<PAGE> 1
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/ / / Confidential, for Use of the
Filed by a Party other than the Registrant / / Commission Only (as permitted
Check the appropriate box: by Rule 14a-6(e)(2)
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
AVIGEN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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 by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
LOGO
1201 HARBOR BAY PARKWAY, #1000
ALAMEDA, CA 94502
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 22, 1996
------------------------------
TO THE STOCKHOLDERS OF AVIGEN, INC.:
Notice Is Hereby Given that the Annual Meeting of Stockholders of Avigen,
Inc., a Delaware corporation (the "Company"), will be held on Friday, November
22, 1996, at 9:00 a.m. local time at 1201 Harbor Bay Parkway, #1000, Alameda, CA
for the following purpose:
1. To elect three directors to hold office until the 1999 Annual
Meeting of Stockholders.
2. To ratify the selection of Ernst & Young, LLP as independent
auditors of the Company for its fiscal year ending June 30, 1997.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on October 15, 1996,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
THOMAS J. PAULSON
Secretary
Alameda, California
October 22, 1996
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
LOGO
1201 HARBOR BAY PARKWAY, #1000
ALAMEDA, CA 94502
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 22, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Avigen, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on November 22, 1996, at 9:00 a.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at 1201 Harbor Bay Parkway, #1000, Alameda, CA. The
Company intends to mail this proxy statement and accompanying proxy card on or
about October 22, 1996, to all stockholders entitled to vote at the Annual
Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on October
15, 1996 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on October 15, 1996 the Company had outstanding and entitled
to vote 7,285,193 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards 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 a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 1201
Harbor Bay Parkway, #1000, Alameda, CA 94502, a written notice of revocation or
a duly executed proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
<PAGE> 4
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1997 Annual Meeting of Stockholders must be received by the Company
not later than July 23, 1997 in order to be included in the proxy statement and
proxy relating to that Annual Meeting. Stockholders are also advised to review
the Company's By-laws, which contain additional requirements with respect to
advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated By-laws provide that the Board of Directors shall be divided into
three classes, each class consisting, 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 may be filled only by persons elected by a majority of the
remaining directors. A director elected by the Board to fill a vacancy
(including a vacancy created by an increase in the Board of Directors) shall
serve for the remainder of the full term of the class of directors in which the
vacancy occurred and until such director's successor is elected and qualified,
or until such director's earlier death, resignation or removal.
The Board of Directors is presently composed of eight members. There are
three directors in the class whose term of office expires in 1996. Each of the
nominees for election to this class is currently a director of the Company who
was previously elected by the stockholders. If elected at the Annual Meeting,
each of the nominees would serve until the 1999 annual meeting and until his or
her successor is elected and has qualified, or until such director's earlier
death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the three nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 1999 ANNUAL MEETING
CLASS I DIRECTORS
JOHN MONAHAN, PH.D.
John Monahan, Ph.D., 49, has served as President, Chief Executive Officer
and a director of the Company since its inception in 1992. Prior to joining
Avigen, Dr. Monahan was Vice President of Research and Development at Somatix
Therapy Corporation ("Somatix"), a gene therapy company, from 1989 to 1992,
where he was responsible for the initiation and development of all research
programs. From 1983 to 1988, he was Director of Molecular and Cell Biology at
Berlex Laboratories, a pharmaceutical company. From 1981 to 1983, he was Group
Research Chief at Hoffmann La Roche, a pharmaceutical company. Dr. Monahan
received his Ph.D. in biochemistry from McMaster University, Hamilton, Canada
and his B.S. degree in science from University College, Dublin, Ireland.
ZOLA HOROVITZ, PH.D.
Zola Horovitz, Ph.D., 62, has served as a director of the Company since
November 1994. From 1991 through 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 Co. ("Bristol-Myers"), 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,
2
<PAGE> 5
Vice President, Drug Development, and Vice President, Biological and
Pharmaceutical R&D. Dr. Horovitz currently serves on the Board of Directors of
Diacrin, Inc., Phyton Catalytic, Procept Corp. and InfoMed Corp. and as a
Commissioner of the New Jersey Cancer Research Commission. From 1975 through
1993 Dr. Horovitz served on the Scientific Advisory Council at Princeton
University and from 1976 through 1989 on the Advisory Board of Rutgers
University College of Pharmacy. Dr. Horovitz received a Ph.D. in Pharmacology,
and both a M.S. in Pharmacology and B.S. in Pharmacy from the University of
Pittsburgh.
YUICHI IWAKI, M.D., PH.D.
Yuichi Iwaki, M.D., Ph.D., 47, has served as a director of the Company
since November 1994. Since 1992, Dr. Iwaki has held two professorships at the
University of Southern California School of Medicine in the Departments of
Urology, Pathology and Surgery and is Director of the Transplantation Immunology
and Immunogenetic Laboratory. In addition, he holds visiting professorships at
Tokai University School of Medicine and Nihon University School of Medicine in
Japan and at the University of Pittsburgh School of Medicine. Prior to joining
the University of Southern California Medical School faculty in 1992, Dr. Iwaki
held professorships at the University of Pittsburgh in the Departments of
Urology and Pathology from 1989 through 1991. Dr. Iwaki received an M.D. and a
Ph.D. from Sapporo Medicine School in Sapporo, Japan.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1997 ANNUAL MEETING
CLASS II DIRECTORS
PHILIP J. WHITCOME, PH.D.
Philip J. Whitcome, Ph.D., 48, has served as a director of the Company
since December 1992. In April 1995, Dr. Whitcome was elected Chairman of the
Board and from March 1996 to September 1996 he served as acting Chief Financial
Officer. From 1988 to 1994, Dr. Whitcome was President and Chief Executive
Officer of Neurogen Corporation, a biopharmaceutical company. From 1981 to 1988,
Dr. Whitcome was employed at Amgen Inc. ("Amgen"), a biopharmaceutical company,
serving most recently as Director of Strategic Planning. Prior to joining Amgen,
he served as Manager of Corporate Development for Medical Products at
Bristol-Myers, and held research and marketing management positions with the
Diagnostics Division of Abbott Laboratories, a pharmaceutical and medical
products company. Dr. Whitcome holds a Ph.D. in Molecular Biology from the
University of California at Los Angeles, a M.B.A. from the Wharton School at the
University of Pennsylvania and a B.S. in Physics from Providence College.
RICHARD T. PRATT
Richard T. Pratt, 59, has served as a director of the Company since January
1994 and served as Chairman of the Board of Directors from January 1994 to April
1995. Mr. Pratt holds a faculty position at the University of Utah, where he
teaches graduate and undergraduate courses in corporate finance, banking and
real estate. From 1983 through 1993, Mr. Pratt was employed at Merrill Lynch &
Co. ("Merrill Lynch"), a financial services company, first as Chairman of
Merrill Lynch Mortgage Capital Inc. and later as Managing Director, Financial
Institutions Group, at Merrill Lynch. Mr. Pratt is also Chairman of Richard T.
Pratt Associates, a financial consulting company. From 1981 to 1983, Mr. Pratt
served as Chairman of the Federal Home Loan Bank Board in Washington D.C. as
chief federal regulator of all federally insured savings and loan associations.
Mr. Pratt has a D.B.A. degree in Finance from Indiana University and M.B.A. and
B.S. degrees from the University of Utah.
JOHN K.A. PRENDERGAST, PH.D.
John K.A. Prendergast, Ph.D., 42, is a co-founder of the Company and has
served as a director of the Company since December 1992. From December 1992 to
March 1996, Dr. Prendergast also served as a Vice President and the Treasurer of
the Company. Dr. Prendergast has also served as a Managing Director of The
Castle Group, Ltd. ("Castle"), a medical technology venture capital firm, since
1991. Dr. Prendergast is a
3
<PAGE> 6
director of Xenometrix, a medical technology company, and Atlantic
Pharmaceuticals, Inc., a medical technology 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.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
CLASS III DIRECTORS
LINDSAY A. ROSENWALD, M.D.
Lindsay A. Rosenwald, M.D., 41, is a co-founder of the Company and has
served as a director since December 1992. Dr. Rosenwald has served as the
President and Chairman of the Board of Directors of both Castle and Paramount
Capital Incorporated, an investment banking firm specializing in biomedical
technology companies, since their respective inceptions in 1990 and 1992. Dr.
Rosenwald also serves as the Chairman of the Board of Directors and founder of
Interneuron Pharmaceuticals, Inc., a biotechnology company. In addition, Dr.
Rosenwald also serves on the Board of Directors of Ansoan, Inc., Atlantic
Pharmaceuticals, Inc., Biocryst Pharmaceuticals, Inc., Boston Life Sciences,
Inc., Neose Technologies, Inc., Sports Pharmaceuticals, Inc., and Xenometrix,
Inc., all of which are medical technology companies. Dr. Rosenwald received an
M.D. from Temple University School of Medicine and a B.A. in finance from
Pennsylvania State University.
LEONARD P. SHAYKIN
Leonard P. Shaykin, 52, has served as a director of the Company since June
1995. Mr. Shaykin is the principal shareholder of Shaykin & Co., LLC ("Shaykin &
Co."), a private investment and management holding company. From 1983 to 1994,
Mr. Shaykin was a managing partner of Adler & Shaykin, an investment partnership
organized to sponsor leveraged buyouts. Prior to forming Adler & Shaykin in
1983, Mr. Shaykin was Vice President, Director and a member of the Investment
Committee of Citicorp Venture Capital Ltd. and Citicorp Capital Investors, Ltd.,
where he was responsible for establishing and subsequently managing a $100
million equity fund dedicated to management leveraged buyouts. Mr. Shaykin is
Chairman of the Board of Directors of Na Pro BioTherapeutics, Inc., a
biopharmaceutical company. He also serves as Chairman of the Neuroblastoma
Foundation and is a Governing Trustee of the Jackson Laboratory, a non-profit
genetic research institute, and a trustee of the University of Chicago's
Graduate School of Business. Mr. Shaykin received M.B.A., M.A., and B.A. degrees
from the University of Chicago and was a doctoral candidate and lecturer in 1970
at the University of Sussex, Brighton, England.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended June 30, 1996 the Board of Directors held six
meetings. The Board has an Audit Committee and a Compensation Committee, but the
Board as a whole performed the functions described below prior to the Company's
initial public offering and, therefore, the Audit Committee did not meet
separately during the fiscal year ended June 30, 1996.
The Audit Committee will meet with the Company's independent auditors at
least annually to review the results of the annual audit and discuss the
financial statements, recommend to the Board the independent auditors to be
retained and receive and consider the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee is composed of four
non-employee directors: Drs. Horovitz, Prendergast and Rosenwald and Mr. Pratt.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of three non-employee
directors: Messrs. Pratt and Shaykin and Dr. Horovitz. It met one time during
the fiscal year ended June 30, 1996.
The Board of Directors has no standing Nominating Committee or any
committee performing the functions of such committee.
4
<PAGE> 7
During the fiscal year ended June 30, 1996, all directors except Dr. Yuichi
Iwaki attended at least 75% of the aggregate of the meetings of the Board and of
the committees on which they served, held during the period for which they were
directors or committee members, respectively.
MANAGEMENT
EXECUTIVE OFFICERS
The names of the executive officers of the Company and certain information
about them are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Philip J. Whitcome, Ph.D(1).............. 47 Chairman of the Board and acting Chief Financial
Officer
John Monahan, Ph.D....................... 49 President, Chief Executive Officer and Director
Thomas J. Paulson(2)..................... 50 Vice President, Finance and Chief Financial Officer
and Secretary
Wanda deVlaminck(3)...................... 54 Vice President, Clinical and Regulatory Affairs and
Secretary
Gary J. Kurtzman, M.D.................... 41 Vice President, Research and Development
</TABLE>
- ---------------
(1) Dr. Whitcome resigned as acting Chief Financial Officer of the Company
effective September 20, 1996.
(2) At the September 20, 1996 meeting of the Board of Directors, Thomas J.
Paulson was appointed Vice President, Finance and Chief Financial Officer
and Secretary of the Company, effective immediately.
(3) Ms. deVlaminck resigned as Secretary of the Company effective September 20,
1996.
Biographical information for Drs. Monahan and Whitcome is set forth under
Proposal 1 above.
Thomas J. Paulson was appointed Vice President, Finance and Chief Financial
Officer and Secretary of the Company effective September 20, 1996. Prior to
joining Avigen, Mr. Paulson was president of Paulson Associates, a biotechnology
consulting firm where Avigen has been a client for the past two years. From its
inception in 1989 until 1994, Mr. Paulson was Chief Financial Officer of
Neurogen Corporation. From 1986 to 1989, he was Director of Finance at
CibaCorning Diagnostics, Gilford Systems. From 1984 to 1986, Mr. Paulson served
as financial director at Quidel Corporation. From 1971 to 1984, Mr. Paulson held
various financial management positions at Abbott Laboratories. Mr. Paulson holds
a MBA from the University of Chicago Graduate School of Business and a BBA in
Accounting from Loyola University in Chicago.
Wanda deVlaminck has served as Vice President, Clinical and Regulatory
Affairs of the Company since its inception in 1992 and in March 1996 she was
appointed as Secretary. From 1989 to 1992, Ms. deVlaminck was Vice President,
Regulatory Affairs at Somatix. In this position, she was responsible for
Somatix's compliance with all local, state and federal regulations pertaining to
environmental issues, personnel safety and products that come under the
jurisdiction of the FDA. In addition, Ms. deVlaminck managed intellectual
property and license agreements at Somatix. From 1988 to 1989, Ms. deVlaminck
worked on assignments in Israel, Japan, and the United States as a regulatory
affairs consultant. From 1983 to 1988, she was Senior Director Regulatory
Affairs at Cetus Corporation, a biotechnology company. Ms. deVlaminck received a
B.S. degree in microbiology from the University of California at Berkeley and is
a licensed Public Health Microbiologist in California.
Gary J. Kurtzman, M.D. has served as Vice President, Research and
Development since October 1994. From December 1993 to October 1994, Dr. Kurtzman
served as Senior Director of Research and Development of the Company. From 1991
to 1993, Dr. Kurtzman was the Virology Group Leader at Gilead Sciences, Inc., a
biotechnology company, where he was responsible for research related to drug
discovery and preclinical development of antiviral compounds. From 1989 to 1993,
he served as Associate at the Howard Hughes Medical Institute at Stanford
University. From 1984 to 1988, Dr. Kurtzman was employed by the National
Institutes of Health, initially as a medical staff fellow and later as a senior
staff fellow in the Hematology
5
<PAGE> 8
Branch of the National Heart, Lung and Blood Institute. Dr. Kurtzman received
his M.D. degree from Washington University, St. Louis, Missouri and completed
his internship and residency in internal medicine at Barnes Hospital in St.
Louis, Missouri. Dr. Kurtzman is board-certified in internal medicine, with a
hematology subspecialty, and is a licensed medical practitioner in California.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, as the Company's
independent auditors for the fiscal year ending June 30, 1997, and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Ernst & Young LLP, has
audited the Company's financial statements since its inception in 1992.
Representatives of Ernst & Young LLP, are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Amended and
Restated Bylaws or otherwise. However, the Board is submitting the selection of
Ernst & Young LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm. Even
if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent auditors at any
time during the year if they determine that such a change would be in the best
interests of the Company 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 Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
6
<PAGE> 9
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of September 15, 1996 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table employed by the Company in that capacity on September 15,
1996; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
Lindsay A. Rosenwald, M.D.(2).......................................... 569,241 7.81%
c/o The Castle Group, Ltd.
375 Park Avenue
New York, NY 10152
John Monahan, Ph.D.(3)................................................. 235,535 3.23%
c/o Avigen, Inc.
1201 Harbor Bay Parkway, #1000
Alameda, CA 94502
Philip J. Whitcome, Ph.D.(4)........................................... 214,686 2.95%
Yuichi Iwaki, M.D., Ph.D.(5)........................................... 108,175 1.48%
Wanda deVlaminck(6).................................................... 68,155 *
John K.A. Prendergast, Ph.D............................................ 58,608 *
Leonard P. Shaykin(7).................................................. 47,530 *
Gary J. Kurtzman, M.D.(8).............................................. 27,934 *
Richard T. Pratt(9).................................................... 9,969 *
Zola Horovitz, Ph.D.(10)............................................... 5,078 *
All executive officers and directors as a group (10 persons)(11)....... 1,284,234 17.63%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G if any filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company 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
7,285,193 shares outstanding on September 15, 1996, adjusted as required by
rules promulgated by the SEC.
(2) Includes warrants to purchase 23,877 shares of Common Stock held by Dr.
Rosenwald. Also includes 160,573 shares held by Dr. Rosenwald's immediately
family members and 66,914 shares held in trust for the benefit of Dr.
Rosenwald's immediate family members, which he disclaims beneficial
ownership of except to the extent of his pecuniary interest therein. Also
includes 5,130 shares of Common Stock and warrants to purchase 3,221 shares
of Common Stock held by the Aries Domestic Fund. Dr. Rosenwald is President
of the sole general partner of the Aries Domestic Fund and disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. Also includes 5,130 shares of Common Stock and warrants
to purchase 2,318 shares of Common Stock held by the Aries Trust. Dr.
Rosenwald is President of the sole investment advisor to the Aries Trust
and disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest therein. Includes 89,606 shares of Common Stock held
by Huntington Street Co. and June Street Co. Dr. Rosenwald is the sole
proprietor of both entities.
(3) Includes 2,821 shares issuable upon the exercise of options held by Dr.
Monahan that are exercisable within 60 days of the date of this table.
7
<PAGE> 10
(4) Includes 214,686 shares issuable upon the exercise of options held by Dr.
Whitcome that are exercisable within 60 days of the date of this table.
(5) Includes 4,937 shares issuable upon the exercise of options held by Dr.
Iwaki that are exercisable within 60 days and warrants to purchase 89,244
shares of Common Stock. Also includes 5,130 shares of Common Stock held by
the Aries Domestic Fund. Dr. Iwaki is a director of the Aries Domestic Fund
and disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest therein.
(6) Includes 8,184 shares issuable upon the exercise of options held by Ms.
deVlaminck that are exercisable within 60 days of the date of this table.
(7) Includes 2,962 shares issuable upon the exercise of options held by Dr.
Shaykin that are exercisable within 60 days of the date of this table.
(8) Includes 27,934 shares issuable upon the exercise of options held by Dr.
Kurtzman that are exercisable within 60 days of the date of this table.
(9) Includes 9,969 shares issuable upon the exercise of options held by Mr.
Pratt that are exercisable within 60 days of the date of this table.
(10) Includes 5,078 shares issuable upon the exercise of options held by Dr.
Horovitz that are exercisable within 60 days of the date of this table.
(11) Includes shares described in the notes above, as applicable. Includes an
aggregate of 395,231 shares issuable upon exercise of certain options and
warrants which certain executive officers and directors of the Company have
the right to acquire within 60 days of the date of this table.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company'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 the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1996, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director receives no cash compensation but is reimbursed
for certain expenses in connection with attendance at Board and Committee
meetings. In the fiscal year ended June 30, 1996, the compensation of the
non-employee directors included options to Drs. Iwaki and Horovitz and Messrs.
Shaykin and Pratt to purchase 1,975, 1,693, 846 and 9,969 shares, respectively,
of Common Stock at an exercise prices of $0.71 per share and an option to Dr.
Whitcome to purchase 515,248 shares of Common Stock at an exercise price of
$0.49 per share in connection with his services as Chairman of the Board.
In March 1996, the Board of Directors adopted and in April 1996 the
stockholders approved the 1996 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") and reserved 200,000 shares of Common Stock for issuance
under the Directors' Plan. The Directors' Plan provides for automatic grants of
options to purchase shares of Common Stock to non-employee directors of the
Company. As of September 14, 1996, no options have been granted under the
Directors' Plan. The essential features of the Directors' Plan are described
below.
8
<PAGE> 11
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
GENERAL
The Directors' Plan provides for the non-discretionary grant of
nonstatutory stock options to non-employee directors of the Company.
Nonstatutory stock options granted under Directors' the Plan are intended not to
qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of nonstatutory stock
options.
PURPOSE
The Directors' Plan was adopted to provide a means by which each director
of the Company who is not otherwise an employee of the Company could be given an
opportunity to benefit from increases in the value of the stock of the Company,
to secure and retain the services of persons capable of filling such positions
and to provide incentives for such persons to exert maximum efforts for the
success of the Company. Seven of the Company's current directors are eligible to
participate in the Plan.
ADMINISTRATION
The Directors' Plan is administered by the Board. The Board is authorized
to delegate administration of the Directors' Plan to a committee composed of not
less than two members of the Board. If administration is delegated to a
committee, such committee shall have, in connection with the administration of
the Directors' Plan, the powers possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Directors' Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the
Directors' Plan.
SHARES SUBJECT TO THE DIRECTORS' PLAN
The Common Stock that may be sold pursuant to awards under the Directors'
Plan shall not exceed in the aggregate 200,000 shares of the Company's Common
Stock. If any award expires or terminates, in whole or in part, without having
been exercised in full, the stock not purchased under such award will revert to,
and again become available for, issuance under the Directors' Plan. The Common
Stock subject to the Director's Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
ELIGIBILITY
Stock options may be granted under the Directors' Plan only to non-employee
directors.
NON-DISCRETIONARY GRANTS
Under the Directors' Plan, each person who is, after the effective date of
the Initial Public Offering, elected for the first time to be a non-employee
director will automatically, upon the date of his or her initial election to be
a non-employee director, be granted an option (the "Initial Grant") to purchase
15,000 shares of Common Stock. At each annual meeting of stockholders commencing
with the first annual meeting held after the closing of the IPO, each
nonemployee director shall be granted an option to purchase 5,000 shares of
Common Stock (pro-rated if the non-employee director has served for less than a
full year).
TERM AND TERMINATION
The maximum term of options under the Directors' Plan is ten years. If the
optionee's service as a non-employee director terminates for any reason or no
reason, options under the Directors' Plan terminate on the earlier of the
expiration date of the option or the date twelve months following the date of
termination of the optionee's service as a non-employee director; provided that,
if such termination of service is due to the optionee's death, the option shall
terminate on the earlier of the expiration date of the option or eighteen months
following the date of the optionee's death.
9
<PAGE> 12
EXERCISE PRICE
The exercise price of stock options under the Directors' Plan will be not
less than one hundred percent (100%) of the fair market value of the Company's
Common Stock on the date of grant.
CONSIDERATION
The purchase price of Common Stock acquired pursuant to an option must be
paid in full in cash at the time of exercise or, for exercises covering 1,000 or
more shares, delivery of previously owned shares of the Company's Common Stock
meeting certain holding period requirements.
TRANSFERABILITY
An option shall not be transferable except by will or by the laws of
descent and distribution, or pursuant to a QDRO satisfying the requirements of
Rule 16b-3 and shall be exercisable during the lifetime of the person to whom
the option is granted only by such person (or by his guardian or legal
representative) or transferee pursuant to such an order, provided that an
optionee may designate a beneficiary who may exercise the option in the event of
optionee's death.
VESTING
Options granted under the Director's Plan become exercisable in
installments over a period of three years from the date of grant. Thirty-three
percent (33%) of the shares vest on the first anniversary of the date of grant,
thirtyfour percent (34%) of the shares vest on the second anniversary of the
grant and thirty-three percent (33%) of the shares vest on the third anniversary
of the grant, provided that the optionee has, during the entire period prior to
such vesting date, continuously served as a Non-Employee Director, employee of,
or consultant to, the Company or any affiliate of the Company.
ADJUSTMENTS UPON CHANGE IN STOCK
If any change is made in the Common Stock subject to the Directors' Plan,
or subject to any option granted under the Directors' Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Directors' Plan and outstanding options will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Directors' Plan and the
class(es) and number of shares and price per share of stock subject to
outstanding options.
In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, or (4) any other capital reorganization (including the sale
of the Company to a single purchaser or single group of affiliated purchasers)
after which less than fifty percent (50%) of the outstanding voting shares of
the new or continuing corporation are owned by stockholders of the Company
immediately before such transaction, the time during which such option may be
exercised shall be accelerated to permit the optionees to exercise all options
in full prior to such event, and the options terminated if not exercised prior
to such event.
AMENDMENT AND TERMINATION OF THE DIRECTORS' PLAN
The Board of Directors may amend the Directors' Plan at any time or from
time to time; provided, however, that the Board shall not amend the Directors'
Plan more than once every six months with respect to the provisions of the
Directors' Plan which relate to the amount, price and timing of grants. No
amendment shall be effective unless approved by the stockholders of the Company
within twelve (12) months before or after its adoption by the Board of
Directors, if the amendment would modify the Directors' Plan in any way if
10
<PAGE> 13
such modification requires stockholder approval in order for the Directors' Plan
to comply with the requirements of Rule 16b-3.
The Board of Directors may suspend or terminate the Directors' Plan without
stockholder approval or ratification at any time or from time to time. No
options may be granted under the Directors' Plan while the Plan is suspended or
after it is terminated.
EFFECTIVE DATE OF THE DIRECTORS' PLAN
The Directors' Plan became effective upon adoption by the Board in March
1996 and approval by the stockholders of the Company in April 1996.
FEDERAL INCOME TAX INFORMATION
Stock options granted under the Plan are subject to federal income tax
treatment pursuant to rules governing options that are not incentive stock
options, as described under the 1996 Equity Incentive Plan description below.
COMPENSATION OF EXECUTIVE OFFICERS
In March 1996 the Board adopted and in April 1996 the stockholders approved
the 1996 Equity Incentive Plan. The essential features of this plan are outlined
below.
1996 EQUITY INCENTIVE PLAN
GENERAL
The 1996 Equity Incentive Plan (the "Incentive Plan") provides for the
grant or issuance of incentive stock options and stock appreciation rights
appurtenant thereto to employees and nonstatutory stock options, stock
appreciation rights, restricted stock purchase awards, and stock bonuses to
consultants, employees and directors. As of September 15, 1996 no option grants
have been awarded under the Incentive Plan. Incentive stock options granted
under the Incentive Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Nonstatutory stock options granted under the Incentive
Plan are intended not to qualify as incentive stock options under the Code. See
"Federal Income Tax Information" for a discussion of the tax treatment of the
various awards included in the Incentive Plan.
PURPOSE
The Incentive Plan provides a means by which selected employees and
directors of, and consultants to, the Company, and its affiliates, may be given
an opportunity to purchase Common Stock of the Company or receive stock
appreciation rights. The Company, by means of the Incentive Plan, seeks to
retain the services of persons who are now employees of or consultants to the
Company or its affiliates, to secure and retain the services of new employees
and consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its affiliates.
FORMS OF BENEFIT
The Incentive Plan provides for incentive stock options, nonstatutory stock
options, restricted stock purchase awards, stock bonuses and stock appreciation
rights (collectively "Stock Awards"). Stock appreciation rights authorized for
issuance under the Incentive Plan may be tandem stock appreciation rights,
concurrent stock appreciation rights or independent stock appreciation rights.
Tandem and concurrent stock appreciation rights are generally subject to the
same terms and conditions of the particular option grant to which they pertain.
Independent stock appreciation rights are granted independently of any option
and are generally subject to the same terms and conditions applicable to
nonstatutory stock options.
11
<PAGE> 14
ADMINISTRATION
The Incentive Plan is administered by the Board unless and until the Board
delegates administration to a committee composed of not fewer than two Board
members, all of the members of which committee must be disinterested persons
(unless the Board expressly declares that such requirement shall not apply) and
may also be, in the discretion of the Board, outside directors. If
administration is delegated to a committee, such committee will have, in
connection with the administration of the Incentive Plan, the powers possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Incentive Plan, as may be adopted from time to time by the
Board. The Board or the committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and/or who are either (i) not then employees
covered by Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") and are not expected to be covered by Section 162(m) of the Code at the
time of recognition of income resulting from such Stock Award, or (ii) not
persons with respect to whom the Company wishes to avoid the application of
Section 162(m) of the Code. The Board may abolish such committee at any time and
revest in the Board the administration of the Incentive Plan. The Board has
delegated the administration of the Incentive Plan to the Compensation
Committee.
The Board has the power to determine from time to time which of the persons
eligible under the Incentive Plan shall be granted awards, the type of awards to
be granted, when and how each award shall be granted, to construe and interpret
the Incentive Plan and awards granted under it, and to establish, amend and
revoke rules and regulations for its administration. The Board may correct any
defect in the Incentive Plan or in any award agreement to make the Incentive
Plan fully effective.
SHARES SUBJECT TO THE PLAN
The Common Stock that may be sold pursuant to awards under the Incentive
Plan shall not exceed in the aggregate 600,000 shares of the Company's Common
Stock. If any award expires or terminates, in whole or in part, without having
been exercised in full, the stock not purchased under such award will revert to
and again become available for issuance under the Incentive Plan. Shares subject
to stock appreciation rights will not be available for subsequent issuance under
the Incentive Plan. The Common Stock subject to the Incentive Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
ELIGIBILITY
Incentive stock options and stock appreciation rights appurtenant thereto
may be granted only to employees. Nonstatutory stock options, restricted stock
purchase awards, stock appreciation rights and stock bonuses may be granted only
to employees or consultants.
A director shall in no event be eligible for the benefits of the Incentive
Plan, unless at the time of grant the director is also an employee of or
consultant to the Company.
No person is eligible for the grant of an incentive stock option if, at the
time of grant, such person owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company unless
the exercise price of such option is at least one hundred ten percent (110%) of
the fair market value of such Common Stock subject to the option at the date of
grant and the option is not exercisable after the expiration of five (5) years
from the date of grant, or in the case of a restricted stock purchase award, the
purchase price is at least one hundred percent (100%) of the fair market value
of Common Stock subject to the award at date of grant. Once the Company becomes
subject to Section 162(m) of the Code (which limits the Company's deduction for
compensation in excess of $1 million per year for certain executives) following
the transition period for newly public companies, no person shall be eligible to
be granted options and stock appreciation rights covering more than one hundred
thousand (100,000) shares of the Company's Common Stock in any calendar year.
12
<PAGE> 15
TERM AND TERMINATION
No option is exercisable after the expiration of ten (10) years from the
date it was granted.
In the event an optionee's continuous status as an employee, director or
consultant is terminated, the optionee may exercise his or her option (to the
extent that the optionee was entitled to exercise it at the time of termination)
but only within the earlier of (i) the date three (3) months after the
termination of the optionee's continuous status as an employee, director or
consultant, or (ii) the expiration of the term of the option as set forth in the
option agreement.
An optionee's option agreement may also provide that if the exercise of the
option following the termination of the optionee's continuous status as an
employee, director, or consultant would result in liability under Section 16(b)
of the Securities Exchange Act of 1934 (the "Exchange Act"), then the option
shall terminate on the earlier of (i) the expiration of the term of the option
set forth in the option agreement, or (ii) the tenth (10th) day after the last
date on which such exercise would result in such liability under Section 16(b)
of the Exchange Act. Finally, an optionee's option agreement may also provide
that if the exercise of the option following the termination of the optionee's
continuous status as an employee, director or consultant would be prohibited at
any time solely because the issuance of shares would violate the registration
requirements under the Securities Act of 1933, then the option shall terminate
on the earlier of (i) the expiration of the term of the option as set forth in
the immediately preceding paragraph, or (ii) the expiration of a period of three
(3) months after the termination of the optionee's continuous status as an
employee, director or consultant during which the exercise of the option would
not be in violation of such registration requirements.
In the event an optionee's continuous status as an employee, director or
consultant terminates as a result of the optionee's death or disability, the
optionee (or such optionee's estate, heirs or beneficiaries) may exercise his or
her option, but only within the period ending on the earlier of (i) twelve (12)
months following such termination (or such longer or shorter period as specified
in the option agreement) or (ii) the expiration of the term of the option as set
forth in the option agreement.
In the event a stock bonus or restricted stock recipient's continuous
status as an employee, director or consultant terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of stock held by that
person which have not vested as of the date of termination under the terms of
the stock bonus or restricted stock purchase agreement between the Company and
such person.
EXERCISE PRICE
The exercise price of each incentive stock option will not be less than one
hundred percent (100%) of the fair market value of the Company's Common Stock on
the date of grant. The exercise price of each nonstatutory stock option will not
be less than eighty-five percent (85%) of the fair market value on the date of
grant. The purchase price of restricted stock will not be less than eighty-five
percent (85%) of the fair market value of the Company's Common Stock on the date
such award is made. Stock bonuses may be awarded in consideration for past
services actually rendered to the Company or for its benefit.
CONSIDERATION
The purchase price of stock acquired pursuant to a Stock Award is paid
either in cash at the time of exercise or purchase, or (if determined by the
Board at the time of grant for an option) by deferred payment or other
arrangement or in any other form of legal consideration that may be acceptable
to the Board. Additionally, in the case of an option and in the discretion of
the Board at the time of the grant of an option, by delivery to the Company of
other Common Stock of the Company. In the case of any deferred payment
arrangement, interest will be payable at least annually and will be charged at
the minimum rate of interest necessary to avoid the treatment as interest of
amounts that are not stated to be interest.
13
<PAGE> 16
TRANSFERABILITY
An incentive stock option shall not be transferable except by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the incentive stock option is granted only by
such person. A nonstatutory stock option, stock bonus, or restricted stock award
shall not be transferable except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order. An optionee
may designate a beneficiary who may exercise his or her option after death.
VESTING
The total number of shares of stock subject to an option may, but need not,
be allotted in periodic installments. The option agreement may provide that from
time to time during each of such installment periods, the option may become
exercisable ("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the shares allotted
to such period and/or any prior period as to which the option became vested but
was not fully exercised. The option agreement may also provide that an optionee
may exercise an option prior to full vesting, provided that the Company may have
a repurchase right with respect to any unvested shares.
Restricted stock purchase awards and stock bonuses granted under the
Incentive Plan may be granted pursuant to a repurchase option in favor of the
Company in accordance with a vesting schedule determined by the Board.
ADJUSTMENTS UPON CHANGES IN STOCK
If any change is made in the Common Stock subject to the Incentive Plan, or
subject to any Stock Award, without receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the class(es) and maximum number of shares subject to
the Incentive Plan, the maximum annual award applicable under the Incentive Plan
and the class(es) and number of shares and price per share of stock subject to
outstanding Stock Awards will be appropriately adjusted.
In the event of a merger, consolidation, liquidation, dissolution or the
sale of substantially all of the Company's assets or a reverse merger in which
the Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, any surviving corporation shall assume any Stock Awards outstanding
under the Incentive Plan or shall substitute similar awards for those
outstanding under the Incentive Plan or such Stock Awards shall continue in full
force and effect. In the event a surviving corporation refuses to assume such
Stock Awards or substitute similar awards, then, with respect to stock awards
held by persons then performing services as employees, directors or consultants,
the time during which such Stock Awards may be exercised shall be accelerated
prior to completion of such transaction and such Stock Awards terminated if not
exercised prior to such transaction.
AMENDMENT OF THE INCENTIVE PLAN
The Board at any time, and from time to time, may amend the Incentive Plan.
However, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will increase the number of shares reserved for
issuance under the Incentive Plan, modify the requirements as to eligibility for
participation or in any other way if such modification requires stockholder
approval in order for the Incentive Plan to satisfy the requirements of Section
422 of the Code or to comply with the requirements of Rule 16b-3. The Board may
in its sole discretion submit any other amendment to the Incentive Plan for
stockholder approval.
14
<PAGE> 17
TERMINATION OR SUSPENSION OF THE INCENTIVE PLAN
The Board may suspend or terminate the Incentive Plan at any time. Unless
sooner terminated, the Incentive Plan shall terminate in March 2006. No Stock
Awards may be granted under the Incentive Plan while the Incentive Plan is
suspended or after it is terminated.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the Incentive Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on whether
the stock was held for more than one year. Capital gains currently are generally
subject to lower tax rates than ordinary income. The maximum long-term capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness and the satisfaction of a tax reporting
obligation) to a corresponding business expense deduction in the tax year in
which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Incentive Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness and the satisfaction of a reporting obligation, the Company will
generally be entitled to a business expense deduction equal to the taxable
ordinary income realized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long or short-term depending on whether the stock was held for more than
one year. Slightly different rules may apply to optionees who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of the
Exchange Act.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to awards granted in the future under the Incentive
Plan, when combined with all other types of compensation received by a covered
employee from the Company, may cause this limitation to be exceeded in any
particular year.
15
<PAGE> 18
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended June 30, 1996 and 1995
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and its other two most highly compensated executive officers at June 30,
1996 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL AWARDS(2)
COMPENSATION(1) -------------------------
----------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS UNDERLYING COMPENSATION
POSITION YEAR ($) ($) OPTIONS(#) ($)(3)
- --------------------------------------- ---- ------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
John Monahan, Ph.D..................... 1996 163,274 -- 11,286 576
President and Chief.................... 1995 159,935 -- -- 576
Executive Officer
Wanda deVlaminck....................... 1996 132,017 -- 16,930 492
Vice President, Clinical............... 1995 127,200 -- 7,900 491
and Regulatory Affairs
Gary J. Kurtzman, M.D.................. 1996 125,000 -- 16,930 461
Vice President, Research............... 1995 120,000 -- 22,573 461
and Development
</TABLE>
- ---------------
(1) As permitted by rules promulgated by the Commission, no amounts are shown
for fiscal year ending June 30, 1994.
(2) The Company has no restricted stock awards, stock appreciation rights (SARs)
or long-term incentive plans (LTIPs).
(3) Represents insurance premiums paid by the Company with respect to term life
insurance for the benefit of the named executive.
STOCK OPTION GRANTS AND EXERCISES
The Company has granted options to its executive officers under its 1993
Stock Option Plan (the "1993 Plan") and in the future will grant options to
executive officers under its 1996 Equity Incentive Plan (the "1996 Plan")
(collectively the "Plans"). As of September 15, 1996, options to purchase a
total of 283,198 shares were outstanding under the Plans and options to purchase
200,000 shares remained available for grant under the 1996 Plan. In March 1996,
the Board of Directors determined that no further options would be granted under
the 1993 Plan.
16
<PAGE> 19
The following tables show for the fiscal year ended June 30, 1996, certain
information regarding options granted to, exercised by, and held at year end by,
the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
----------------------------------------------------------- ASSUMED ANNUAL
PERCENT OF TOTAL RATES OF STOCK
OPTIONS PRICE APPRECIATION
GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED(#)(2) FISCAL YEAR%(3) ($/SH) DATE 5%($) 10%($)
- ---------------------------- ------------- ---------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
John Monahan................ 11,286 1.6 $0.49 9/15/05 141,639 228,316
Wanda deVlaminck............ 16,930 2.4 $0.49 9/15/05 212,471 342,494
Gary J. Kurtzman, M.D....... 16,930 2.4 $0.49 9/15/05 212,471 342,494
</TABLE>
- ---------------
(1) The potential realizable value is based on the term of the option at the
time of grant (10 years). Assumed stock price appreciation of 5% and 10% is
used pursuant to rules promulgated by the commission. The potential
realizable value is calculated by assuming that the Company's initial public
offering price of $8.00 per share appreciates at the indicated rate, for the
entire term of the option and that the option is exercised and sold on the
last day of its term at the appreciated price.
(2) Options granted become exercisable at the rate of 6.25% of the shares
subject to the option each quarter for four years. The options expire 10
years from the date of grant, or earlier upon termination of employment.
(3) Based on 700,147 options granted to employees and directors of, and
consultants to, the Company during the fiscal year ended June 30, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FY- OPTIONS AT
SHARES END(#) FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(2)
- --------------------------------------- ----------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C>
John Monahan........................... - - 2,116/9,170 $ 13,775/$59,697
Wanda deVlaminck....................... - - 6,632/18,198 $ 43,307/$118,833
Gary J. Kurtzman, M.D.................. - - 24,336/33,224 $159,157/$217,285
</TABLE>
- ---------------
(1) Reflects shares vested and unvested at June 30, 1996. Certain options
granted under the 1993 Plan are immediately exercisable, but are subject to
the Company's right to repurchase unvested shares on termination of
employment.
(2) Fair market value of the Company's Common Stock at June 30, 1996 ($7.00)
minus the exercise price of the options.
EMPLOYMENT AGREEMENTS
In August and October 1992, the Company entered into employment agreements
with John Monahan, the Company's President and Chief Executive Officer, and with
Wanda deVlaminck, the Company's Vice President, Clinical and Regulatory Affairs.
The employment agreements provide for, among other items, (i) a minimum base
salary of at least $150,000 and $120,000 per year for Dr. Monahan and Ms.
deVlaminck, respectively, and (ii) severance payments and benefits at the
standard compensation rate for 12 months or until new employment in the gene
therapy field is commenced, unless termination is for just cause. The employment
agreements automatically renew for successive one year periods unless 30 days
prior written notice is provided by either party or unless terminated by either
party for just cause.
17
<PAGE> 20
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee of the Board of Directors ("Committee") is
composed of Dr. Horovitz and Messrs. Pratt and Shaykin, none of whom are
currently officers or employees of the Company. The Committee is responsible for
establishing the Company's compensation programs for all employees, including
executives. For executive officers, the Committee evaluates performance and
determines compensation policies and levels.
COMPENSATION PHILOSOPHY
The primary goal of the compensation program is to align compensation with
business objectives and performance. The Company's aim is to attract, retain and
reward executive officers and other key employees who contribute to the longterm
success of the Company and to motivate those individuals to enhance long-term
stockholder value. To establish this relationship between executive compensation
and creation of stockholder value, the Board of Directors has adopted a total
compensation package comprised of base salary and stock option awards. Key
elements of this philosophy are:
- The Company pays competitively with leading biotechnology companies with
which the Company competes for talent.
- The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to generate
rewards that bring total compensation to competitive levels.
- The Company provides significant equity-based incentives for executives
and other key employees to ensure that they are motivated over the
long-term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
Base Salary. The Committee annually reviews each executive officer's base
salary. Among the factors taken into consideration are (1) individual and
corporate performance, (2) levels of responsibility, (3) prior experience, (4)
breadth of knowledge of the industry, and (5) competitive pay practices.
Bonus. The Company believes that executive performance may be maximized
via a system of annual incentive awards. The actual incentive awards earned
depend on the extent to which the Company and individual performance objectives
are achieved. During the fiscal year, the Compensation Committee will review and
approve the annual performance objectives for the Company and the individual
officers. The Company's objectives consist of operating, strategic and financial
goals that are considered to be critical to the Company's overall goal: building
stockholder value. Given the Company's early stage of development and current
financial position, the Board of Directors did not grant any bonuses during the
fiscal year ended June 30, 1996. For the next fiscal year the Board of Directors
determined that the primary goals in building stockholder value were:
- understanding, identifying and developing products in the research
pipeline as candidates for clinical testing
- implementing strategies relating to the development of manufacturing
capacity for clinical testing
- establishing strategic corporate collaborations to facilitate product
development and provide support for clinical testing
- identifying additional potential applications for products which are
currently under development
- ---------------
(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 the Company under the 1933 Act or 1934 Act, whether made before or after the
date hereof and irrespective of any general incorporation language contained in
such filing.
18
<PAGE> 21
Long-Term Incentives. The Company's long-term incentive program consists
of the Plans. The Plans utilize vesting periods (generally four years) to
encourage key employees to continue in the employ of the Company. Through option
grants, executives receive significant equity incentives to build long-term
stockholder value. The exercise price of options granted under the Plans
generally is 100% of fair market value of the underlying stock on the date of
grant. Employees receive value from these grants only if the Company's Common
Stock appreciates over the long-term. The size of option grants is determined
based on competitive practices at leading companies in the biotechnology
industry and the Company's philosophy of significantly linking executive
compensation with stockholder interests.
CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. Monahan's base salary, bonus and grants of stock options were
determined in accordance with the criteria described in the "Base Salary,"
Bonus," and "Long Term Incentives" sections of this report. Dr. Monahan's Base
Salary of $163,274 reflects the Board's subjective assessment of (1) his very
favorable performance, (2) his skills in relation to other CEOs in the Company's
industry, (3) the Board's confidence in Dr. Monahan's ability to lead the
Company's continued development, and (4) his broad involvement in the operations
of the Company. Considering these factors, the Committee set Dr. Monahan's base
annual salary at $200,000 through the fiscal year ending June 30, 1997.
CERTAIN TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of not more than $1 million of
compensation paid to certain executive officers in a taxable year. Compensation
above $1 million may be deducted if it is "performance-based compensation"
within the meaning of the Code.
The Board of Directors believes that at the present time it is unlikely
that the compensation paid to any executive officer in a taxable year will
exceed $1 million. Therefore, the Board of Directors has not established a
policy for determining which forms of incentive compensation awarded to
executive officers shall be designed to qualify as "performance-based
compensation."
COMPENSATION COMMITTEE
Zola Horovitz, Ph.D.
Richard T. Pratt
Leonard P. Shaykin
19
<PAGE> 22
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John Monahan, Ph.D., the Company's President and Chief Executive Officer
participated in the deliberations of the Board of Directors concerning executive
officer compensation, except where the decision directly involved his
compensation package.
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on May 22, 1996 for (i) the Company's Common Stock, (ii) the Nasdaq
Stock Market (U.S.) and (iii) the American Stock Exchange Biotechnology Index
(the "AMEX Biotech"). All values assume reinvestment of the full amount of all
dividends and are calculated as of May 22 of each year:
<TABLE>
<CAPTION>
AMEX Bio-
Measurement Period Nasdaq Com- technology
(Fiscal Year Covered) Avigen, Inc. posite Index Index
<S> <C> <C> <C>
5/22/96 100 100 100
6/28/96 88 95 91
</TABLE>
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
20
<PAGE> 23
CERTAIN TRANSACTIONS
In March 1996, in connection with a bridge financing in which the Company
raised $1,937,500 (the "1996 Bridge Financing"), the Company entered into a
Placement Agency Agreement with Paramount Capital Incorporated ("Paramount"),
pursuant to which the Company agreed to pay Paramount a selling commission of 7%
of the gross proceeds from the financing, and a non-accountable expense
allowance of 3% of the gross proceeds and warrants to purchase a number of newly
issued shares of Common Stock equal to 10% of the warrants issued in the
offering to Paramount and its designees at an exercise price of 110% of the
exercise price of the warrants in connection with its services as placement
agent. Dr. Rosenwald, a director of the Company, is the Chairman of the Board,
President and sole stockholder of Paramount. In addition, Mr. Shaykin, a
director of the Company, purchased $25,000 aggregate principal amount of notes
in the 1996 Bridge Financing and received a warrant to purchase 2,500 shares of
Common Stock at an exercise price equal to $6.40 per share. The warrant is
exercisable until March 2001.
In March 1996, the Company completed a private placement of its Series D
Preferred Stock ("Series D Private Placement"). Pursuant to a March 1995
Engagement Agreement between the Company and Dr. Yuichi Iwaki, a director of the
Company, Dr. Iwaki received a fee for identifying investors in the amount of
$25,279. In addition, the Company issued warrants to purchase up to 45,272
shares of Series D Preferred Stock at an exercise price of $7.80 per share,
which equaled 110% of the purchase price of the Series D Preferred Stock. The
warrants are exercisable until March 2001.
In October 1995, the Company entered into an agreement with The Aries Trust
pursuant to which The Aries Trust extended a bridge loan in the principal amount
of $80,000. The loan bore interest at the rate of 12% per year and was due and
payable on the earlier of April 1996 or the receipt by the Company of an equity
investment in excess of $500,000. In December 1995, the Company paid the
principal amount of $80,000 plus accrued interest in the amount of $1,707 and
issued warrants to purchase 1,805 shares of Common Stock at an exercise price of
$7.09 per share. The warrants are exercisable until November 2005. Dr. Rosenwald
is the President of Aries Financial Services, which serves as the investment
manager of The Aries Trust.
In September 1995, the Company entered into an agreement with the Aries
Domestic Fund pursuant to which the Aries Domestic Fund extended a bridge loan
in the principal amount of $120,000. Dr. Rosenwald is President of the sole
general partner to the Aries Domestic Fund. Dr. Iwaki is a director of the Aries
Domestic Fund. The loan bore interest at the rate of 12% and was due and payable
on the earlier of March 1996 or the receipt by the Company of an equity
investment in excess of $500,000. In December 1995, the Company paid the
principal amount of $120,000, accrued interest in the amount of $2,880 and
issued warrants to purchase 2,708 shares of Common Stock at an exercise price of
$7.09. The warrants are exercisable until October 2005.
In July 1995, the Company granted to Dr. Whitcome, chairman of the Board of
Directors of the Company, an option to purchase 515,248 shares of Common Stock
at $0.49 per share, exercisable for ten years from the date of grant. The shares
vest in equal monthly installments over thirty-six months. The shares issuable
upon exercise of such option are subject to repurchase at the original price per
share upon cessation of service prior to vesting in such shares. Such grant was
made outside of the 1993 Stock Plan.
In July 1995, the Company completed a private placement of shares of its
Series C Preferred Stock in which Paramount acted as placement agent. Under the
agreement, Paramount received (i) a commission of 9% of gross proceeds received
by the Company from investors, (ii) a nonaccountable expense allowance equal to
4% of the gross proceeds and (iii) warrants to purchase 10% of the Series C
Shares sold by Paramount. For a period of eighteen months from the final closing
date, Paramount was entitled to receive a commission of 9% and a non-accountable
expense allowance equal to 4% of any securities sold by the Company, other than
in a public offering, to individuals or entities who purchased the Series C
Preferred Stock through Paramount prior to the final closing date. As of
September 15, 1996, Paramount had received cash payments in the amount of
$156,024 and warrants to purchase 24,471 shares of Series C Preferred Stock, at
an exercise price of $5.36 per share. The warrants are exercisable until June
2005. In addition, Mr. Shaykin, a director of the Company, and an immediate
family member purchased a total of 47,198 shares of Series C Preferred Stock at
a price of $4.87 per share in the private placement.
21
<PAGE> 24
INDEMNIFICATION
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party be
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
Amended and Restated Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. 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
THOMAS J. PAULSON
Secretary
October 22, 1996
22
<PAGE> 25
AVIGEN, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 22, 1996
The undersigned hereby appoints JOHN MONAHAN and THOMAS J. PAULSON, 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 1201 Harbor Bay Parkway, #1000, Alameda, California
on Friday, November 22, 1996, at 9:00 a.m. local time, and at any and all
continuations and adjournments thereof, with all powers that the undersigned
would possess if personally present, upon and in respect of the following
matters and in accordance with the following instructions, 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
ALL NOMINEES 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.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED ON
THE REVERSE SIDE OF THIS PROXY CARD.
(Continued on other side)
1.
<PAGE> 26
(Continued from other side)
PROPOSAL 1: To elect three directors to hold office until the 1999 Annual
Meeting of Stockholders.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed
below). below.
NOMINEES: John Monahan, Ph.D.
Zola Horovitz, Ph.D.
Yuichi Iwaki, M.D., Ph.D.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH NOMINEE(S)'
NAME(S) BELOW:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 2: To ratify selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending June 30,
1997.
/ / FOR / / AGAINST / / ABSTAIN
Dated ____________, 1996 _________________________________________
_________________________________________
SIGNATURE(S)
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.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
2.
