<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
/ / Confidential, For Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
ADVANCED MAGNETICS, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of filing fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transactions
applies:
------------------------------------------------------------
(2) Aggregate number of securities to which transactions
applies:
------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by
/ / Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing and registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------
</TABLE>
<PAGE>
ADVANCED MAGNETICS, INC.
61 MOONEY STREET
CAMBRIDGE, MASSACHUSETTS 02138
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 6, 2001
------------------------
The Annual Meeting of Stockholders ("Annual Meeting") of Advanced
Magnetics, Inc. (the "Company") will be held at the offices of the Company, 61
Mooney Street, Cambridge, Massachusetts 02138 on Tuesday, February 6, 2001 at
10:00 a.m., local time, to consider and act upon the following matters:
1. To elect five members of the Board of Directors to serve until the next
Annual Meeting and until their successors have been elected and qualified;
2. To consider and act upon the proposed 2000 Stock Plan which provides for a
maximum of 1,000,000 shares of common stock, par value $0.01 per share, of
the Company to be available for issuance thereunder; and
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Stockholders of record at the close of business on December 12, 2000 are
entitled to notice of, and will be entitled to vote at, the Annual Meeting or
any adjournment thereof. A list of the stockholders of record entitled to vote
shall be available for inspection at the principal office of the Company for ten
days prior to the Annual Meeting. The stock transfer books of the Company will
remain open between the record date and the date of the Annual Meeting.
By Order of the Board of Directors
MARLENE KAPLAN GOLDSTEIN,
SECRETARY
Cambridge, Massachusetts
December 18, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES. IF YOUR SHARES ARE HELD IN A BANK OR BROKERAGE
ACCOUNT, Y0U MAY BE ELIGIBLE TO VOTE ELECTRONICALLY OR BY TELEPHONE. PLEASE
REFER TO THE ENCLOSED FORM FOR INSTRUCTIONS.
<PAGE>
ADVANCED MAGNETICS, INC.
61 MOONEY STREET
CAMBRIDGE, MASSACHUSETTS 02138
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 6, 2001
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Advanced Magnetics, Inc. (the "Company")
for use at the Annual Meeting of Stockholders ("Annual Meeting") to be held at
the offices of the Company at 61 Mooney Street, Cambridge, Massachusetts 02138,
on Tuesday, February 6, 2001 and at any adjournment of the Annual Meeting.
December 12, 2000 was the record date for the determination of stockholders
entitled to vote at the Annual Meeting. On that date, there were 6,773,932
shares of common stock, par value $0.01 per share, of the Company (the "Common
Stock") outstanding. Each stockholder is entitled to one vote for each share of
Common Stock held by such stockholder on the record date.
At the Annual Meeting, a proposal to elect Messrs. Jerome Goldstein, Joseph
Lassiter III, Michael Loberg, Edward Roberts and George Whitesides as directors
and a proposal to adopt the 2000 Stock Plan of the Company will be subject to a
vote of stockholders. Where a choice has been specified on the accompanying
proxy card with respect to these proposals, the shares represented by the proxy
will be voted in accordance with the specifications, and will be voted in favor
of the proposals if no specification is indicated.
The Board of Directors of the Company knows of no other matters to be
presented at the Annual Meeting. If any other matter should be presented at the
Annual Meeting upon which a vote properly may be taken, shares represented by
all proxies received by the Board of Directors will be voted with respect
thereto in accordance with the judgment of the persons named in the proxies. Any
proxy may be revoked by a stockholder at any time before its exercise by
delivery of written revocation to the Secretary of the Company.
The Company's Annual Report, including audited financial statements for the
fiscal year ended September 30, 2000, is being mailed to the stockholders
entitled to vote at the Annual Meeting along with the mailing of this proxy
statement. This proxy statement and accompanying form of proxy will first be
mailed to stockholders on or about December 26, 2000.
VOTING PROCEDURES
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum for the transaction of business. Votes withheld
from any nominee, abstentions and broker "non-votes" are counted as present or
represented for purposes of determining the presence or absence of a quorum for
the meeting. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because, with
respect to such other proposal, the nominee does not have discretionary voting
power and has not received instructions from the beneficial owner. Votes will be
tabulated by American Stock Transfer and Trust Company as Transfer Agent/
Registrar of the Company.
Directors are elected by a plurality of the votes cast by stockholders
entitled to vote at the meeting. With respect to the proposed 2000 Stock Plan
(the "Plan"), the Company's By-Laws and federal tax regulations provide that the
affirmative vote of a majority of shares present, in person or represented by
proxy, and voting, on that mater is required for approval. The affirmative vote
of the
1
<PAGE>
holders of a majority of the shares of Common Stock present or represented, and
voting, at the Annual Meeting is required for approval of all other matters, if
any, to be submitted to stockholders at the meeting. Abstentions and broker
"non-votes" are not considered to have been voted on any matter and have the
practical effect of reducing the number of affirmative votes required to achieve
a majority for such matter.
A large number of banks and brokerage firms are participating in the ADP
Investor Communication Services online program. This program provides eligible
stockholders the opportunity to vote via the Internet or by telephone. If your
bank or brokerage firm is participating in ADP's program, your voting form will
provide instructions. If your voting form does not reference Internet or
telephone information, please complete and return the paper proxy card in the
self-addressed, postage paid envelope provided.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to
be furnished to all stockholders entitled to vote at the next annual meeting of
stockholders of the Company must be received at the Company's principal
executive offices not later than August 24, 2001. The deadline for providing
timely notice to the Company of matters that stockholders otherwise desire to
introduce at the next annual meeting of stockholders of the Company is
November 7, 2001. The Company may exercise its discretionary voting authority to
direct the voting of proxies on any matter submitted for a vote at the next
annual meeting of stockholders if notice concerning proposal of such matter was
not received prior to November 7, 2001. In order to curtail any controversy as
to the date on which a proposal was received by the Company, it is suggested
that proponents submit their proposals by Certified Mail, Return Receipt
Requested.
2
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information, as of December 12, 2000,
with respect to the beneficial ownership of the Company's Common Stock by
(i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) the directors, (iii) the chief
executive officer and each of the four other most highly compensated executive
officers of the Company as of September 30, 2000 whose annual compensation
exceeded $100,000 (the "Named Officers") and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS SHARES COMMON STOCK
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OUTSTANDING
----------------------------------------------- ------------------ -------------
<S> <C> <C>
Jerome Goldstein(2)(3)(4)...................... 686,734 10.1%
Marlene Kaplan Goldstein(2)(3)(5).............. 657,587 9.7%
BVF Partners L.P.(6)
227 West Monroe Street, Suite 4800
Chicago, Illinois 60606...................... 608,133 9.0%
Dimensional Fund Advisors, Inc.(7)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401....................... 461,285 6.8%
Edward B. Roberts, Ph.D.(8).................... 102,806 1.5%
George M. Whitesides, Ph.D.(9)................. 91,875 1.4%
Leonard M. Baum(10)............................ 27,961 *
Joseph B. Lassiter III, Ph.D.(11).............. 19,500 *
Michael D. Loberg, Ph.D.(12)................... 19,500 *
Mark C. Roessel(13)............................ 19,081 *
Paula M. Jacobs, Ph.D.(14)..................... 15,560 *
Jerome M. Lewis, Ph.D.(15)..................... 15,317 *
All directors and executive officers as a group
(11 persons)(16)............................. 1,015,120 14.6%
</TABLE>
------------------------
* Less than 1%.
(1) Unless otherwise indicated, each stockholder referred to above has sole
voting and investment power with respect to the shares listed and the
address of each stockholder is: c/o Advanced Magnetics, Inc., 61 Mooney
Street, Cambridge, Massachusetts 02138.
(2) Jerome Goldstein and Marlene Kaplan Goldstein are husband and wife, and each
disclaims control or beneficial ownership of shares held by the other.
(3) Includes 49,900 shares held by the Kaplan Goldstein Family Foundation, a
charitable foundation whose trustees are Jerome Goldstein, Marlene Kaplan
Goldstein and their two adult children.
(4) Includes 30,312 shares issuable to Jerome Goldstein pursuant to options
exercisable on or before February 10, 2001.
(5) Includes 750 shares issuable to Marlene Kaplan Goldstein pursuant to options
exercisable on or before February 10, 2001.
(6) Based solely upon a Form 4 for the month of August 2000, filed with the
Securities and Exchange Commission, a copy of which was provided to the
Company pursuant to SEC rules, BVF Partners L.P. ("Partners") and
BVF, Inc., an investment advisor to and general partner of Partners, are the
beneficial owners of 608,133 shares. Mark N. Lampert is the sole shareholder
of and sole director of BVF, Inc. Partners is the general partner of
Biotechnology Value Fund, L.P. ("BVF") and Biotechnology Value Fund I, L.P.
("BVF2") both of which are investment limited partnerships.
3
<PAGE>
BVF and BVF2 disclaim beneficial ownership of shares beneficially owned by
Partners on behalf of certain managed investment accounts.
(7) Based solely upon a Schedule 13G filed with the Securities and Exchange
Commission on February 3, 2000, Dimensional Fund Advisors Inc.
("Dimensional"), an investment advisor registered under the Investment
Advisor's Act of 1940, is deemed to have beneficial ownership of 461,285
shares as of December 31, 1999, all of which shares are held by investment
companies to which it furnishes investment advice and certain other
investment vehicles for which it serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(8) Includes 26,500 shares held by Dr. Roberts as trustee for his children and
24,375 shares issuable to Dr. Roberts pursuant to options exercisable on or
before February 10, 2001.
(9) Includes 24,375 shares issuable to Dr. Whitesides pursuant to options
exercisable on or before February 10, 2001.
(10) Includes 23,750 shares issuable to Mr. Baum pursuant to options exercisable
on or before February 10, 2001.
(11) Represents 19,500 shares issuable to Dr. Lassiter pursuant to options
exercisable on or before February 10, 2001.
(12) Represents 19,500 shares issuable to Dr. Loberg pursuant to options
exercisable on or before February 10, 2001.
(13) Includes 9,081 shares owned as joint tenant with right of survivorship with
Mr. Roessel's spouse and 10,000 shares issuable to Mr. Roessel under options
exercisable on or before February 10, 2001.
(14) Includes 980 shares held by Dr. Jacobs' spouse as custodian for the benefit
of her daughter and 11,062 shares issuable to Dr. Jacobs pursuant to options
exercisable on or before February 10, 2001.
(15) Includes 11,687 shares issuable to Dr. Lewis pursuant to options
exercisable on or before February 10, 2001.
(16) Includes 77,380 shares held in family or charitable trusts and custodial
accounts for various directors' and officers' children, 9,081 shares owned
jointly with spouses of directors and officers and 188,092 shares issuable
under options exercisable on or before February 10, 2001.
4
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors the
five nominees named below, all of whom are now directors of the Company, unless
authority to vote for the election of any or all of the directors is withheld by
marking the proxy to that effect.
Each director will be elected to hold office until the next annual meeting
of stockholders and until his successor is elected and qualified, or until his
earlier death, resignation or removal. Each of the nominees has indicated his
willingness to serve, if elected, but if a nominee should be unable to serve,
the proxies may be voted for a substitute nominee designated by management.
Set forth below are the name and age of each nominee and the positions and
offices held by him, his principal occupation and business experience during the
past five years and the year of the commencement of his term as a director of
the Company.
JEROME GOLDSTEIN, age 61, has been a director since 1981. He is a founder of
the Company and has been Chairman of the Board of Directors, Chief Executive
Officer and Treasurer since the Company's organization in November 1981.
Mr. Goldstein was President of the Company from the Company's organization in
November 1981 until June 1997.
JOSEPH B. LASSITER III, Ph.D., age 53, has been a director since 1997. He
has been a Lecturer and Professor of Management Practice at the Harvard Business
School since September 1996. He was the President of Wildfire
Communications, Inc., a telecommunications software company, from July 1994 to
February 1996. He is a director of RSA Security, Inc.
MICHAEL D. LOBERG, Ph.D., age 53, has been a director since 1997. He has
been Chief Executive Officer of NitroMed, Inc. since September 1997. Prior to
that, he served for twenty years in various senior management positions at
Bristol-Myers Squibb, including President of Squibb Diagnostics, President of
BMS Northern Europe and President of BMS Specialty Pharmaceuticals.
EDWARD B. ROBERTS, Ph.D., age 65, has been a director since 1982. He has
been Professor at the Sloan School at the Massachusetts Institute of Technology
since 1961. He was a co-founder and the Chairman of Pugh-Roberts
Associates, Inc., a management consulting firm that is now a division of PA
Consulting Group, Inc. He is also a general partner of Zero Stage Capital
Management, L.P., a venture capital limited partnership. He is also a director
of Sohu.com Inc., Inverness Medical Technology Inc., Pegasystems Inc., Medical
Information Technology Inc. and NETsilicon, Inc.
GEORGE M. WHITESIDES, Ph.D., age 61, has been a director since 1981. He has
been a Professor of Chemistry at Harvard University since July 1982. He is a
director of Dexter Corporation, a manufacturer of specialty material product and
Life Technologies, Inc., a supplier of products used in life sciences research
and the commercial manufacture of genetically engineered products.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met six times during the fiscal year ended
September 30, 2000. Each director attended at least 75% of the meetings of the
Board of Directors and all the Committees on which he served with the exception
of George M. Whitesides who attended four meetings.
Under the Company's by-laws, the Board of Directors may designate committees
composed of members of the Board to exercise the power and authority of the
Board in the management of the business and affairs of the Company, subject to
limitations imposed by law. The Board of Directors has a standing Audit
Committee, composed of Jerome Goldstein, Joseph B. Lassiter III, and Edward B.
Roberts. The Audit Committee oversees generally the financial controls and
practices of the Company and the performance and independence of its independent
accountants and reviews the Company's
5
<PAGE>
financial statements. The Audit Committee conducted one formal meeting apart
from Board of Directors meetings during the fiscal year ended September 30,
2000.
The Board of Directors does not have standing nomination or compensation
committees or committees performing similar functions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock
(collectively, "Reporting Persons") to file with the Commission initial reports
of ownership and reports of changes in ownership of Common Stock of the Company.
Such persons are required by regulations of the Commission to furnish the
Company with copies of all such filings. Based on its review of the copies of
such filings received by it with respect to the fiscal year ended September 30,
2000, and written representations from certain of its directors and executive
officers, the Company believes that all Reporting Persons complied with all
Section 16(a) filing requirements in the fiscal year ended September 30, 2000.
AUDIT COMMITTEE REPORT
The Audit Committee is composed of Jerome Goldstein, Joseph B. Lassiter III,
and Edward B. Roberts. Neither Dr. Lassiter nor Dr. Roberts is an officer or
employee of the Company, and aside from being a director of the Company, each is
otherwise independent of the Company (as independence is defined in the American
Stock Exchange's listing standards). Jerome Goldstein is an employee of the
Company and holds the offices of Chief Executive Officer and Treasurer of the
Company. After June 14, 2001, Mr. Goldstein will not be eligible to serve on the
Audit Committee unless the Board of Directors, under exceptional and limited
circumstances, determines that membership on the committee by Mr. Goldstein is
required by the best interests of the Company and its stockholders. If Mr.
Goldstein resigns from the Audit Committee, the Company anticipates adding a
third independent member of the Audit Committee. The Audit Committee operates
under a written charter adopted by the Board of Directors, a copy of which is
attached as Appendix A to this Proxy Statement.
The Audit Committee has reviewed the audited financial statements of the
Company at September 30, 2000, and September 30, 1999 and for each of the three
years ended September 30, 2000, and has discussed them with both management and
PricewaterhouseCoopers LLP, the Company's independent accountants. The Audit
Committee has also discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees), as currently in effect. The Audit
Committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as currently in effect, and
has discussed with PricewaterhouseCoopers LLP that firm's independence. Based on
its review of the financial statements and these discussions, the Audit
Committee concluded that it would be reasonable to recommend, and on that basis
did recommend, to the Board of Directors that the audited financial statements
be included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2000.
Audit Committee of the Board of Directors of Advanced Magnetics, Inc.
Jerome Goldstein
Joseph B. Lassiter III
Edward B. Roberts
6
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the annual and long-term compensation of each
of the Named Officers for each of the fiscal years ended September 30, 2000,
1999 and 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS(2)
ANNUAL ---------------------------------
COMPENSATION(1) SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) OPTIONS/SARS(#) COMPENSATION($)
--------------------------- -------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
Jerome Goldstein............................... 2000 251,266 0 2,000(3)
Chairman of the Board of Directors, 1999 243,001 20,000 19,900(3)
Chief Executive Officer and 1998 235,273 0 18,100(3)
Treasurer
Leonard M. Baum................................ 2000 236,645 0 2,000(4)
President and Chief Operating Officer 1999 212,759 10,000 2,000(4)
1998 204,632 10,000 2,000(4)
Paula M. Jacobs, Ph.D.......................... 2000 136,400 0 2,000(4)
Vice President--Development 1999 131,073 5,000 2,000(4)
1998 126,592 0 2,000(4)
Jerome M. Lewis, Ph.D.......................... 2000 130,535 0 2,000(4)
Vice President--Scientific Operations 1999 126,471 5,000 2,000(4)
1998 121,209 0 2,000(4)
Mark C. Roessel................................ 2000 120,595 0 2,000(4)
Vice President--Regulatory Affairs 1999 121,011 5,000 2,000(4)
1998 112,337 0 2,000(4)
</TABLE>
------------------------
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or 10%
of the total salary and bonus reported.
(2) The Company did not grant any restricted stock awards or stock appreciation
rights or make any long term incentive plan payouts during the fiscal years
ended September 30, 2000, 1999 and 1998.
(3) Includes $0, $17,900 and $16,100 in premiums on a term life insurance policy
related to coverage in the fiscal years ended September 30, 2000, 1999 and
1998, respectively, in the event of the death of Mr. Goldstein and his wife
to a trust for the benefit of their children and $2,000 in contributions for
Mr. Goldstein's benefit to the Company's 401(k) plan in each fiscal year.
(4) Represents amount contributed for the benefit of the Named Officer to the
Company's 401(k) plan.
OPTION GRANTS IN THE LAST FISCAL YEAR
No stock options or stock appreciation rights were granted to the Named
Officers in the fiscal year ended September 30, 2000.
7
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information as to the Named Officers with
respect to options to purchase the Company's Common Stock held by each Named
Officer, including (i) the number of shares of Common Stock purchased upon
exercise of options in fiscal 2000, (ii) the net value realized upon such
exercise, (iii) the number of unexercised options outstanding at September 30,
2000 and (iv) the value of such unexercised options at September 30, 2000:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
SEPTEMBER 30, 2000 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
SHARES VALUE SEPTEMBER 30, 2000 (#) SEPTEMBER 30, 2000 ($)(2)
ACQUIRED ON REALIZED ------------------------------ ------------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jerome Goldstein....... -- -- 30,312 19,688 -- --
Leonard M. Baum........ -- -- 23,750 16,250 -- --
Paula M. Jacobs,
Ph.D................. 1,250 3,594 11,062 5,188 -- --
Jerome M. Lewis,
Ph.D................. 1,250 3,594 11,687 5,063 -- --
Mark C. Roessel........ 1,250 5,314 10,000 5,500 -- --
</TABLE>
------------------------
(1) Amounts disclosed in this column do not reflect amounts actually received by
the Named Officers but are calculated based on the difference between the
fair market value of the Company's Common Stock on the date of exercise and
the exercise price of the options. The Named Officers will receive cash only
if and when they sell the Common Stock issued upon exercise of the options,
and the amount of cash received by such individuals is dependent on the
price of the Company's Common Stock at the time of such sale.
(2) Value is based on the difference between the option exercise price and the
fair market value at September 30, 2000 ($3.75 per share as quoted on the
American Stock Exchange) multiplied by the number of shares underlying the
option. All options held by the Named Officers have an exercise price of
greater than $3.75 per share, and, therefore, no such options are
"in-the-money."
8
<PAGE>
REPORT ON EXECUTIVE COMPENSATION BY THE BOARD OF DIRECTORS
To Our Stockholders:
The Board of Directors of the Company is responsible for establishing and
administering the Company's executive compensation programs. The Company's
executive compensation policies rely on regular cash salaries and significant
equity incentives in the form of stock options.
Salaries of the five highest paid executives who served the Company during
the fiscal year ended September 30, 2000 are listed on the Executive
Compensation Summary table found on page 7. On an annual basis, the Board
reviews the salaries of its executive officers and, while it is not required to,
it may in its discretion increase the salaries. The Board has typically adjusted
the compensation of each of the executives by the same percentage amount. The
amount of the annual increases has historically reflected the Board's subjective
assessment of the salary level necessary for the Company to remain at the
approximate median in compensation levels when compared to other
biopharmaceutical companies of comparable size and geographical location (which
together comprise a subset of the Company's Peer Group Index referred to in the
Performance Graph below), and the Board's subjective judgment as to Company
performance. In fiscal 2000, the Board determined the Company's performance
primarily by reference to the progress of the Company's product development and
marketing efforts, including the filing of an NDA for one of the Company's
products with the FDA and the negotiation of a significant distribution
agreement. The Board determined to grant the Named Officers the compensation
disclosed in the Executive Compensation Summary table found on page 7.
In order to align the interests of executives and other employees with
stockholders and motivate them to work for the long-term growth of the Company,
the Company provides significant stock option grants to its employees.
Executives are typically considered every two years for stock option grants, and
it is the Company's policy to weight total compensation heavily toward equity
compensation through stock options. Options are generally granted at fair market
value and become exercisable ratably over a four-year period. The actual number
of stock options granted to executives is not determined pursuant to any
formula, but rather they are awarded subjectively by the Board in its
discretion.
COMPANY PERFORMANCE AND CEO COMPENSATION
The compensation of the Chief Executive Officer has typically been adjusted
annually by the same percentage as the average percentage increase for all of
the Company's employees. In exercising its discretion, the Board takes into
consideration, among other things, the Company's progress in achieving the goals
of the Board of Directors (focusing in recent periods on the Company's product
development and clinical trial progress), and the compensation packages of
executive officers of comparable companies of similar size in the
biopharmaceutical industry.
As a result of the Company's performance and his individual contribution,
Jerome Goldstein was awarded the amounts reflected in the Executive Compensation
Summary table on page 7 in fiscal 2000.
Members of the Board of Directors:
<TABLE>
<S> <C>
Leonard M. Baum Michael D. Loberg
Jerome Goldstein Edward B. Roberts
Joseph B. Lassiter III George M. Whitesides
</TABLE>
COMPENSATION OF DIRECTORS
During the fiscal year ended September 30, 2000, directors received no cash
compensation for their services as directors, except for reimbursement of
expenses incurred in connection with attending meetings.
9
<PAGE>
Under the terms of the Company's 1992 Director Plan, each person who was a
member of the Company's Board of Directors on November 5, 1991 (or was appointed
to the Board of Directors thereafter), and who was not an employee or an officer
of the Company, was automatically granted on November 5, 1991 (or the date of
their appointment to the Board of Directors, if thereafter) (the "1992 Initial
Grant Date") and November 5, 1996 an option to purchase 5,000 shares of the
Company's Common Stock, and will receive an option to purchase an additional
5,000 shares on each successive fifth anniversary of the 1992 Initial Grant Date
if he or she is then a member of the Board of Directors. The exercise price of
options granted under the 1992 Director Plan is the fair market value of the
Company's Common Stock on the date the option is granted (subject to adjustment
for any dividend, stock split or other relevant change in the Company's
capitalization). Each option granted under the 1992 Director Plan first becomes
exercisable with respect to 20% of the shares subject to such option on the day
preceding each annual anniversary of the date of grant, until the option is
exercisable with respect to all of the shares subject thereto.
Under the terms of the Company's 1993 Director Plan, each person who was a
member of the Company's Board of Directors on November 10, 1992 (or was
appointed to the Board of Directors thereafter), and who was not an employee or
an officer of the Company, was automatically granted on November 10, 1992 (or
the date of their appointment to the Board of Directors, if thereafter) (the
"1993 Initial Grant Date") and November 10, 1998 an option to purchase 5,000
shares of the Company's Common Stock, and will receive an option to purchase an
additional 5,000 shares on each successive sixth anniversary of the 1993 Initial
Grant Date if he or she is then a member of the Board of Directors. The exercise
price of options granted under the 1993 Director Plan is the fair market value
of the Company's Common Stock on the date the option is granted (subject to
adjustment for any dividend, stock split or other relevant change in the
Company's capitalization). Each option granted under the 1993 Director Plan
first becomes exercisable with respect to 20% of the shares subject to such
option on the day preceding each annual anniversary of the date of grant, until
the option is exercisable with respect to all of the shares subject thereto.
Directors are also eligible for option grants under the terms of the
Company's 1993 Stock Plan and would be eligible for grants under the proposed
2000 Stock Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a Compensation Committee. The Board of Directors
was responsible for determining compensation of executive officers of the
Company. During the fiscal year ended September 30, 2000, Jerome Goldstein, the
Company's Chairman of the Board of Directors, Chief Executive Officer and
Treasurer, and Leonard Baum, the Company's Chief Operating Officer and
President, participated in the establishment and administration of the Company's
executive compensation programs. Mr. Goldstein and Mr. Baum abstained from
voting with respect to decisions concerning their respective compensation as
executive officers of the Company.
10
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five fiscal
years ended September 30, 2000 with the cumulative total return on the American
Stock Exchange Market Value Index and the Company's Peer Group based on SIC Code
2834 (pharmaceutical preparations). The comparisons assume $100 was invested on
October 1, 1995 in the Company's Common Stock in the American Stock Exchange
Market Value Index and with the Company's Peer Group and assumes reinvestment of
dividends, if any.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG
ADVANCED MAGNETICS, INC., AMEX MARKET INDEX AND SIC CODE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
9/29/95 9/30/96 9/30/97 9/30/98 9/30/99 9/30/00
<S> <C> <C> <C> <C> <C> <C>
Advanced Magnetics, Inc. 100 64.56 41.5 29.13 12.14 14.56
Paramaceutical Preperations 100 132.68 188.5 249.95 256.16 322.81
Amex Market Index 100 104.08 126.56 110.55 128.74 153.97
</TABLE>
The stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used in the graph was obtained from
Media General Financial Services, a source the Company believes is reliable.
However, the Company is not responsible for any errors or omissions in such
information.
Neither the report of the Audit Committee, the Audit Committee Charter, the
Report on Executive Compensation of the Board of Directors nor the Performance
Graph following it shall be deemed to be incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or any filing under the
Securities Exchange Act of 1934, as amended, except to the extent that any such
filing specifically incorporates this information by reference, and will not
otherwise be deemed filed under either Act.
11
<PAGE>
PROPOSAL II
APPROVAL OF THE 2000 STOCK PLAN
On November 8, 2000, the Board of Directors adopted, subject to the approval
of the stockholders, the Company's 2000 Stock Plan (the "2000 Plan"). The 2000
Plan provides for up to 1,000,000 shares of the Company's Common Stock to be
reserved for the grant of incentive stock options to employees of the Company
and the grant of non-qualified stock options, stock awards and opportunities to
make direct purchases of stock in the Company to employees, directors, officers
and consultants of the Company.
The stockholders are being asked to approve the 2000 Plan because, as of
December 12, 2000, only 100,925 shares remained available for grant under the
Company's 1993 Stock Plan. The Company's management relies on stock options as
an essential part of the compensation packages necessary for the Company to
attract and retain experienced officers and employees. The Board of Directors
adopted the 2000 Plan in order to ensure that the Company would be able to
continue to attract and retain the quality of employees, directors and officers
needed to compete effectively. The Board of Directors of the Company believes
that the 2000 Plan provides sufficient shares to permit the Company's management
to continue to provide meaningful long-term, equity-based incentives to present
and future key employees.
While the Board of Directors is aware of and has considered the potential
dilutive effect of option grants, it also recognizes the performance and
motivational benefits of equity compensation and believes that the proposed
increase in available options is appropriate under the circumstances. All of the
Company's option grants under its 1993 Stock Plan were made at or above fair
market value at the time of grant. As a result, no dilution to the Company's
stockholders occurs unless and until the stock price increases, benefiting both
stockholders and optionholders of the Company. Furthermore, since the Company
typically grants options that become exercisable over a four year period,
employees must remain with the Company in order to reap the potential benefits
of their option grants.
The Company is seeking stockholder approval of the 2000 Plan pursuant to
this Proposal II in order to be able to grant "incentive stock options" ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). As described below under the heading "United States
Federal Income Tax Consequences," there are several potential benefits to the
Company's employees if options granted under the 2000 Plan are treated as ISOs.
In addition, stockholder approval of the 2000 Plan is required in order to allow
for directors and officers to be eligible to participate in the 2000 Plan.
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Annual Meeting of Stockholders
and voting will be required to approve the adoption of the 2000 Plan. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION OF
THE 2000 PLAN.
The following is a summary description of the 2000 Plan, which is qualified
in its entirety by reference to the complete text of the 2000 Plan which is
attached as Appendix B to this Proxy Statement.
12
<PAGE>
SUMMARY OF THE 2000 PLAN
PURPOSE. The purpose of the 2000 Plan is to encourage employees, directors
and officers of the Company as well as other individuals who render services to
the Company by providing opportunities to obtain stock of the Company pursuant
to the 2000 Plan.
SHARES SUBJECT TO THE 2000 PLAN. The Board of Directors has reserved a
maximum of 1,000,000 shares of Common Stock for issuance under the 2000 Plan.
ELIGIBILITY. The 2000 Plan provides for the grant of incentive stock
options ("ISOs") to employees of the Company and the grant of non-qualified
stock options ("NQSOs"), stock awards ("Awards") and opportunities to make
direct purchases of stock in the Company ("Purchases") to employees, officers
and directors of the Company, subject to stockholder approval as discussed
below. ISOs, NQSOs, Awards and Purchases are sometimes collectively referred to
as "Stock Rights" and ISOs and NQSOs are sometimes collectively referred to as
"Options." For information concerning the United States federal income tax
consequences of ISOs, NQSOs, Awards and Purchases, please see below.
ADMINISTRATION. The 2000 Plan is to be administered by the Board of
Directors. Subject to the provisions of the 2000 Plan, the Board of Directors
has the authority to (i) determine to whom Options, Awards and authorizations to
make Purchases shall be granted, (ii) determine the time at which Options or
Awards shall be granted or Purchases made, (iii) determine the purchase price
for NQSOs, Awards and Purchases, (iv) determine whether each Option granted
shall be an ISO or a NQSO, (v) determine when each Option shall become
exercisable and the duration of the exercise period, (vi) determine whether
restrictions such as repurchase options are to be imposed on shares subject to
Options, Awards and Purchases and the nature of such restrictions, if any, and
(vii) interpret the 2000 Plan and prescribe and rescind rules and regulations
relating to it. The Board of Directors may delegate its authority to a
committee.
OPTION PRICE AND DURATION. The exercise price per share for each ISO and
NQSO granted under the 2000 Plan may be set at the direction of the Board of
Directors, but, under current federal income tax laws, may not be less than the
fair market value per share of Common Stock on the date of such grant in the
case of an ISO. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, under current federal income tax laws, the
price per share for such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
Under current federal income tax laws, the aggregate fair market value
(determined at the time of grant) of the shares of Common Stock subject to ISOs
granted to an employee and which first become exercisable during any calendar
year cannot exceed $100,000; any portion of an ISO grant that exceeds such
$100,000 limit will be treated for tax purposes as a NQSO. Each Option expires
on the date specified by the Board of Directors, but, under current federal
income tax laws, not more than (i) ten years from the date of grant in the case
of Options generally and (ii) five years from the date of grant in the case of
ISOs granted to an employee owning stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company.
EXERCISABILITY OF SHARES. The vesting schedule of all Options, Awards and
Purchases shall be determined by the Board of Directors. An Option shall be
exercisable in whole or in part by giving written notice to the Company, stating
the number of shares with respect to which the Option is being exercised,
accompanied by payment in full for such shares.
AMENDMENT AND TERMINATION. The Board of Directors may from time to time
adopt amendments, certain of which are subject to stockholder approval, and may
terminate the 2000 Plan at any time. Any shares subject to an Option which for
any reason expires or terminates unexercised may again be
13
<PAGE>
available for future grants under the 2000 Plan. No Options may be granted under
the 2000 Plan after November 7, 2010.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The following discussion
summarizes certain United States federal income tax considerations for persons
receiving Stock Rights under the 2000 Plan and certain tax effects on the
Company, based upon the provisions of the Code as in effect on the date of this
Proxy Statement, current regulations and existing administrative rulings of the
Internal Revenue Service. However, this summary is not intended to be a complete
discussion of all the United States federal income tax consequences of these
plans.
Incentive Stock Options:
1. In general, no taxable income results to the optionee upon the grant of
an ISO or upon the issuance of shares to him or her upon the exercise of
the ISO, and the Company is not entitled to a federal income tax
deduction upon either grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years from the date the ISO was granted and (ii) one year from
the date the shares are issued to the optionee pursuant to the ISO
exercise (the "Holding Periods"), the difference between the amount
realized on any subsequent disposition of the shares and the exercise
price will generally be treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of and the
optionee does not satisfy the Holding Periods (a "Disqualifying
Disposition"), then in most cases the lesser of (i) any excess of the
fair market value of the shares at the time of exercise of the ISO over
the exercise price or (ii) the actual gain on disposition will be treated
as compensation to the optionee and will be taxed as ordinary income in
the year of such disposition.
4. In any year that an optionee recognizes ordinary income as the result of
a Disqualifying Disposition of stock acquired by exercising an ISO, the
Company generally should be entitled to a corresponding federal income
tax deduction.
5. The difference between the amount realized by the optionee as the result
of a Disqualifying Disposition and the sum of (i) the exercise price and
(ii) the amount of ordinary income recognized under the above rules
generally will be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year
7. An optionee may be entitled to exercise an ISO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise
price if the optionee's ISO agreement so provides. If an optionee
exercises an ISO in such fashion, special rules will apply.
8. In addition to the tax consequences described above, the exercise of
ISOs may result in an "alternative minimum tax" under the Code. The Code
provides that an "alternative minimum tax" will be applied against a
taxable base which is equal to "alternative minimum taxable income,"
generally reduced by a statutory exemption. In general, the amount by
which the value of the shares received upon exercise of the ISO exceeds
the exercise price is included in the optionee's alternative minimum
taxable income. A taxpayer is required to pay the higher of his or her
regular tax liability or the alternative minimum tax. A taxpayer who pays
alternative minimum tax attributable to the exercise of an ISO may be
entitled to a tax credit against his or her regular tax liability in
later years.
14
<PAGE>
9. Special rules apply if the shares acquired upon the exercise of an ISO
are subject to vesting, or are subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
Non-Qualified Options:
1. The optionee generally does not recognize any taxable income upon the
grant of a NQSO, and the Company is not entitled to a federal income tax
deduction by reason of such grant.
2. The optionee generally will recognize ordinary income at the time of
exercise of a NQSO in an amount equal to the excess, if any, of the fair
market value of the shares on the date of exercise over the exercise
price. The Company may be required to withhold income tax on this amount.
3. When the optionee sells the shares acquired upon exercise of a NQSO, he
or she generally will recognize capital gain or loss in an amount equal
to the difference between the amount realized upon the sale of the shares
and his or her basis in the shares (generally, the exercise price plus
the amount taxed to the optionee as ordinary income). If the optionee's
holding period for the shares exceeds one year, such gain or loss will be
a long-term capital gain or loss.
4. The Company generally should be entitled to a federal income tax
deduction when ordinary income is recognized by the optionee.
5. An optionee may be entitled to exercise a NQSO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise
price. If an optionee exercises a NQSO in such fashion, special rules
will apply.
6. Special rules apply if the shares acquired upon the exercise of an NQSO
are subject to vesting, or are subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
Awards and Purchases:
1. Under current federal income tax law, persons receiving Common Stock
pursuant to an Award or Purchase generally will recognize ordinary income
equal to the fair market value of the shares received, in the case of an
Award, or the excess of the fair market value of the shares (determined
on the date of purchase) over the purchase price, in the case of an
authorization to Purchase. The Company generally will be entitled to a
corresponding federal income tax deduction. When such stock is sold, the
seller generally will recognize capital gains or loss.
2. Special rules apply if the stock acquired is subject to vesting, or is
subject to certain restrictions on resale under federal securities laws
applicable to directors, officers or 10% stockholders.
15
<PAGE>
OPTION INFORMATION. As of December 12, 2000, the Company had approximately
24 employees with outstanding option grants under its 1993 Plan and the
Company's 1983 Plan, which expired in 1993 (the "Existing Plans").
STOCK OPTIONS GRANTED UNDER THE 1993 PLAN SINCE ITS INCEPTION
The following table sets forth as of December 12, 2000, all options granted
under the 1993 Plan since its inception to (i) the Named Officers, (ii) each
nominee for election as a director, (iii) all current executive officers as a
group, (iv) all current directors who are not executive officers as a group,
(v) all employees, excluding executive officers as a group, and (vi) each person
who has received five percent or greater of the options granted under the 1993
Plan.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION NUMBER OF OPTIONS
--------------------------- -----------------
<S> <C>
Jerome Goldstein(l)
Chief Executive Officer, Treasurer, Chairman and
Director.................................................. 50,000
Leonard M. Baum(1)
President, Chief Operating Officer and Director........... 40,000
Paula M. Jacobs, Ph.D.
Vice President--Development............................... 24,750
Mark Roessel
Vice President--Regulatory Affairs........................ 24,750
Jerome M. Lewis, Ph.D.
Senior Vice President--Scientific Operations.............. 23,750
George M. Whitesides, Ph.D.
Director.................................................. 25,000
Edward B. Roberts, Ph.D.
Director.................................................. 25,000
Joseph B. Lassiter III, Ph.D.
Director.................................................. 20,000
Michael D. Loberg, Ph.D.
Director.................................................. 20,000
All Current Executive Officers as a Group (7) Persons....... 229,250
All Current Directors who are not Executive Officers as a
Group (4) Persons......................................... 90,000
All Employees who are not Executive Officers as a Group..... 476,325
</TABLE>
------------------------
(l) Persons who have received five percent or greater of options granted
under the 1993 Plan.
16
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP,
as the Company's independent accountants for the 2001 fiscal year.
PricewaterhouseCoopers LLP has served as the Company's independent accountants
since the Company's inception. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting. They will have the opportunity to
make a statement if they desire to do so and will also be available to respond
to appropriate questions from stockholders.
EXPENSES AND SOLICITATION
All costs of solicitation of proxies will be borne by the Company. In
addition, the Company has retained Corporate Investor Communications, Inc.
("CIC") to act as a proxy solicitor in connection with the Annual Meeting. The
Company has agreed to pay approximately $10,000, plus reasonable out of pocket
expenses, to CIC for proxy solicitation services. In addition to solicitations
by mail, the Company's directors, officers and regular employees, without
additional remuneration, may solicit proxies by telephone, telegraph and
personal interviews. Brokers, custodians and fiduciaries will be requested to
forward proxy soliciting material to the owners of stock held in their names,
and the Company will reimburse them for their out-of-pocket expenses in this
connection.
By Order of the Board of Directors
MARLENE KAPLAN GOLDSTEIN,
SECRETARY
THE BOARD OF DIRECTORS WELCOMES STOCKHOLDERS WHO WISH TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES BY PROVIDING WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY REVOKING THEIR PRIOR PROXY.
17
<PAGE>
APPENDIX A
ADVANCED MAGNETICS, INC.
Audit Committee Charter
ADOPTED BY THE BOARD OF DIRECTORS ON MAY 2, 2000
A. PURPOSE AND SCOPE
The primary function of the Audit Committee (the "Committee") is to assist
the Board of Directors in fulfilling its responsibilities by reviewing: (i) the
financial reports provided by the Corporation to the Securities and Exchange
Commission ("SEC"), the Corporation's stockholders or to the general public, and
(ii) the Corporation's internal financial and accounting controls.
B. COMPOSITION
The Committee shall be comprised of a minimum of three directors as
appointed by the Board of Directors, who shall meet the independence and audit
committee composition requirements under any rules or regulations of the
American Stock Exchange, as in effect from time to time, and shall be free from
any relationship that, in the opinion of the Board of Directors, would interfere
with the exercise of their independent judgment as a member of the Committee.
All members of the Committee shall either (i) be able to read and understand
fundamental financial statements, including a balance sheet, cash flow statement
and income statement, or (ii) be able to do so within a reasonable period of
time after appointment to the Committee. At least one member of the Committee
shall have employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable experience or
background which results in the individual's financial sophistication, including
being or having been a chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities.
The Board of Directors may appoint one member who does not meet the
independence requirements set forth above and who is not a current employee of
the Corporation or an immediate family member of such employee if the Board of
Directors, under exceptional and limited circumstances, determines that
membership on the Committee by the individual is required in the best interests
of the Corporation and its stockholders. The Board of Directors shall disclose
in the next proxy statement after such determination the nature of the
relationship and the reasons for the determination.
The members of the Committee shall be elected by the Board of Directors at
the meeting of the Board of Directors following each annual meeting of
stockholders and shall serve until their successors shall be duly elected and
qualified or until their earlier resignation or removal. Unless a Chair is
elected by the full Board of Directors, the members of the Committee may
designate a Chair by majority vote of the full Committee membership.
C. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
DOCUMENT REVIEW
1. Review and assess the adequacy of this Charter periodically as conditions
dictate, but at least annually (and update this Charter if and when
appropriate).
2. Review with representatives of management and representatives of the
Corporation's independent accounting firm the Corporation's audited annual
financial statements prior to their filing as part of the Annual Report on
Form 10-K. After such review and discussion, the Committee shall recommend
to the Board of Directors whether such audited financial statements should
be included in the Corporation's Annual Report on Form 10-K. The Committee
shall also review the
A-1
<PAGE>
Corporation's quarterly financial statements prior to their inclusion in the
Corporation's quarterly SEC filings on Form 10-Q.
3. Take steps designed to insure that the independent accounting firm reviews
the Corporation's interim financial statements prior to their inclusion in
the Corporation's quarterly reports on Form 10-Q.
INDEPENDENT ACCOUNTING FIRM
4. Recommend to the Board of Directors the selection of the independent
accounting firm, and approve the fees and other compensation to be paid to
the independent accounting firm. The Committee shall have the ultimate
authority and responsibility to select, evaluate and, when warranted,
replace such independent accounting firm (or to recommend such replacement
for stockholder approval in any proxy statement).
5. On an annual basis, receive from the independent accounting firm a formal
written statement identifying all relationships between the independent
accounting firm and the Corporation consistent with Independence Standards
Board ("ISB") Standard 1. The Committee shall actively engage in a dialogue
with the independent accounting firm as to any disclosed relationships or
services that may impact its independence. The Committee shall take, or
recommend that the Board of Directors take, appropriate action to oversee
the independence of the independent accounting firm.
6. On an annual basis, discuss with representatives of the independent
accounting firm the matters required to be discussed by Statement on
Auditing Standards ("SAS") 61, as it may be modified or supplemented.
7. Meet with the independent accounting firm prior to the audit to review the
planning and staffing of the audit.
8. Evaluate the performance of the independent accounting firm and recommend to
the Board of Directors any proposed discharge of the independent accounting
firm when circumstances warrant. The independent accounting firm shall be
ultimately accountable to the Board of Directors and the Committee.
FINANCIAL REPORTING PROCESSES
9. In consultation with the independent accounting firm and management, review
annually the adequacy of the Corporation's internal financial and accounting
controls.
COMPLIANCE
10. To the extent deemed necessary by the Committee, it shall have the authority
to engage outside counsel and/or independent accounting consultants to
review any matter under its responsibility.
REPORTING
11. Prepare, in accordance with the rules of the SEC as modified or supplemented
from time to time, a written report of the audit committee to be included in
the Corporation's annual proxy statement for each annual meeting of
stockholders occurring after December 14, 2000.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles.
A-2
<PAGE>
APPENDIX B
ADVANCED MAGNETICS, INC.
2000 STOCK PLAN
1. PURPOSE AND ELIGIBILITY
The purpose of this 2000 Stock Plan (the "PLAN") of Advanced
Magnetics, Inc. (the "COMPANY") is to provide stock options and other equity
interests in the Company (each an "AWARD") to employees, officers, directors,
consultants and advisors of the Company and its Subsidiaries, all of whom are
eligible to receive Awards under the Plan. Any person to whom an Award has been
granted under the Plan is called a "PARTICIPANT." Additional definitions are
contained in Section 8.
2. ADMINISTRATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
the Board of Directors of the Company (the "BOARD"). The Board, in its
sole discretion, shall have the authority to grant and amend Awards, to
adopt, amend and repeal rules relating to the Plan and to interpret and
correct the provisions of the Plan and any Award. All decisions by the
Board shall be final and binding on all interested persons. Neither the
Company nor any member of the Board shall be liable for any action or
determination relating to the Plan.
(b) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "COMMITTEE"). All
references in the Plan to the "BOARD" shall mean such Committee or the
Board.
(c) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by applicable
law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under
the Plan as the Board may determine; PROVIDED THAT the Board shall fix
the maximum number of Awards to be granted and the maximum number of
shares issuable to any one Participant pursuant to Awards granted by such
executive officers.
3. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 3(c), the
aggregate number of shares of common stock, par value $0.01 per share, of
the Company (the "COMMON STOCK") that may be issued pursuant to the Plan
is 1,000,000 shares. If any Award expires, or is terminated, surrendered
or forfeited, in whole or in part, the unissued Common Stock covered by
such Award shall again be available for the grant of Awards under the
Plan. If shares of Common Stock issued pursuant to the Plan are
repurchased by, or are surrendered or forfeited to, the Company at no
more than cost, such shares of Common Stock shall again be available for
the grant of Awards under the Plan; PROVIDED, HOWEVER, that the
cumulative number of such shares that may be so reissued under the Plan
will not exceed 1,000,000 shares. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 3(c), no
Participant may be granted Awards during any one fiscal year to purchase
more than 500,000 shares of Common Stock.
(c) ADJUSTMENT TO COMMON STOCK. In the event of any stock split, stock
dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation,
spin-off, split-up, or other similar change in capitalization or event,
(i) the number and class of securities available for Awards under the
Plan and the per-Participant share limit, (ii) the number and class of
securities, vesting schedule and exercise price per share subject to each
outstanding Option, (iii) the repurchase price per
B-1
<PAGE>
security subject to repurchase, and (iv) the terms of each other
outstanding stock-based Award shall be adjusted by the Company (or
substituted Awards may be made) to the extent the Board shall determine,
in good faith, that such an adjustment (or substitution) is appropriate.
If Section 7(e)(i) applies for any event, this Section 3(c) shall not be
applicable.
4. STOCK OPTIONS
(a) GENERAL. The Board may grant options to purchase Common Stock (each, an
"OPTION") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the
conditions and limitations applicable to the exercise of each Option and
the Common Stock issued upon the exercise of each Option, including
vesting provisions, repurchase provisions and restrictions relating to
applicable federal or state securities laws, as it considers advisable.
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an
"INCENTIVE STOCK OPTION") shall be granted only to employees of the
Company and shall be subject to and shall be construed consistently with
the requirements of Section 422 of the Code. The Board and the Company
shall have no liability if an Option or any part thereof that is intended
to be an Incentive Stock Option does not qualify as such. An Option or
any part thereof that does not qualify as an Incentive Stock Option is
referred to herein as a "NONQUALIFIED STOCK OPTION".
(c) EXERCISE PRICE. The Board shall establish the exercise price (or
determine the method by which the exercise price shall be determined) at
the time each Option is granted and specify it in the applicable option
agreement.
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) EXERCISE OF OPTION. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person
together with payment in full as specified in Section 4(f) for the number
of shares for which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an
Option shall be paid for by one or any combination of the following forms
of payment:
(i) by check payable to the order of the Company;
(ii) except as otherwise explicitly provided in the applicable option
agreement, and only if the Common Stock is then publicly traded,
delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient
funds to pay the exercise price, or delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions
to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price; or
(iii) to the extent explicitly provided in the applicable option
agreement, by (x) delivery of shares of Common Stock owned by the
Participant valued at fair market value (as determined by the Board
or as determined pursuant to the applicable option agreement),
(y) delivery of a promissory note of the Participant to the Company
(and delivery to the Company by the Participant of a check in an
amount equal to the par value of the shares purchased), or
(z) payment of such other lawful consideration as the Board may
determine.
5. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least
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<PAGE>
equal to the par value of the shares purchased, and (ii) the right of the
Company to repurchase all or part of such shares at their issue price or
other stated or formula price from the Participant in the event that
conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or
periods established by the Board for such Award (each, a "RESTRICTED
STOCK AWARD").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and conditions
of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited
by the Participant, together with a stock power endorsed in blank, with
the Company (or its designee). After the expiration of the applicable
restriction periods, the Company (or such designee) shall deliver the
certificates no longer subject to such restrictions to the Participant
or, if the Participant has died, to the beneficiary designated by a
Participant, in a manner determined by the Board, to receive amounts due
or exercise rights of the Participant in the event of the Participant's
death (the "DESIGNATED BENEFICIARY"). In the absence of an effective
designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
6. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including,
without limitation, the grant of shares based upon certain conditions, the grant
of securities convertible into Common Stock and the grant of stock appreciation
rights, phantom stock awards or stock units.
7. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred,
pledged or otherwise encumbered by the person to whom they are granted,
either voluntarily or by operation of law, except by will or the laws of
descent and distribution, and, during the life of the Participant, shall
be exercisable only by the Participant. References to a Participant, to
the extent relevant in the context, shall include references to
authorized transferees.
(b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a written
instrument in such form as the Board shall determine or as executed by an
officer of the Company pursuant to authority delegated by the Board. Each
Award may contain terms and conditions in addition to those set forth in
the Plan; PROVIDED THAT such terms and conditions do not contravene the
provisions of the Plan.
(c) BOARD DISCRETION. The terms of each type of Award need not be identical,
and the Board need not treat Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or
other change in the employment or other status of a Participant and the
extent to which, and the period during which, the Participant, or the
Participant's legal representative, conservator, guardian or Designated
Beneficiary, may exercise rights under the Award.
(e) ACQUISITION OF THE COMPANY
(i) CONSEQUENCES OF AN ACQUISITION. Unless otherwise expressly provided
in the applicable Option or Award, upon the occurrence of an
Acquisition, the Board or the board of directors of the surviving or
acquiring entity (as used in this Section 7(e)(i), also the
"BOARD"), shall, as to outstanding Awards (on the same basis or on
different bases, as the Board shall specify), make appropriate
provision for the continuation of such Awards by
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the Company or the assumption of such Awards by the surviving or
acquiring entity and by substituting on an equitable basis for the
shares then subject to such Awards either (a) the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the
surviving or acquiring corporation or (c) such other securities as
the Board deems appropriate, the fair market value of which (as
determined by the Board in its sole discretion) shall not materially
differ from the fair market value of the shares of Common Stock
subject to such Awards immediately preceding the Acquisition. In
addition to or in lieu of the foregoing, with respect to outstanding
Options, the Board may, upon written notice to the affected
optionees, provide that one or more Options then outstanding shall
become immediately exercisable in full and that such Options must be
exercised within a specified number of days of the date of such
notice, at the end of which period such Options shall terminate; or
provide that one or more Options then outstanding shall become
immediately exercisable in full and shall be terminated in exchange
for a cash payment equal to the excess of the fair market value (as
determined by the Board in its sole discretion) for the shares
subject to such Options over the exercise price thereof.
An "ACQUISITION" shall mean: (x) the sale of the Company by merger in which
the stockholders of the Company in their capacity as such no longer own a
majority of the outstanding equity securities of the Company (or its successor);
or (y) any sale of all or substantially all of the assets or capital stock of
the Company (other than in a spin-off or similar transaction) or (z) any other
acquisition of the business of the Company, as determined by the Board.
(ii) ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. In connection with a
merger or consolidation of an entity with the Company or the
acquisition by the Company of property or stock of an entity, the
Board may grant Awards under the Plan in substitution for stock and
stock-based awards issued by such entity or an affiliate thereof.
The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(iii) POOLING-OF INTERESTS-ACCOUNTING. If the Company proposes to engage
in an Acquisition intended to be accounted for as a
pooling-of-interests, and in the event that the provisions of this
Plan or of any Award hereunder, or any actions of the Board taken
in connection with such Acquisition, are determined by the
Company's or the acquiring company's independent public accountants
to cause such Acquisition to fail to be accounted for as a
pooling-of-interests, then such provisions or actions shall be
amended or rescinded by the Board, without the consent of any
Participant, to be consistent with pooling-of-interests accounting
treatment for such Acquisition.
(iv) PARACHUTE AWARDS. Notwithstanding the provisions of
Section 7(e)(i), if, in connection with an Acquisition described
therein, a tax under Section 4999 of the Code would be imposed on
the Participant (after taking into account the exceptions set forth
in Sections 280G(b)(4) and 280G(b)(5) of the Code), then the number
of Awards which shall become exercisable, realizable or vested as
provided in such section shall be reduced (or delayed), to the
minimum extent necessary, so that no such tax would be imposed on
the Participant (the Awards not becoming so accelerated, realizable
or vested, the "PARACHUTE AWARDS"); PROVIDED, HOWEVER, that if the
"AGGREGATE PRESENT VALUE" of the Parachute Awards would exceed the
tax that, but for this sentence, would be imposed on the
Participant under Section 4999 of the Code in connection with the
Acquisition, then the Awards shall become immediately exercisable,
realizable and vested without regard to the provisions of this
sentence. For purposes of the preceding sentence, the "AGGREGATE
PRESENT VALUE" of an Award shall be calculated on an after-tax
basis (other than taxes imposed by Section 4999 of the Code) and
shall be based on economic principles rather than the principles
set
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<PAGE>
forth under Section 280G of the Code and the regulations
promulgated thereunder. All determinations required to be made
under this Section 7(e)(iv) shall be made by the Company.
(f) WITHHOLDING. Each Participant shall pay to the Company, or make
provisions satisfactory to the Company for payment of, any taxes required
by law to be withheld in connection with Awards to such Participant no
later than the date of the event creating the tax liability. The Board
may allow Participants to satisfy such tax obligations in whole or in
part by transferring shares of Common Stock, including shares retained
from the Award creating the tax obligation, valued at their fair market
value (as determined by the Board or as determined pursuant to the
applicable option agreement). The Company may, to the extent permitted by
law, deduct any such tax obligations from any payment of any kind
otherwise due to a Participant.
(g) AMENDMENT OF AWARDS. The Board may amend, modify or terminate any
outstanding Award including, but not limited to, substituting therefor
another Award of the same or a different type, changing the date of
exercise or realization, and converting an Incentive Stock Option to a
Nonqualified Stock Option; PROVIDED THAT, except as otherwise provided in
Section 7(e)(iii), the Participant's consent to such action shall be
required unless the Board determines that the action, taking into account
any related action, would not materially and adversely affect the
Participant.
(h) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until
(i) all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii) in the opinion of the Company's
counsel, all other legal matters in connection with the issuance and
delivery of such shares have been satisfied, including any applicable
securities laws and any applicable stock exchange or stock market rules
and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws,
rules or regulations.
(i) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of some or all restrictions, or that any other
stock-based Awards may become exercisable in full or in part or free of
some or all restrictions or conditions, or otherwise realizable in full
or in part, as the case may be, despite the fact that the foregoing
actions may (i) cause the application of Sections 280G and 4999 of the
Code if a change in control of the Company occurs, or (ii) disqualify all
or part of the Option as an Incentive Stock Option.
8. MISCELLANEOUS
(a) DEFINITIONS.
(i) "COMPANY" for purposes of eligibility under the Plan, shall include
any present or future subsidiary corporations of Advanced
Magnetics, Inc., as defined in Section 424(f) of the Code (a
"SUBSIDIARY"), and any present or future parent corporation of
Advanced Magnetics, Inc., as defined in Section 424(e) of the Code.
For purposes of Awards other than Incentive Stock Options, the term
"COMPANY" shall include any other business venture in which the
Company has a direct or indirect significant interest, as determined
by the Board in its sole discretion.
(ii) "CODE" means the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
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<PAGE>
(iii) "EMPLOYEE" for purposes of eligibility under the Plan (but not for
purposes of Section 4(b)) shall include a person to whom an offer
of employment has been extended by the Company.
(b) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or
any other relationship with the Company. The Company expressly reserves
the right at any time to dismiss or otherwise terminate its relationship
with a Participant free from any liability or claim under the Plan.
(c) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as
a stockholder with respect to any shares of Common Stock to be
distributed with respect to an Award until becoming the record holder
thereof.
(d) EFFECTIVE DATE AND TERM OF PLAN. Subject to the approval of the
stockholders of the Company, the Plan shall be effective as of the date
on which it was adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the date on which the
Plan was adopted by the Board, but Awards previously granted may extend
beyond that date.
(e) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time.
(f) GOVERNING LAW. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the
State of Delaware without regard to any applicable conflicts of law.
Adopted by the Board of Directors on
November 8, 2000, subject to
Stockholder approval
Approved by the Stockholders on
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<PAGE>
ADVANCED MAGNETICS, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 6, 2001
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R
O
X
Y
The undersigned, revoking all prior proxies, hereby appoint(s) Jerome
Goldstein and Edward B. Roberts, and each of them, with full power of
substitution, as proxies to represent and vote as designated herein, all shares
of stock of Advanced Magnetics, Inc. (the "Company") which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held at the offices of the Company, 61 Mooney Street,
Cambridge, Massachusetts 02138, on Tuesday, February 6, 2001 at 10:00 a.m.,
local time, and at any adjournment thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE COMPANY'S 2000
STOCK PLAN AND AUTHORITY WILL BE DEEMED GRANTED UNDER ITEM 3. Attendance of the
undersigned at the meeting or at any adjournment thereof will not be deemed to
revoke this proxy unless the undersigned shall revoke this proxy in writing.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. Election of Directors - To elect five members to the Board of Directors
to serve until the next Annual Meeting of Stockholders and until their
successors have been elected and qualified.
<TABLE>
<S> <C> <C>
For All Nominees listed at right Withhold Authority* NOMINEES:
/ / / / JEROME GOLDSTEIN
JOSEPH B. LASSITER III
MICHAEL D. LOBERG
EDWARD B. ROBERTS
GEORGE M. WHITESIDES
</TABLE>
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*Instruction: To withhold authority to vote for one or more of the nominees
listed at right, mark the "Withhold Authority" box and write the nominee(s)
name(s) in the space provided above.
2. To approve the Company's 2000 Stock Plan.
<TABLE>
<S> <C> <C>
For Against Abstain
/ / / / / /
</TABLE>
3. To transact such other business as may properly come before the Annual
Meeting.
/ / Mark here if you plan to attend the Annual Meeting.
/ / Mark here for address change and note at left
-------------------------------
Sign as name appears. Joint owners must both sign. Attorney, executor,
administrator, trustee or guardian must give title. A corporation or partnership
must sign its name by authorized person.
Signature: Date:
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Signature: Date:
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