation Committee
The
Compensation Committee of the Board of Directors for the fiscal year ended
December 31, 2007 consisted of Drs. Horovitz, Vapnek and Prendergast until May
30, 2007, and Drs. Prendergast, Iwaki and Mr. Wallace thereafter. All members of
Avigen’s Compensation Committee are independent (as independence is currently
defined in Rule 4200(a)(15) of the Nasdaq listing standards. The Compensation
Committee met five times during the fiscal year and acted by unanimous written
consent one time. The Compensation Committee has adopted a written charter. A
current copy is available to stockholders on our website at
www.avigen.com.
The
Compensation Committee of the Board of Directors acts on behalf of the Board of
Directors to review, approve and oversee Avigen’s compensation strategy,
policies, plans and programs, including:
-
establishment of corporate and individual
performance objectives relevant to the compensation of Avigen’s executive
officers and other senior management and evaluation of performance in light of
these stated objectives;
-
review and recommendation to the Board of
Directors for approval of the compensation and other terms of employment or
service, including severance and change-in-control arrangements, of Avigen’s
Chief Executive Officer and other senior management;
-
administration of Avigen’s equity compensation
plans, pension and profit-sharing plans, deferred compensation plans and other
similar plan and programs; and
-
review of Avigen’s Compensation Discussion and
Analysis with management and consideration of whether to recommend that it be
included in proxy statements and other filings.
Compensation Committee Processes and
Procedures
Typically,
the Compensation Committee meets quarterly and with greater frequency if
necessary. The agenda for each meeting is usually developed by the Committee
Chair, in consultation with the Chief Executive Officer. The Compensation
Committee meets regularly in executive session. However, from time to time,
various members of management may be invited by the Compensation Committee to
make presentations, provide financial or other background information or advice
or otherwise participate in Compensation Committee meetings. The Chief Executive
Officer reviews the performance of each executive officer, other than his own,
with the Compensation Committee and makes compensation recommendations, which
the Compensation Committee considers in its final determination. The Chief
Executive Officer may not participate in or be present during any deliberations
or determinations of the Compensation Committee regarding his compensation or
individual performance objectives. The charter of the Compensation Committee
grants the Compensation Committee full access to all books, records, facilities
and personnel of Avigen, as well as authority to obtain, at the expense of
Avigen, advice and assistance from internal and external legal, accounting or
other advisors and consultants and other external resources that the
Compensation Committee considers necessary or appropriate in the performance of
its duties. In particular, the Compensation Committee has the sole authority to
retain compensation consultants to assist in its evaluation of executive and
director compensation, including the authority to approve the consultant’s
reasonable fees and other retention terms.
During 2007,
the Committee evaluated management’s and each individual’s performance based on
the achievement of corporate goals set by the Chief Executive Officer and the
Board of Directors. During 2007, the Compensation Committee met in session
several times, discussed Avigen’s performance toward achieving its established
operating objectives, as well as the performance of individual members of senior
management, reviewed salary benchmark information from Radford Surveys, reviewed
compensation levels of executive officers at a sample of other biotechnology
companies that were selected due to their comparable employee size, market
capitalization, and stage of clinical development, and reviewed proposed
adjustments to individual compensation levels based on these
discussions.
The specific
determinations of the Compensation Committee with respect to executive
compensation for fiscal 2007 are described in greater detail in the Compensation
Discussion and Analysis section of this proxy statement.
11.
Compensation Committee Interlocks and
Insider Participation
Drs.
Horovitz, Prendergast, Vapnek, Iwaki and Mr. Wallace served as members of the
Compensation Committee during the fiscal year ended December 31, 2007. No member
of the Committee was, at any time during fiscal 2007, an officer or employee of
Avigen. Dr. Prendergast was an executive officer of Avigen from December 1992 to
1995. There are no Compensation Committee interlocks between Avigen and any
other entities involving our executive officers and Board members who serve as
executive officers or Board members of such entities.
Compensation Committee
Report
2
The
Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis contained in this proxy statement. Based on
this review and discussion, the Compensation Committee has recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in
this proxy statement and incorporated into our Annual Report on Form 10-K for
the fiscal year ended 2007.
C
OMPENSATION
C
OMMITTEE
J
OHN
K. A. P
RENDERGAST
, P
H
.D. (
C
HAIR
)
Y
UICHI
I
WAKI
, M.D.,
P
H
.D.
R
ICHARD
W
ALLACE
____________________
|
2
|
The material in this report is not “soliciting material,” is not
deemed “filed” with the SEC and is not to be incorporated by reference
into any filing of Avigen under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made before or
after the date hereof and irrespective of any general incorporation
language in any such filing.
|
Corporate Governance and Nominating
Committee
The
Corporate Governance and Nominating Committee of the Board of Directors, in
consultation with the Chief Executive Officer, has the primary responsibility
for establishing criteria for Board membership and identifying, evaluating,
reviewing and recommending qualified candidates to serve as directors of Avigen.
The Corporate Governance and Nominating Committee also has the primary
responsibility for evaluating, reviewing and considering the recommendation for
nomination of current directors for election to the Board of Directors as well
as monitoring the size of the Board of Directors, has the power and authority to
consider Board nominees and proposals submitted by Avigen’s stockholders and to
establish any procedures to facilitate stockholder communication with the Board
of Directors. In this regard, the Corporate Governance and Nominating Committee
recommended to the Board of Directors that Dr. Horovitz be nominated for
re-election as a Class I director at the 2008 Annual Meeting of Stockholders.
The Corporate Governance and Nominating Committee also periodically reviews,
discusses and assesses the performance of the Board of Directors and Board
committees; annually recommends to the Board of Directors the chairmanship and
membership of each Board committee; develops corporate governance principles and
periodically reviews and assesses these principles and their application;
oversees and reviews the processes and procedures used by Avigen to provide
information to the Board of Directors and its committees; and periodically
reviews the compensation paid to non-employee directors for their service on the
Board of Directors and its committees, and recommends any changes to the full
Board of Directors for its approval. Avigen’s Corporate Governance and
Nominating Committee charter is available on our website at
www.avigen.com.
All members
of the Corporate Governance and Nominating Committee are independent (as
independence is currently defined in Rule 4200(a)(15) of the Nasdaq listing
standards).
The
Corporate Governance and Nominating Committee believes that candidates for
director should have certain minimum qualifications, including being able to
read and understand basic financial statements, being over 21 years of age and
having the highest personal integrity and ethics. The Corporate Governance and
Nominating Committee also intends to consider such factors as possessing
relevant expertise upon which to be able to offer advice and guidance to
management, having sufficient time to devote to the affairs of Avigen,
demonstrated excellence in his or her field, having the ability to exercise
sound business judgment and having the commitment to rigorously represent the
long-term interests of Avigen’s stockholders. However, the Corporate Governance
and Nominating Committee retains the right to modify these qualifications from
time to time. Candidates for
12.
director nominees are evaluated by the
Corporate Governance and Nominating Committee in the context of the current
composition of the Board of Directors, the operating requirements of Avigen and
the long-term interests of Avigen’s stockholders. In conducting this assessment,
the Corporate Governance and Nominating Committee considers the criteria for
director qualifications set by the Board of Directors, as well as diversity,
age, skills, and such other factors as it deems appropriate given the current
needs of the Board of Directors and Avigen to maintain a balance of knowledge,
experience and capability. In the case of incumbent directors whose terms of
office are set to expire, the Corporate Governance and Nominating Committee
reviews such directors’ overall service to Avigen during their term, including
the number of meetings attended, level of participation, quality of performance,
and any other relationships and transactions that might impair such directors’
independence. In the case of new director candidates, the Corporate Governance
and Nominating Committee will also determine whether the nominee must be
independent for Nasdaq purposes, which determination is based upon applicable
Nasdaq listing standards, applicable SEC rules and regulations and the advice of
counsel, if necessary. The Corporate Governance and Nominating Committee may
also use its network of contacts to compile a list of potential candidates, but
may also engage, if it deems appropriate, a professional search firm. In fiscal
year 2007, Avigen paid $50,000 to a professional search firm to assist in the
process of identifying or evaluating director candidates which led to the
appointments of Drs. Dilly and Öhrström. The Corporate Governance and Nominating
Committee conducts any appropriate and necessary inquiries into the backgrounds
and qualifications of possible candidates after considering the function and
needs of the Board of Directors. The Corporate Governance and Nominating
Committee meets to discuss and consider such candidates’ qualifications and then
selects, by majority vote, a nominee for recommendation to the Board of
Directors.
The
Corporate Governance and Nominating Committee will consider director candidates
recommended by stockholders. The Corporate Governance and Nominating Committee
does not intend to alter the manner in which it evaluates candidates based on
whether the candidate was recommended by a stockholder. Stockholders who wish to
recommend individuals for consideration by the Corporate Governance and
Nominating Committee to become nominees for election to the Board of Directors
may do so by delivering a written recommendation to the Corporate Governance and
Nominating Committee at the following address: 1301 Harbor Bay Parkway, Alameda,
California 94502, not less than six months prior to any meeting at which
directors are to be elected. Submissions must include the full name of the
proposed nominee, a description of the proposed nominee’s business experience
for at least the previous five years, complete biographical information, a
description of the proposed nominee’s qualifications as a director and a
representation that the nominating stockholder is a beneficial or record owner
of Avigen’s stock. Any such submission must be accompanied by the written
consent of the proposed nominee to be named as a nominee and to serve as a
director if elected. To date, the Corporate Governance and Nominating Committee
has not received a timely director nominee from a stockholder of
Avigen.
STOCKHOLDER COMMUNICATIONS WITH THE
BOARD OF DIRECTORS
Avigen’s
Board of Directors has adopted a formal process by which stockholders may
communicate with the Board of Directors or any of its directors. Stockholders
who wish to communicate with the Board of Directors or an individual director
may send a written communication addressed as follows: Avigen Board
Communication, 1301 Harbor Bay Parkway, Alameda, California 94502.
Communications may also be sent by e-mail to the following address:
board@avigen.com. Each communication sent must state the number of shares owned
by the stockholder making the communication. Each communication will be reviewed
by the Corporate Secretary of Avigen who will forward such communication to the
Board of Directors or to any individual director to whom the communication is
addressed unless the communication is unduly frivolous, hostile, threatening or
similarly inappropriate, in which case, the Corporate Secretary will discard the
communication.
13.
CODE OF BUSINESS CONDUCT AND
ETHICS
Avigen has
adopted a Code of Business Conduct and Ethics that applies to all officers,
directors and employees. The Code of Business Conduct and Ethics is available on
our website at
www.avigen.com.
The Code of Business Conduct and Ethics may be found as
follows:
-
From our main Web page, first click on
“Investors.”
-
Next, click on “Corporate
Governance.”
-
Next, click on “Conduct.”
-
Finally, click on “Code of Business Conduct and
Ethics.”
Avigen
intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K
regarding an amendment to, or waiver from, a provision of the Code of Business
Conduct and Ethics by posting such information on its website at the address and
the location specified above.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit
Committee of the Board of Directors has selected Odenberg, Ullakko, Muranishi
& Co. LLP (OUM) as Avigen’s independent registered public accounting firm
for the fiscal year ending December 31, 2008 and has further directed that
management submit the selection of the independent registered public accounting
firm to the stockholders for ratification at the 2008 Annual Meeting of
Stockholders. OUM audited Avigen’s financial statements for the years ended
December 31, 2006 and December 31, 2007. Prior to the selection of OUM, Ernst
& Young LLP had audited Avigen’s financial statements since its inception in
1992. Representatives of OUM are expected to be present at the 2008 Annual
Meeting of Stockholders, will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Neither
Avigen’s Bylaws nor other governing documents or law require stockholder
ratification of the selection of OUM as Avigen’s independent registered public
accounting firm. However, the Audit Committee is submitting the selection of OUM
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee in its discretion may direct the appointment of a
different independent registered public accounting firm at any time during the
year if it determines that such a change would be in the best interests of
Avigen and its stockholders.
The
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the annual meeting will be required
to ratify the selection of OUM. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this matter
has been approved.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FEES
The
following table is a summary of the fees billed to Avigen by OUM for the fiscal
years ended December 31, 2007 and 2006 for professional services rendered as
Avigen’s registered public accountant.
|
|
Fiscal Year Ended
|
|
|
December 31
|
|
|
2007
|
|
2006
|
|
Audit Fees
|
$
|
326,585
|
|
$
|
207,000
|
|
Audit-related
Fees
|
|
—
|
|
|
—
|
|
Tax Fees
|
|
12,000
|
|
|
12,000
|
|
All Other
Fees
|
|
—
|
|
|
—
|
|
Total Fees
|
$
|
338,585
|
|
$
|
219,000
|
14.
Audit Fees
Consists of
fees for professional services rendered for the audit of Avigen’s annual
financial statements and services that are normally provided by OUM in
connection with regulatory filings or engagements.
Audit-Related Fees
During the fiscal years ended
December 31, 2007 and 2006, no audit-related services were performed by OUM.
Tax Fees
Consists of
fees for professional services for tax compliance, tax advice and tax planning
by OUM for the tax years ended December 31, 2007 and 2006.
All Other Fees
During the
fiscal years ended December 31, 2007 and 2006, there were no other fees for
services rendered by OUM.
The following table is a summary of
the fees billed to Avigen by Ernst & Young LLP for the fiscal year ended
December 31, 2006 for professional services rendered as Avigen’s registered
public accountant.
|
|
Fiscal Year
|
|
|
Ended
|
|
|
December
|
|
|
31, 2006
3
|
|
Audit Fees
|
$
|
103,356
|
|
Audit-related
Fees
|
|
—
|
|
Tax Fees
|
|
—
|
|
All Other
Fees
|
|
11,500
|
|
Total Fees
|
$
|
114,856
|
____________________
|
3
|
Avigen changed its independent registered public accounting firm
from Ernst & Young LLP to Odenberg, Ulakko, Muranishi & Co. LLP on
November 2, 2006. Odenberg, Ulakko, Muranishi & Co. LLP rendered the
audit opinion on Avigen’s 2006 financial statements. During fiscal 2006,
Ernst & Young LLP was Avigen’s independent registered public
accounting firm up to November 2, 2006.
|
Audit Fees
Consists of
fees for professional services rendered for the audit of Avigen’s annual
financial statements and reviews of the interim financial statements included in
quarterly reports and services that are normally provided by Ernst & Young
LLP in connection with regulatory filings or engagements.
Audit-Related Fees
During the fiscal year ended
December 31, 2006, no audit-related services were performed by Ernst & Young
LLP.
Tax Fees
During the
fiscal year ended December 31, 2006, no professional services for tax
compliance, tax advice or tax planning were performed by Ernst & Young
LLP.
All Other Fees
Consists of
fees for products and services other than the services described above. For the
fiscal year ended December 31, 2006, these fees included a subscription to Ernst
& Young LLP’s online financial regulations research tool and services in
connection with the transition to OUM as Avigen’s registered public accountant.
All fees described above were
approved by the Audit Committee.
15.
PRE-APPROVAL POLICIES AND
PROCEDURES.
Avigen’s
Audit Committee pre-approves all audit and permissible non-audit services
provided by Avigen’s independent registered public accounting firm. These
services may include audit services, audit-related services, tax services and
other services. Prior to engaging Avigen’s independent registered public
accounting firm to render an audit or permissible non-audit service, the Audit
Committee specifically approves the engagement of Avigen’s independent
registered public accounting firm to render that service. Accordingly, Avigen
does not engage its independent registered public accounting firm to render
audit or permissible non-audit services pursuant to pre-approval policies or
procedures or otherwise, unless the engagement to provide such services has been
approved by the Audit Committee in advance. As such, 100% of the services
described in the categories above for which OUM and Ernst & Young LLP were
engaged were approved by the Audit Committee in advance of the rendering of
those services. The Audit Committee has determined that the rendering of the
services other than audit services by Ernst & Young LLP and OUM is
compatible with maintaining the registered public accounting firm’s
independence, respectively.
CHANGE IN INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
On October
27, 2006, the Audit Committee of the Board of Directors approved, effective as
of November 2, 2006, the dismissal of Ernst & Young LLP and the appointment
of OUM as Avigen’s independent registered public accounting firm to audit
Avigen’s financial statements for the fiscal year ending December 31, 2006.
The
independent registered public accounting firm’s report of Ernst & Young LLP
on the consolidated financial statements of Avigen for each of the two years in
the period ended December 31, 2005, dated March 14, 2006, included in the Form
10-K filed with the SEC on March 16, 2007 states that the financial statements
audited by Ernst & Young LLP present fairly, in all material respects, the
financial position of Avigen at December 31, 2005 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 2005 and for the period from inception (October 22, 1992) through
December 31, 2005. Ernst & Young LLP’s report on the financial statements
for such years contained no adverse opinion or disclaimer of opinion and was not
qualified as to uncertainty, audit scope or accounting principles.
In
connection with the audits of Avigen’s financial statements for each of the two
fiscal years ended December 31, 2004 and 2005, and in the subsequent interim
periods through November 2, 2006, there were no disagreements with Ernst &
Young LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope and procedures which, if not resolved to
the satisfaction of Ernst & Young LLP would have caused Ernst & Young
LLP to make reference to the matter of such disagreements in their reports.
Ernst & Young LLP’s letter to the Securities and Exchange Commission stating
its agreement with the statements in this paragraph was filed as an exhibit to
Avigen’s Current Report on Form 8-K dated November 2, 2006.
During the
fiscal years ended December 31, 2004 and 2005 and any subsequent interim period
before November 2, 2006, neither Avigen nor anyone on its behalf consulted with
OUM regarding either the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on Avigen’s financial statements.
T
HE
B
OARD
OF
D
IRECTORS
R
ECOMMENDS
A
V
OTE
IN
F
AVOR
OF
P
ROPOSAL
2.
16.
SECURITY OWNERSHIP
OF
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information regarding the ownership of
Avigen’s common stock as of
March 15,
2008
by: (1) each director and nominee for
director; (2) each of the executive officers named in the Summary Compensation
Table; (3) all executive officers and directors of Avigen as a group; and (4)
all those known by Avigen to be beneficial owners of more than five percent of
its common stock.
|
|
|
Beneficial Ownership
(1)
|
|
Beneficial Owner
|
|
Number of Shares
|
|
Percent of Total
|
|
Kenneth Chahine, J.D., Ph.D. (2)
|
|
|
654,316
|
|
|
|
2.15
|
%
|
|
Andrew Sauter
(3)
|
|
|
200,567
|
|
|
|
*
|
|
|
Michael Coffee (2)
|
|
|
237,254
|
|
|
|
*
|
|
|
Kirk Johnson,
Ph.D. (2)
|
|
|
241,394
|
|
|
|
*
|
|
|
M. Christina Thomson, J.D.(2)
|
|
|
262,416
|
|
|
|
*
|
|
|
Stephen Dilly,
M.B.B.S., Ph.D. (2)
|
|
|
9,900
|
|
|
|
*
|
|
|
Zola Horovitz, Ph.D.(4)
|
|
|
110,800
|
|
|
|
*
|
|
|
Yuichi Iwaki,
M.D., Ph.D.(5)
|
|
|
121,564
|
|
|
|
*
|
|
|
Jan Öhrström, M.D. (2)
|
|
|
9,900
|
|
|
|
*
|
|
|
John
Prendergast, Ph.D.(6)
|
|
|
137,408
|
|
|
|
*
|
|
|
Richard Wallace (2)
|
|
|
21,750
|
|
|
|
*
|
|
|
All executive
officers and directors as a group (11 persons)(7)
|
|
|
2,007,269
|
|
|
|
6.34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
Federated
Investors, Inc. (8)
|
|
|
3,594,260
|
|
|
|
12.07
|
%
|
|
Federated Investors Tower
|
|
|
|
|
|
|
|
|
|
Pittsburgh, PA 15222-3779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Davidson Kempner Partner (9)
|
|
|
2,651,430
|
|
|
|
8.91
|
%
|
|
65
East 55th Street, 19th Floor
|
|
|
|
|
|
|
|
|
|
New
York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley (10)
|
|
|
2,046,642
|
|
|
|
6.88
|
%
|
|
1585
Broadway
|
|
|
|
|
|
|
|
|
|
New
York, NY 10036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BVF, Inc. (11)
|
|
|
1,596,837
|
|
|
|
5.36
|
%
|
|
900
North Michigan Avenue, Suite 1100
|
|
|
|
|
|
|
|
|
|
Chicago, IL 60611
|
|
|
|
|
|
|
|
|
____________________
|
*
|
|
Less than one
percent.
|
|
|
|
|
|
(1)
|
|
This table
is based upon information supplied by officers, directors and principal
stockholders and Schedules 13G filed with the SEC. Unless otherwise
indicated in the footnotes to this table and subject to community property
laws where applicable, Avigen believes that each of the stockholders named
in this table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based
on 29,769,115 shares outstanding on March 15, 2008, adjusted as required
by rules promulgated by the SEC. Unless otherwise indicated, the address
of each of the individuals and entities listed in this table is c/o Avigen
at the address on the first page of this proxy statement.
|
|
|
|
(2)
|
|
Consists
solely of shares issuable upon the exercise of options that are
exercisable within 60 days of the date of this table.
|
|
|
|
(3)
|
|
Includes
196,442 shares issuable upon the exercise of options held by Mr. Sauter
that are exercisable within 60 days of the date of this
table.
|
|
|
|
(4)
|
|
Includes
105,800 shares issuable upon the exercise of options held by Dr. Horovitz
that are exercisable within 60 days of the date of this
table.
|
17.
|
(5)
|
|
Includes 78,300 shares
issuable upon the exercise of options held by Dr. Iwaki that are
exercisable within 60 days of the date of this table, as well as 39,621
shares of common stock held by the Iwaki Family Limited Partnership. Dr.
Iwaki is a partner of the Iwaki Family Limited Partnership and disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. Dr. Iwaki also holds 3,643 shares of common stock with
his wife.
|
|
|
|
(6)
|
|
Includes 90,800 shares
issuable upon the exercise of options held by Dr. Prendergast that are
exercisable within 60 days of the date of this table.
|
|
|
|
(7)
|
|
Includes an aggregate
of 1,908,272 shares issuable upon exercise of options which executive
officers and directors of Avigen have the right to acquire within 60 days
of the date of this table.
|
|
|
|
(8)
|
|
Based upon a Schedule
13G/A filed with the SEC on February 13, 2008 by Federated Investors, Inc.
(“
FII
”) in its capacity as the parent holding company of
Federated Equity Management Company of Pennsylvania and Federated Global
Investment Management Corp. (together, the “
Investment Advisers
”), which
act as investment advisers to registered investment companies and separate
accounts that own such shares. The Investment Advisers are wholly-owned
subsidiaries of FII Holdings, Inc., which is a wholly-owned subsidiary of
FII. All of FII’s outstanding voting stock is held in a Voting Shares
Irrevocable Trust (the “
Trust
”) for which John F.
Donahue, Rhodora J. Donahue and J. Christopher Donahue act as trustees
(collectively, the “
Trustees
”). FII and the
Trust each has sole voting and dispositive power over the shares; each of
the Trustees shares voting and dispositive power over the shares. FII, the
Trust and each of the Trustees expressly disclaim beneficial ownership of
the shares. The Schedule 13G/A provides information only as of December
31, 2007 and, consequently, FII’s beneficial ownership of Avigen’s common
stock may have changed between December 31, 2007 and March 15,
2008.
|
|
|
|
(9)
|
|
Based upon a Schedule
13G/A filed with the SEC on February 14, 2008 by Davidson Kempner Partners
and includes shares owned by the following entities affiliated with
Davidson Kempner Partners (the “
DKP Shares
”): (a)
Davidson Kempner International, Ltd. 481,032 shares; (b) Serena Limited
11,271 shares; (c) Davidson Kempner Institutional Partners, L.P. 290,142
shares; (d) Davidson Kempner Partners 152,913 shares; (e) Davidson Kempner
Healthcare Fund LP 805,316 shares; (f) Davidson Kempner Healthcare
International Ltd. 887,859 shares; and (g) M. H. Davidson & Co. 22,897
shares. The DKP Shares, an aggregate 2,651,430 shares, are beneficially
owned by Messrs. Thomas L. Kempner, Jr., Marvin H. Davidson, Stephen M.
Dowicz, Scott E. Davidson, Michael J. Leffell, Timothy I. Levart, Robert
J. Brivio, Jr., Anthony A. Yoseloff, Eric P. Epstein and Avram Z.
Friedman. The Schedule 13G/A provides information only as of December 31,
2007 and, consequently, DKP’s beneficial ownership of Avigen’s common
stock may have changed between December 31, 2007 and March 15,
2008.
|
|
|
|
(10)
|
|
Based upon a Schedule
13G filed with the SEC on February 14, 2008 by Morgan Stanley. The shares
are beneficially owned by certain operating units of Morgan Stanley (the
“MS Reporting Units”) and its subsidiaries and affiliates (collectively,
“MS”). Beneficial ownership by any operating units of MS whose ownership
of shares is disaggregated from that of the MS Reporting Units is
disclaimed. The Schedule 13G/A provides information only as of December
31, 2007 and, consequently, MS Reporting Units’ beneficial ownership of
Avigen’s common stock may have changed between December 31, 2007 and March
15, 2008.
|
|
|
|
(11)
|
|
Based upon a Schedule
13G/A filed with the SEC on February 8, 2008 by Biotechnology Value Fund,
L.P. and includes shares owned by the following affiliated entities: (a)
Biotechnology Value Fund, L.P. 399,327 shares; (b) Biotechnology Value
Fund II, L.P. 258,811 shares; (c) BVF Investments, L.L.C. 843,484 shares;
and (d) Investment 10, L.L.C. 95,215 shares. BVF, Inc. (“
BVF
”) and BVF Partners (“
Partners
”) beneficially own
1,596,837 aggregate shares. The Schedule 13G/A provides information only
as of December 31, 2007 and, consequently, BVF’s and Partners’ beneficial
ownership of Avigen’s common stock may have changed between December 31,
2007 and March 15, 2008.
|
18.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 (the “
1934 Act
”) requires Avigen’s
directors and executive officers, and persons who own more than ten percent of a
registered class of Avigen’s equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of Avigen. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish Avigen with
copies of all Section 16(a) forms they file.
To Avigen’s
knowledge, based solely on a review of the copies of such reports furnished to
Avigen and written representations that no other reports were required, during
the fiscal year ended December 31, 2007, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, except that Drs. Dilly, Horovitz, Iwaki, Ohrstrom,
Prendergast and Mr. Wallace each filed one Form 4 late regarding their May 30,
2007 stock option grant.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND
ANALYSIS
Compensation Philosophy
Our
compensation approach is designed to reward the achievement of corporate
objectives and individual performances that contribute toward building a
sustainable business that develops differentiated drugs to improve the health
and quality of life of patients and creates value for our stockholders. To this
end, the Board of Directors and management establish annual and long-term
corporate goals that reflect the priorities of our product and business
development plans. Our Board of Directors and management review these goals on a
regular basis and our Compensation Committee (the “Committee”) uses these
objectives to determine levels of compensation for executive officers to ensure
management incentives are aligned with the interests of stockholders.
Avigen’s
compensation practice is designed to provide remuneration packages that are
commensurate with the marketplace in which we compete to attract and motivate
our executive officers, management and staff to achieve our strategic
objectives. Specifically, we review base salaries annually and, along with a
comprehensive array of medical, health, life insurance and disability plans
generally available to all our employees, set salaries at levels that are
intended to attract, engage and retain executive officers whose abilities are
critical to our long-term success and competitiveness. We vary bonus payments
annually based on a performance structure designed to reward results and balance
individual accountability with team-oriented collaboration that fosters
integrity and a high-performance culture. We also issue equity-based
compensation annually in varying amounts that are intended to represent a
significant portion of each executive’s total compensation package because we
believe it promotes innovation and calculated assessment and management of risk
designed to achieve Avigen’s long-term objectives.
Successful
drug development can extend over many years and requires our executives to
employ their judgment in developing long-term operating plans that:
-
identify meaningful treatments for
patients,
-
effectively demonstrate the safety and efficacy of
our products, and
-
protect our intellectual property and optimize the
use of our financial resources in order to maximize
value retention for our stockholders.
The
Committee believes that in determining compensation, management performance
should be evaluated against specific strategic objectives that create
shareholder value. Complete achievement of these strategic objectives may extend
beyond a given compensation period; therefore, the Committee must use its
discretionary judgment based on the experience and knowledge within the industry
of its members, in assessing the quality of management’s performance within an
established framework of general parameters for annual compensation.
19.
Compensation Components
The
Committee draws on a number of reference sources to assist in the evaluation of
the various components of executive compensation. One source is industry data
compiled in the Radford Biotechnology Survey which represents a nationally-based
assessment of executive compensation widely used within the pharmaceutical and
biotechnology industry sectors. The Committee generally focuses on regional data
from companies in the San Francisco Bay Area and targets compensation levels
that fall within the 50
th
and 70
th
percentiles reported
for comparable positions based on the Committee’s subjective determination as to
the appropriate range to attract and retain our executives given the size of our
company. In addition, the Committee examines performance compensation packages
of a number of selected companies that develop products for similar neurological
indications or that are at a similar employee size and development stage. In
2007, this group consisted of Acorda Therapeutics, Inc., XenoPort, Inc.,
Renovis, Inc., Pain Therapeutics, and Palatin Technologies, Inc.
To establish
the relationship between executive compensation and the creation of stockholder
value, the Committee subjectively evaluates the success of the management team
as a whole and each individual executive’s performance in contributing to
achieving the company’s strategic objectives. The Committee applies its
assessment within the framework of our compensation program which defines a
discretionary range in which to determine individual compensation adjustments
for each executive officer. Our compensation program consists of three principal
components: salary, short-term incentive compensation consisting of incentive
bonus payments, and long-term incentive compensation consisting of equity
grants. In 2007, the Committee reviewed executive officer compensation using
summary “tally sheets” that showed for each of the executive officers the
following: (a) summary of total compensation; (b) each element of current
compensation; and (c) cumulative amount of all previously issued equity
awards.
Base
Salary.
The Committee reviews each
executive’s base salary annually. Among the factors taken into consideration are
(1) individual performance, (2) corporate performance measured against strategic
objectives, (3) levels of responsibility, (4) prior experience, (5) breadth of
knowledge of the industry, and (6) competitive pay practices examined from
industry source material discussed above. The Committee does not assign any
specific weighting to these various factors when determining base salary. In
2007, the Committee established an overall base salary cost of living adjustment
for executives that was in line with the target for Avigen’s broader employee
group.
Incentive
Bonus.
The Committee sets target incentive
levels annually for each executive officer in consultation and discussion with
Dr. Chahine, other than for his own target incentive level, that would generally
assume strong performances. In 2007, the Committee considered industry data
compiled by Radford and determined that the appropriate level of target
incentive bonus award for our chief executive officer was 45% of his base salary
and for our other executive officers were between 35% and 40% of their base
salaries based on the Committee’s subjective determination as to the appropriate
range to attract and retain our executive officers given the size of the
company, assigning the actual percentage within this range based upon the level
of each executive officer’s responsibility and experience. The Committee
determines actual bonus payments based on subjective assessments of the
performance of management and individual officers in achieving the company’s
strategic objectives, applied to these target incentive levels. As a function of
this process, the Committee met several times throughout the year with Dr.
Chahine to review the status of the management team’s individual contributions.
The 2007 strategic objectives against which corporate performance was measured
are discussed below under “2007 Performance”.
The
Committee establishes the company’s strategic objectives in discussions with Dr.
Chahine at the beginning of the compensation period to ensure that its
performance evaluations at the end of the compensation period reflect the
strategic priorities of the company to create value for our stockholders. Dr.
Chahine reviews the performance of the company and of each executive officer,
other than his own, with the Committee at the end of the compensation period and
makes recommendations to the Committee for its review and final determination.
Equity
Incentives.
The Committee is responsible for
making stock option grants under Avigen’s 2006 Equity Incentive Plan (the
“
2006 Plan
”), and believes that long-term stockholder value is best achieved
through an ownership culture among all our employees, particularly our
executives, through grants of stock-based awards.
20.
The
Committee grants stock-based awards under the 2006 Plan with multi-year vesting
periods designed as incentives to retain key employees to continue in the employ
of Avigen. Through option grants, executives receive significant equity
incentives to build long-term stockholder value. The exercise price of options
granted under the 2006 Plan is 100% of fair market value of the underlying stock
on the date of grant. Employees receive value from these grants only if Avigen’s
common stock appreciates over the long-term. The size of option grants is
determined based primarily on Avigen’s philosophy of significantly linking
executive compensation with stockholder interests, the individual criteria set
forth below, and the Committee’s use of industry sources in order to be
knowledgeable of compensation practices for companies of a similar size and
development stage in the biotechnology and pharmaceutical industries. The
Committee does not target any specific level as compared to industry average in
determining stock option grants; however, in 2007, the Committee determined that
the appropriate aggregate total of stock option grants issued to our CEO and
other executive officers would approximate 1.4% of total common stock
outstanding, based upon the Committee’s experience and subjective determination
as to the appropriate level. Prior to 2006, the Committee granted stock-based
awards that vest over a four-year period; however, in 2006 and 2007, the
Committee granted stock-based awards that vest over a three-year period after
taking into consideration the significant number of outstanding options that
were out-of-the-money and the objective of these awards to serve as retention
incentives to Avigen’s senior management team during a critical stage in the
company’s business development.
Change in
Control Arrangements.
The Board of Directors,
upon the recommendation of the Committee, established a Management Transition
Plan in May 2005, which is intended to retain key employees and enable executive
officers to represent stockholder interests during periods involving a possible
change in control of the company. The Management Transition Plan is designed to
protect the earned benefits of key employees, including executive officers,
against adverse changes that may result from a change in control of the company.
The level of payments provided under the agreement for executives reflects the
Committee’s subjective view, based upon its experience, of comparable benefits
offered to executives under change of control arrangements at other companies
within the industry in a similar development stage. Each of our named executive
officers are participants in the plan and will receive the following benefits if
their employment is involunarily terminated, or they resign as a result of a
constructive termination, within 18 months of a change in control:
-
12 months base salary (18 months in the case of
Dr. Chahine);
-
extended option exercisability of two
years;
-
full accelerated vesting of outstanding stock
options; and
-
12 months (18 months in the case of Dr. Chahine)
health benefits payments, or until such earlier date as
the executive officer secures subsequent employment that
provides substantially similar health benefits.
2007 Performance
In assessing
Avigen’s overall performance for the fiscal year ended December 31, 2007, the
Committee based its assessment on the following strategic objectives:
-
Phase II clinical development progress of
AV650;
-
Clinical development progress of
AV411;
-
Development and progress toward clinical testing
of AV513;
-
Evaluation, identification and development of new
product candidates for clinical testing, including
proprietary analogs for AV411; and
-
Execution of a strategic plan that efficiently
manages financial and staffing resources to support the
research and development needs of the company, including
raising additional capital for clinical testing.
21.
In
particular, with respect to achieving progress toward the overall strategic
objectives noted above, the Committee noted the following key accomplishments
during the review period:
-
AV650 clinical development progress which included
the initiation of two independent Phase II clinical
trials involving patients suffering from spasticity in connection with
Multiple Sclerosis and spinal cord
injury,
-
Completion of a successful drug-drug-interaction
clinical trial with AV650 and collection of other
ancillary non-clinical data that will be necessary to support approval
for initiating later-stage pivotal
studies,
-
Identification and progress toward an intellectual
property strategy which could extend the exclusivity
of AV650 in North America beyond the expected Hatch-Waxman exclusivity
period,
-
AV411 clinical development progress which included
the completion of an initial phase IIa exploratory
therapeutic clinical trial in Australia that demonstrated favorable
safety and tolerability at escalating
doses in
patients suffering from diabetic peripheral neuropathy, and initiation of a
Phase I maximum-
tolerated-dose clinical trial
in the U.S. with healthy volunteers,
-
AV513 preclinical development progress which
included advancement in the process development and
manufacture of the target drug substance,
-
Identification of several promising analogs of
AV411, and
-
Effectively executing the financial plan which
kept cash used in operating activities below $25.0 million
and raised additional equity capital in April 2007 under
favorable terms.
The
Committee applies its discretion in determining a subjective evaluation of the
overall performance of the company. Dr. Chahine discussed the performance and
2007 contributions of the individual officers with the Committee. In evaluating
these individual contributions, the Committee noted the effectiveness and
leadership of the management team which resulted in the company significantly
accomplishing all of its key objectives, and, in December 2007, adopted the
recommendation from Dr. Chahine regarding the compensation adjustments for other
executive officers as follows:
-
Base salary increases of 3.9%;
-
Bonus awards based on a company performance rating
of 85% and individual performance ratings that
resulted in actual payouts ranging between 75% and 85% of the pro rata
annual level targeted by the
Committee;
and
-
Stock option grants to purchase between 69,568 and
88,141 shares of common stock per executive
officer, which when accumulated with the stock option grant to the CEO,
equaled the aggregate target
established by the
Committee.
Chief Executive Officer
Compensation
Avigen’s
performance for the period ended December 31, 2007 as described above and as
reflected in the company’s financial statements included significant progress in
the clinical development of AV650 and AV411 and advancing other pipeline
compounds while maintaining a strong financial position to support ongoing
development. Accordingly, in evaluating Dr. Chahine’s overall performance, the
Committee determined that Dr. Chahine significantly accomplished his strategic
performance objectives established for the fiscal year 2007. The Committee noted
in particular that Avigen’s overall corporate performance against strategic
objectives had been positive throughout the year on many fronts and that Dr.
Chahine had provided good leadership in executing on the company’s development
strategies. Therefore, in December 2007, the Committee awarded Dr. Chahine an
incentive bonus of $158,380, or 82% of the pro rata annual level targeted by the
Committee, for his performance in 2007.
22.
Other
compensation approved for Dr. Chahine by the Committee in December 2007 for his
performance during the period ended December 31, 2007, included a base salary
increase of 3.9%, and a stock option grant for 113,324 shares, which represented
the same proportion as in 2006 of the aggregate executive stock option grants,
at an exercise price equal to $4.42 which was the fair market value on the date
of grant. These options will vest in equal quarterly installments through
December 2010.
2008 Compensation
The
Committee has determined to approach the 2008 compensation period in a manner
consistent with 2007 and has established strategic corporate objectives that
will serve as the basis for its year-end evaluation of management’s performance.
For 2008, these corporate objectives are significantly weighted toward the
clinical development progress of AV650 and have been communicated to our CEO and
other officers.
Share Retention and Ownership
Guidelines
We encourage
our executive officers to hold a significant equity interest in the company.
However, we do not have specific share retention and ownership guidelines for
our executive officers. We do not permit our executive officers, directors or
other members of management to engage in short sales, hedging transactions or
other inherently speculative transactions with respect to Avigen’s
stock.
Section 162(m) Policy
Section
162(m) (“
Section 162(m)
”) of the Internal Revenue Code of 1986, as amended (the
“
Code
”), generally provides that publicly held companies may not deduct
compensation paid to certain of the company’s executive officers to the extent
such compensation exceeds $1 million per officer in any year. Compensation above
$1 million may be deducted if it is “performance-based compensation” within the
meaning of the Code. Compensation will qualify as performance-based
compensation, provided that, among other things, the award is granted by a
Compensation Committee comprised solely of “outside directors” within the
meaning of the Code. As a former Vice President and Treasurer of Avigen, Dr.
Prendergast does not meet the Section 162(m) definition of outside director. The
Committee believes that at the present time it is unlikely that the compensation
paid to any named executive officer in a taxable year will exceed $1.0 million.
Therefore, the Committee has not established a policy for determining which
forms of incentive compensation awarded to its named executive officers will be
designed to qualify as “performance-based compensation” and does not believe
that Dr. Prendergast’s failure to meet the Section 162(m) definition of outside
director will impact Avigen at this time. Avigen will continue to monitor the
applicability of Section 162(m) to its ongoing compensation
arrangements.
23.
SUMMARY COMPENSATION
TABLE
The
following table shows for the fiscal years ended December 31, 2007 and 2006,
compensation awarded to or paid to, or earned by, Avigen’s Chief Executive
Officer, Chief Financial Officer and its three other most highly compensated
executive officers at December 31, 2007 (the “
Named Executive Officers
”).
Summary Compensation
Table
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
All Other
|
|
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Compensation
|
|
|
|
|
Name and Principal
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
(1)
|
|
($)
(2)
|
|
Total ($)
|
|
Kenneth G. Chahine,
|
|
2007
|
|
$
|
426,613
|
|
$
|
158,380
|
|
$
|
333,763
|
|
$
|
4,299
|
|
$
|
923,055
|
|
President and Chief Executive Officer
|
|
2006
|
|
|
407,239
|
|
|
95,000
|
|
|
271,027
|
|
|
4,199
|
|
|
777,465
|
|
|
|
Andrew A. Sauter,
|
|
2007
|
|
|
238,625
|
|
|
68,903
|
|
|
166,461
|
|
|
3,558
|
|
|
477,547
|
|
Chief Financial Officer
|
|
2006
|
|
|
229,017
|
|
|
28,000
|
|
|
98,733
|
|
|
3,458
|
|
|
359,208
|
|
|
|
Michael D. Coffee,
|
|
2007
|
|
|
302,120
|
|
|
90,636
|
|
|
237,876
|
|
|
4,711
|
|
|
635,343
|
|
Chief Business Officer
|
|
2006
|
|
|
288,400
|
|
|
69,000
|
|
|
152,547
|
|
|
4,711
|
|
|
514,658
|
|
|
|
Kirk W. Johnson, Ph.D.,
|
|
2007
|
|
|
248,824
|
|
|
74,025
|
|
|
282,000
|
|
|
4,091
|
|
|
608,940
|
|
Vice
President
|
|
2006
|
|
|
237,524
|
|
|
46,000
|
|
|
192,092
|
|
|
4,091
|
|
|
479,707
|
|
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Christina Thompson, J.D.,
|
|
2007
|
|
|
239,861
|
|
|
65,062
|
|
|
234,067
|
|
|
3,466
|
|
|
542,456
|
|
Vice
President,
|
|
2006
|
|
|
239,444
|
|
|
46,000
|
|
|
162,436
|
|
|
3,466
|
|
|
451,346
|
|
Corporate Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
|
(1)
|
|
The amounts shown in this column
represent the dollar amounts recognized for financial statement reporting
purposes for the fiscal years ended December 31, 2007 and 2006 in
accordance with FAS 123(R), disregarding estimates of forfeitures related
to service-based vesting conditions, and thus include amounts from awards
granted in those years and prior to 2006. Assumptions used in the
calculation of these amounts are described in Note 11 – “Share-based
Compensation,” to Avigen’s audited financial statements for the fiscal
year ended December 31, 2007, included in Avigen’s Annual Report on Form
10-K that was filed with the SEC on March 17, 2008. All grants were made
subject to individual award agreements, the form of which was previously
filed with the SEC.
|
|
|
|
(2)
|
|
Except as otherwise indicated,
represents insurance premiums paid by Avigen with respect to supplemental
long-term care insurance for the benefit of the Named Executive Officer
and up to $2,500 of matching contributions to Avigen’s 401(k) savings
plan.
|
24.
GRANTS OF PLAN-BASED
AWARDS
The
following table shows for the fiscal year ended December 31, 2007, certain
information regarding grants of plan-based awards to the Named Executive
Officers:
Grants of Plan-Based Awards in Fiscal
2007
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
Grant
Date
|
|
|
|
|
|
Awards:
|
|
Exercise or
|
|
Fair Value
of
|
|
|
|
|
|
Number of
|
|
Base Price
|
|
Stock
and
|
|
|
|
|
|
Securities
|
|
of
Option
|
|
Option
|
|
|
|
|
|
Underlying
|
|
Awards
|
|
Awards
|
|
|
|
Grant
|
|
Options
|
|
($/Sh)
|
|
($)
|
|
Name
|
|
Date
|
|
(#)
|
|
(3)
|
|
(4)
|
|
Kenneth Chahine
|
|
1/3/07
|
|
90,000
|
(1)
|
|
|
$
|
5.50
|
|
|
$259,290
|
|
|
|
12/5/07
|
|
113,324
|
(2)
|
|
|
|
4.42
|
|
|
235,147
|
|
Andrew Sauter
|
|
1/3/07
|
|
65,000
|
(1)
|
|
|
|
5.50
|
|
|
187,265
|
|
|
|
12/5/07
|
|
81,845
|
(2)
|
|
|
|
4.42
|
|
|
169,828
|
|
Michael Coffee
|
|
1/3/07
|
|
65,000
|
(1)
|
|
|
|
5.50
|
|
|
187,265
|
|
|
|
12/5/07
|
|
81,845
|
(2)
|
|
|
|
4.42
|
|
|
169,828
|
|
Kirk Johnson
|
|
1/3/07
|
|
70,000
|
(1)
|
|
|
|
5.50
|
|
|
201,670
|
|
|
|
12/5/07
|
|
88,141
|
(2)
|
|
|
|
4.42
|
|
|
182,893
|
|
M. Christina Thomson
|
|
1/3/07
|
|
65,000
|
(1)
|
|
|
|
5.50
|
|
|
187,265
|
|
|
|
12/5/07
|
|
68,903
|
(2)
|
|
|
|
4.42
|
|
|
142,974
|
____________________
|
(1)
|
|
Option Award was granted under
the 2006 Equity Incentive Plan and will vest in equal quarterly
installments through January 2010.
|
|
|
|
(2)
|
|
Option Award was granted under
the 2006 Equity Incentive Plan and will vest in equal quarterly
installments through December 2010.
|
|
|
|
(3)
|
|
Under the terms of the 2006
Equity Incentive Plan, the exercise price of option awards was determined
based on the closing price of Avigen’s common stock as reported on the
Nasdaq Global Market on the date of the grant.
|
|
|
|
(4)
|
|
The amounts shown in this column
were determined as of the option’s grant date using a Black-Scholes stock
option valuation model and represent the dollar amounts that serves as the
basis for stock-based compensation expenses recognized for financial
statement reporting purposes in accordance with FAS 123(R). Assumptions
used in the calculation of these amounts are described in Note 11 –
“Share-based Compensation,” to Avigen’s audited financial statements for
the fiscal year ended December 31, 2007, included in Avigen’s Annual
Report on Form 10-K that was filed with the SEC on March 17, 2008. All
grants were made subject to individual award agreements, the form of which
was previously filed with the SEC.
|
25.
OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR END.
The
following table shows for the fiscal year ended December 31, 2007, certain
information regarding outstanding equity awards at fiscal year end for the Named
Executive Officers.
Outstanding Equity Awards at December
31, 2007
|
|
|
Option Awards (1)
|
|
|
|
Number
of
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
|
|
|
|
Options
|
|
Options
|
|
Price
|
|
Option
|
|
|
|
(#)
|
|
(#)
|
|
($)
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(2)
|
|
Date
|
|
Kenneth Chahine (3)
|
|
37,500
|
|
—
|
|
|
|
$
|
5.88
|
|
|
01/16/09
|
|
|
|
17,500
|
|
—
|
|
|
|
|
5.38
|
|
|
07/01/09
|
|
|
|
25,000
|
|
—
|
|
|
|
|
29.00
|
|
|
05/19/10
|
|
|
|
75,000
|
|
—
|
|
|
|
|
38.19
|
|
|
06/14/10
|
|
|
|
100,000
|
|
—
|
|
|
|
|
14.63
|
|
|
03/09/11
|
|
|
|
37,500
|
|
—
|
|
|
|
|
8.53
|
|
|
07/02/12
|
|
|
|
75,000
|
|
—
|
|
|
|
|
3.53
|
|
|
05/20/13
|
|
|
|
101,562
|
|
23,438
|
|
|
|
|
3.38
|
|
|
06/25/14
|
|
|
|
18,562
|
|
14,438
|
|
|
|
|
3.14
|
|
|
07/01/15
|
|
|
|
87,500
|
|
62,500
|
|
|
|
|
5.06
|
|
|
02/22/16
|
|
|
|
22,500
|
|
67,500
|
|
|
|
|
5.50
|
|
|
01/03/17
|
|
|
|
—
|
|
113,324
|
|
|
|
|
4.42
|
|
|
12/05/17
|
|
Andrew Sauter
(4)
|
|
25,000
|
|
—
|
|
|
|
$
|
17.50
|
|
|
11/01/09
|
|
|
|
5,000
|
|
—
|
|
|
|
|
29.00
|
|
|
05/19/10
|
|
|
|
13,333
|
|
—
|
|
|
|
|
14.63
|
|
|
03/09/11
|
|
|
|
7,500
|
|
—
|
|
|
|
|
8.53
|
|
|
07/02/12
|
|
|
|
13,000
|
|
—
|
|
|
|
|
3.53
|
|
|
07/11/13
|
|
|
|
16,250
|
|
3,750
|
|
|
|
|
3.13
|
|
|
08/10/14
|
|
|
|
10,312
|
|
4,688
|
|
|
|
|
3.25
|
|
|
01/03/15
|
|
|
|
4,437
|
|
6,563
|
|
|
|
|
3.45
|
|
|
07/12/15
|
|
|
|
21,875
|
|
28,125
|
|
|
|
|
3.63
|
|
|
01/18/16
|
|
|
|
29,166
|
|
20,834
|
|
|
|
|
5.06
|
|
|
02/22/16
|
|
|
|
16,250
|
|
48,750
|
|
|
|
|
5.50
|
|
|
01/03/17
|
|
|
|
—
|
|
81,845
|
|
|
|
|
4.42
|
|
|
12/05/17
|
|
Michael Coffee (5)
|
|
103,125
|
|
46,875
|
|
|
|
$
|
2.86
|
|
|
02/23/15
|
|
|
|
3,937
|
|
3,063
|
|
|
|
|
3.14
|
|
|
07/01/15
|
|
|
|
67,082
|
|
47,918
|
|
|
|
|
5.06
|
|
|
02/22/16
|
|
|
|
16,250
|
|
48,750
|
|
|
|
|
5.50
|
|
|
01/03/17
|
|
|
|
—
|
|
81,845
|
|
|
|
|
4.42
|
|
|
12/05/17
|
|
Kirk Johnson
(6)
|
|
65,625
|
|
4,375
|
|
|
|
$
|
6.31
|
|
|
01/12/14
|
|
|
|
40,625
|
|
9,375
|
|
|
|
|
3.38
|
|
|
06/25/14
|
|
|
|
9,281
|
|
7,219
|
|
|
|
|
3.14
|
|
|
07/01/15
|
|
|
|
67,082
|
|
47,918
|
|
|
|
|
5.06
|
|
|
02/22/16
|
|
|
|
17,500
|
|
52,500
|
|
|
|
|
5.50
|
|
|
01/03/17
|
|
|
|
—
|
|
88,141
|
|
|
|
|
4.42
|
|
|
12/05/17
|
|
M. Christina Thomson (7)
|
|
20,000
|
|
—
|
|
|
|
$
|
47.63
|
|
|
02/07/10
|
|
|
|
18,333
|
|
—
|
|
|
|
|
14.63
|
|
|
03/09/11
|
|
|
|
10,000
|
|
—
|
|
|
|
|
8.53
|
|
|
07/02/12
|
|
|
|
12,500
|
|
—
|
|
|
|
|
3.53
|
|
|
07/11/13
|
|
|
|
73,250
|
|
18,750
|
|
|
|
|
3.38
|
|
|
06/25/14
|
|
|
|
4,281
|
|
7,219
|
|
|
|
|
3.14
|
|
|
07/01/15
|
|
|
|
67,082
|
|
47,918
|
|
|
|
|
5.06
|
|
|
02/22/16
|
|
|
|
16,250
|
|
48,750
|
|
|
|
|
5.50
|
|
|
01/03/17
|
|
|
|
—
|
|
68,903
|
|
|
|
|
4.42
|
|
|
12/05/17
|
26.
____________________
|
(1)
|
|
All option awards were granted on
a date 10-years prior to the expiration date, with option awards that were
granted prior to February 22, 2006 vesting in 16 equal quarterly
installments from the date of grant and option awards granted on or after
February 22, 2006 vesting in 12 equal quarterly installments from the date
of grant.
|
|
|
|
(2)
|
|
Option exercise price subtotals
represent the weighted average of all outstanding equity awards including
both exercisable and unexercisable.
|
|
|
|
(3)
|
|
In the aggregate, these options
are to purchase 878,824 shares of our common stock at a weighted average
exercise price of $9.37 per share.
|
|
|
|
(4)
|
|
In the aggregate, these options
are to purchase 356,678 shares of our common stock at a weighted average
exercise price of $6.14 per share.
|
|
|
|
(5)
|
|
In the aggregate, these options
are to purchase 418,845 shares of our common stock at a weighted average
exercise price of $4.18 per share.
|
|
|
|
(6)
|
|
In the aggregate, these options
are to purchase 409,641 shares of our common stock at a weighted average
exercise price of $4.93 per share.
|
|
|
|
(7)
|
|
In the aggregate, these options
are to purchase 413,236 shares of our common stock at a weighted average
exercise price of $7.12 per share.
|
OPTION EXERCISES AND STOCK
VESTED
The
following table shows for the fiscal year ended December 31, 2007, certain
information regarding option exercises and stock vested during the last fiscal
year with respect to the Named Executive Officers:
Option Exercises and Stock Vested in
Fiscal 2007
|
|
|
Option Awards
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
|
|
on
Exercise
|
|
on
Exercise
|
|
Name
|
|
(#)
|
|
($)
|
|
(a)
|
|
(b)
|
|
(c)
(1)
|
|
Andrew Sauter
|
|
4,000
|
|
|
$
|
27,200
|
|
|
M. Christina
Thomson
|
|
13,000
|
|
|
$
|
90,979
|
|
____________________
|
(1)
|
|
Represents the excess of the fair
market value of the shares exercised on the exercise date over the
aggregate exercise price of such shares.
|
SEVERANCE AND CHANGE OF CONTROL
AGREEMENTS
Change of Control
Agreements
Avigen has
established a Management Transition Plan. The Management Transition Plan is
intended to attract and retain key executive talent for Avigen. An employee of
Avigen becomes a participant in the Management Transition Plan only if Avigen
delivers to that employee a Management Transition Plan Eligibility Notice, in
which case the employee becomes a “Participant” in the Management Transition
Plan. Each of Dr. Chahine, Mr. Coffee, Ms. Thomson, Dr. Johnson, and Mr. Sauter
is a participant in the Management Transition Plan.
A
Participant in the Management Transition Plan will receive, if the Participant’s
employment with Avigen terminates due to an “involuntary termination” or a
“constructive termination,” as those terms are defined in the Management
Transition Plan, in either case within two (2) months prior to or eighteen (18)
months following a “change in control” (defined in the Management Transition
Plan), the following benefits:
|
|
(a)
|
|
salary continuation for the
number of months designated in the Management Transition Plan Eligibility
Notice given to the Participant (18 months in the case of Dr. Chahine, and
12 months in the case of each of Mr. Coffee, Ms. Thomson, Dr. Johnson and
Mr. Sauter);
|
27.
|
|
(b)
|
|
accelerated stock option vesting
and extended exercisability as provided in the Management Transition Plan
Eligibility Notice given to the Participant (full option vesting and 2
years extended exercisability in the case of each of Dr. Chahine, Mr.
Coffee, Ms. Thomson, Dr. Johnson and Mr. Sauter); and
|
|
|
|
|
|
(c)
|
|
Avigen will pay the COBRA
premiums for the Participant for the number of months designated in the
Management Transition Plan Eligibility Notice given to the Participant (18
months in the case of Dr. Chahine, and 12 months in the case of each of
Mr. Coffee, Ms. Thomson, Dr. Johnson and Mr. Sauter), or until such
earlier date as the Participant shall secure subsequent employment that
shall provide the Participant with substantially similar health
benefits.
|
If a change
of control occurred on December 31, 2007, our named executive officers would
have received the following benefits:
|
|
|
Salary
|
|
Option
|
|
COBRA
|
|
Name
|
|
Continuation
|
|
Vesting (1)
|
|
Payments
|
|
Kenneth Chahine
|
|
$
|
639,920
|
|
$
|
36,417
|
|
$
|
46,000
|
|
Andrew
Sauter
|
|
|
238,625
|
|
|
31,586
|
|
|
20,000
|
|
Michael Coffee
|
|
|
302,120
|
|
|
68,556
|
|
|
21,000
|
|
Kirk
Johnson
|
|
|
248,824
|
|
|
16,169
|
|
|
21,000
|
|
M. Christina Thomson
|
|
|
213,210
|
|
|
24,326
|
|
|
22,000
|
____________________
|
(1)
|
|
Calculated based on the value of
our common stock on December 31, 2007 ($4.25 at close of market on
December 31, 2007) less the exercise price for all unvested stock
options.
|
Equity Incentive Plans
In the event
of a dissolution or liquidation of Avigen, the Board of Directors may accelerate
vesting on some or all of the outstanding Stock Awards, as defined in Avigen’s
2006 Equity Incentive Plan (the “
Plan
”), so that such Stock Awards
become fully vested, exercisable and/or no longer subject to repurchase or
forfeiture (to the extent such Stock Awards have not previously expired or
terminated) before the dissolution or liquidation is completed but contingent on
its completion.
In the event
of a Corporate Transaction, as defined in the Plan, in which the surviving
corporation or acquiring corporation (or its parent company) does not assume or
continue outstanding stock awards or substitute similar stock awards for such
outstanding stock awards, the vesting of such stock awards shall (contingent
upon the effectiveness of the Corporate Transaction) be accelerated in full to a
date prior to the effective time of such Corporate Transaction as the Board
shall determine. The table above states the value of this accelerated vesting as
if the Corporate Transaction occurred on December 31, 2007 and the stock options
held by our named executive officers were not assumed, substituted or
continued.
DIRECTOR COMPENSATION
Compensation of
Directors
Effective
January 1, 2006, each of Avigen’s non-employee directors receives an annual
retainer of $28,000. Any non-employee director who serves as Chairman of
Avigen’s Board of Directors receives, in addition to regular payments for
service rendered as a member of the Board of Directors, an additional annual
retainer of $28,000. Dr. Zola Horovitz is currently designated as Chairman of
the Board of Directors. Any non-employee director who serves as the Lead
Independent Director of Avigen’s Board of Directors receives, in addition to
regular payments for service rendered as a member of the Board of Directors, an
additional annual retainer of $14,000 to be paid in equal quarterly
installments. Dr. John K. A. Prendergast is currently designated as the Lead
Independent Director. There are no additional fees for attendance at Board of
Directors or committee meetings; however, Avigen reimburses members of the Board
of Directors for their expenses incurred in connection with attendance at Board
and committee meetings in accordance with Avigen’s policy. In the fiscal year
ended December 31, 2007, the total compensation paid to non-employee directors
was $217,001.
28.
Each of
Avigen’s non-employee directors is qualified to receive stock option grants
under Avigen’s 2006 Equity Incentive Stock Option Plan. The Board of Directors
has determined that non-employee directors of Avigen, not serving as Chairman,
will be granted options to purchase 20,000 shares of Avigen’s common stock at
each annual meeting of Avigen’s stockholders if such non-employee director has
served for the entire preceding year. An option to purchase a prorated number of
shares is granted to each non-employee director who has served for less than the
full preceding year. In addition, each director who is elected for the first
time to be a non-employee director of Avigen will be granted an option to
purchase 30,000 shares upon the date of initial election to the Board of
Directors whether by the Board of Directors or stockholders of
Avigen.
The Board of
Directors has also determined that any non-employee director that serves as
Chairman of Avigen’s Board of Directors will be granted options to purchase
40,000 shares of Avigen’s common stock at each annual meeting of Avigen’s
stockholders.
The
following table shows for the fiscal year ended December 31, 2007 certain
information with respect to the compensation of all non-employee directors of
Avigen:
Director Compensation for Fiscal
2007
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
Option
|
|
|
|
|
|
|
Paid in
|
|
Awards
|
|
|
|
|
|
|
Cash
|
|
($)
|
|
Total
|
|
Name
|
|
($)
|
|
(2)
(3)(4)
|
|
($)
|
|
Zola Horovitz, Ph.D.
|
|
$
|
56,000
|
|
$
|
87,036
|
|
$
|
143,036
|
|
Stephen Dilly,
M.B.B.S., Ph.D. (1)
|
|
|
25,667
|
|
|
32,843
|
|
|
58,510
|
|
Yuichi Iwaki, M.D., Ph.D.
|
|
|
28,000
|
|
|
38,679
|
|
|
66,679
|
|
Jan Öhrström,
M.D. (1)
|
|
|
25,667
|
|
|
32,843
|
|
|
58,510
|
|
John Prendergast, Ph.D.
|
|
|
42,000
|
|
|
38,679
|
|
|
80,679
|
|
Daniel Vapnek,
Ph.D.
|
|
|
11,667
|
|
|
25,627
|
|
|
37,294
|
|
Richard Wallace
|
|
|
28,000
|
|
|
47,575
|
|
|
75,575
|
____________________
|
(1)
|
|
Appointed to Avigen’s Board of
Directors in February 2007.
|
|
|
|
(2)
|
|
The amounts shown in this column
represent the dollar amounts recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2007 in accordance with
FAS 123(R), excluding an estimate of forfeitures related to service-based
vesting conditions, and thus include amounts from awards granted in and
prior to 2007. Assumptions used in the calculation of these amounts are
described in Note 11 – “Share-based Compensation,” to Avigen’s audited
financial statements for the fiscal year ended December 31, 2007, included
in Avigen’s Annual Report on Form 10-K that was filed with the SEC on
March 17, 2008. All grants were made subject to individual award
agreements, the form of which was previously filed with the
SEC.
|
|
|
|
(3)
|
|
The following options were
outstanding as of December 31, 2007: Z. Horovitz: 182,500; S. Dilly:
36,667; Y. Iwaki: 115,000; J. Öhrström: 36,667; J. Prendergast: 127,500;
D. Vapnek: 44,083; and R. Wallace: 55,000.
|
29.
|
(4)
|
|
The following table sets forth
each grant of options to Avigen’s non-employee directors during 2007 under
the 2006 Plan, together with the exercise price per share and grant fair
value of each award computed in accordance with FAS 123(R) using the
Black-Scholes model.
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Options
|
|
|
|
Exercise
|
|
Fair Value
|
|
|
|
Granted in
|
|
|
|
Price Per
|
|
of Option
|
|
|
|
2007
|
|
|
|
Share
|
|
Award
|
|
Non-employee
Director
|
|
(#)
|
|
Grant Date
|
|
($)
|
|
($)
|
|
Zola Horovitz, Ph.D.
|
|
40,000
|
|
|
05/30/07
|
|
$
|
6.73
|
|
$133,068
|
|
|
Stephen G.
Dilly, M.B.B.S., Ph.D.
|
|
30,000
|
|
|
02/05/07
|
|
|
6.04
|
|
94,917
|
|
|
|
|
6,667
|
|
|
05/30/07
|
|
|
6.73
|
|
22,179
|
|
|
Yuichi Iwaki, M.D., Ph.D.
|
|
20,000
|
|
|
05/30/07
|
|
|
6.73
|
|
66,534
|
|
|
Jan K. Öhrström,
M.D.
|
|
30,000
|
|
|
02/05/07
|
|
|
6.04
|
|
94,917
|
|
|
|
|
6,667
|
|
|
05/30/07
|
|
|
6.73
|
|
22,179
|
|
|
John K. A. Prendergast, Ph.D.
|
|
20,000
|
|
|
05/30/07
|
|
|
6.73
|
|
66,534
|
|
|
Richard
Wallace
|
|
20,000
|
|
|
05/30/07
|
|
|
6.73
|
|
66,534
|
|
TRANSACTIONS WITH RELATED
PERSONS
RELATED-PERSON TRANSACTIONS POLICY AND
PROCEDURES
Our Audit
Committee has authority to review and approve all related-person transactions as
set forth in the Audit Committee Charter. Avigen has a simple organizational
structure in which potential transactions with related person are generally
easily recognizable by the members of our Board of Directors and management in
the ordinary course of business. In addition, each member of our Board of
Directors and management is aware that all related-person transactions must be
approved by our Audit Committee. As such, we rely on each member of our Board of
Directors and management to report any potential related-person transactions to
our General Counsel, who then would bring the potential related-person
transaction to the Audit Committee for approval. In addition, we submit and
require our directors and officers to complete Director and Officer
Questionnaires identifying any transactions with us in which the executive
officer or director or their family members have an interest. We review
related-person transactions due to the potential for a conflict of interest. A
conflict of interest occurs when an individual’s private interest interferes, or
appears to interfere, with our interests. In addition, our Corporate Governance
and Nominating Committee determines, on an annual basis, which members of our
Board of Directors are independent (as independence is currently defined in Rule
4200(a)(15) of the Nasdaq listing standards). Our Corporate Governance and
Nominating Committee reviews and discusses any relationships with directors that
would potentially interfere with his or her exercise of independent judgment in
carrying out the responsibilities of a director. In cases where the Corporate
Governance and Nominating Committee determines it is likely a particular board
member or board members will have a conflict of interest concerning an aspect of
our business, it may recommend the establishment of a Special Committee of the
Board of Directors comprised solely of non-conflicted Directors to act with
respect to such business. Such a Special Committee was formed with respect to
our AV411 program as the Board of Directors determined that two of the members
of our Board of Directors had a conflict of interest. Finally, our Code of
Business Conduct and Ethics establishes the standards of behavior for all
employees, officers, and directors.
HOUSEHOLDING OF PROXY
MATERIALS
The SEC has
adopted rules that permit companies and intermediaries (e.g., brokers) to
satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by delivering a
single proxy statement addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially means extra convenience for
stockholders and cost savings for companies.
30.
This year, a
number of brokers with account holders who are Avigen stockholders will be
“householding” our proxy materials. A single proxy statement may be delivered to
multiple stockholders sharing an address unless contrary instructions have been
received from the affected stockholders. Once you have received notice from your
broker that it will be “householding” communications to your address,
“householding” will continue until you are notified otherwise or until you
notify your broker or Avigen that you no longer wish to participate in
“householding.” If, at any time, you no longer wish to participate in
“householding” and would prefer to receive a separate proxy statement and annual
report in the future you may (1) notify your broker, (2) direct your written
request to: Investor Relations, Avigen, Inc., 1301 Harbor Bay Parkway, Alameda,
California 94502, or (3) contact our Chief Financial Officer, Andrew Sauter, at
(510) 748-7150. Stockholders who currently receive multiple copies of the proxy
statement at their address and would like to request “householding” of their
communications should contact their broker. In addition, Avigen will promptly
deliver, upon written or oral request to the address or telephone number above,
a separate copy of the annual report and proxy statement to a stockholder at a
shared address to which a single copy of the documents was delivered.
A copy of
Avigen’s Annual Report to the Securities and Exchange Commission on Form 10-K
for the fiscal ended December 31, 2007 is available without charge upon written
request to: Investor Relations, Avigen, Inc., 1301 Harbor Bay Parkway, Alameda,
California 94502.
OTHER MATTERS
The Board of
Directors knows of no other matters that will be presented for consideration at
the 2008 Annual Meeting of Stockholders. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of
Directors
M. C
HRISTINA
T
HOMSON
Vice President, Corporate
Counsel and Secretary
April 24, 2008
31.
|
|
1301 HARBOR BAY
PARKWAY ALAMEDA,
CA
94502
|
|
TO VOTE BY INTERNET -
www.proxyvote.com
|
|
Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59
P.M. Eastern Daylight Time the day before the meeting date. Have your
proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form. Do not return your proxy card if you are voting by
Internet.
|
|
|
|
ELECTRONIC DELIVERY OF FUTURE
STOCKHOLDER COMMUNICATIONS
|
|
If you would like to reduce the costs
incurred by Avigen, Inc. in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access
stockholder communications electronically in future years.
|
|
|
|
VOTE BY PHONE –
1-800-690-6903
|
|
Use any touch-tone telephone to transmit
your voting instructions up until 11:59 P.M. Eastern Daylight Time the day
before the meeting date. Have your proxy card in hand when you call and
then follow the simple instructions the Vote Voice provides you. Do not
return your proxy card if you are voting by telephone.
|
|
|
|
VOTE BY MAIL
|
|
Mark, sign, and date your proxy card
and return it in the postage-paid envelope we have provided or return it
to Avigen, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK
AS FOLLOWS:
|
AVIGE1
|
|
KEEP THIS FOR YOUR RECORDS
|
|
|
DETACH AND RETURN THIS
PORTION ONLY
|
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
|
|
AVIGEN, INC.
|
|
|
|
|
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEE.
|
|
|
|
|
|
|
|
PROPOSAL 1:
|
|
|
|
|
|
|
|
|
To elect one Class I director to hold office until the 2011 Annual
Meeting of Stockholders.
|
|
|
|
|
|
|
|
Nominee:
|
|
|
|
|
|
|
|
Zola Horovitz, Ph.D.
|
|
|
|
|
|
|
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For
The
Nominee
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Withhold
Authority
to Vote
For The
Nominee
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o
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o
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THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR PROPOSAL 2
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The
Board Recommends
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PROPOSAL
2:
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For
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Against
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Abstain
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To ratify the
selection by the Audit Committee of the Board of Directors of Odenberg,
Ullakko, Muranishi & Co. LLP as Avigen's independent registered public
accounting firm for its fiscal year ending December 31,
2008.
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o
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o
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o
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These items of
business are more fully described in the Proxy Statement accompanying this
Proxy.
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Please
sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-in-fact should add their
titles. If signer is a corporation, please give full corporate name and
have a duly authorized officer sign, stating title. If signer is a
partnership, please sign in partnership name by authorized
person.
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Please vote, date and
promptly return this proxy in the enclosed return envelope which is
postage prepaid if mailed in the United States.
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For comments, please check this box and write the
changes on the back where indicated.
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o
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Yes
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No
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Please
indicate if you plan to attend this meeting.
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o
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o
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Signature [PLEASE SIGN WITHIN
BOX]
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Date
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Signature (Joint Owners)
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Date
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AVIGEN, INC.
PROXY SOLICITED BY THE BOARD OF
DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19,
2008
The undersigned hereby appoints KENNETH G. CHAHINE and M.
CHRISTINA THOMSON, and each of them, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the shares of stock
of Avigen, Inc. which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of Avigen, Inc. to be held at Avigen's offices at 1301
Harbor Bay Parkway, Alameda, California, on Monday, May 19, 2008 at 10:00 a.m.
(local time), and at any and all postponements, continuations and adjournments
thereof, with all powers that the undersigned would possess if personally
present, upon and in respect of the matters listed on the reverse side and in
accordance with the instructions designated on the reverse side, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS
INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEE LISTED IN PROPOSAL 1 AND FOR
PROPOSAL 2 AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
Comments:
(If you noted
any Comments above, please mark corresponding box on the reverse
side.)
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