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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO
1201 HARBOR BAY PARKWAY, #1000
ALAMEDA, CA 94502
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1997
------------------------
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 Thursday, November
20, 1997, at 9:00 a.m. local time at 1201 Harbor Bay Parkway, #1000, Alameda, CA
for the following purpose:
1. To elect directors to hold office until their successors are elected.
2. To approve an amendment to the Company's 1996 Equity Incentive Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan from 600,000 shares to 1,300,000 shares.
3. To approve the Company's 1997 Employee Stock Purchase Plan.
4. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending June 30, 1998.
5. 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 14, 1997,
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
/s/ Thomas J. Paulson
Thomas J. Paulson
Secretary
Alameda, California
October 23, 1997
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 20, 1997
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 20, 1997, 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 23, 1997, 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,
or, at the Company's request, Shareholder Communications. No additional
compensation will be paid to directors, officers or other regular employees for
such services, but Shareholder Communications will be paid its customary fee,
estimated to be about $5,000, if it renders solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on October
14, 1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on October 14, 1997 the Company had outstanding and entitled
to vote 7,288,582 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
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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.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than July 21, 1998 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 Class II whose term of office expires in 1997. Each of the
nominees for election to these classes is currently a director of the Company,
and were previously elected by the stockholders. If elected at the Annual
Meeting, they would serve until the 2000 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 2000 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
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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, D.B.A.
Richard T. Pratt, D.B.A., 60, 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. 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., 43, 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 Paramount
Capital Investments, LLC, The Castle Group, Ltd., a medical technology venture
capital firm, since 1991. Dr. Prendergast is a co founder and director of a
number of publicly held biotechnology companies including AVAX Technologies,
Inc., Atlantis Pharmaceuticals, Inc., and Xenometrix, Inc. 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.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
CLASS III DIRECTORS
LINDSAY A. ROSENWALD, M.D.
Lindsay A. Rosenwald, M.D., 42, 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 Paramount Capital, Inc., an
investment banking firm specializing in the biotechnology, biomedical and
biopharmaceutical industries, since its inception in 1992. In addition, Dr.
Rosenwald has served as President and Chairman of both Paramount Capital
Investments, LLC, a biotechnology, biomedical and biopharmaceutical merchant
banking firm, and Paramount Capital Asset Management, Inc., a money management
firm specializing in the health sciences industry. Dr. Rosenwald also serves as
the Chairman of the Board of Directors of Interneuron Pharmaceuticals, Inc., a
biopharmaceutical company. In addition, Dr. Rosenwald also serves on the Board
of Directors of Ansan, Inc., Biocryst Pharmaceuticals, Inc., Sparta
Pharmaceuticals, Inc., Titan Pharmaceuticals, Inc. and Xenometrix, Inc., all of
which are biotechnology companies. Dr. Rosenwald received an M.D. from Temple
University School of Medicine and a B.S. in finance from Pennsylvania State
University.
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LEONARD P. SHAYKIN
Leonard P. Shaykin, 53, has served as a director of the Company since June
1995. Mr. Shaykin is the principal shareholder of Shaykin & Co., LLC, 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.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
CLASS I DIRECTORS
JOHN MONAHAN, PH.D.
John Monahan, Ph.D., 50, 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. 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, Vice President, Drug Development, and Vice President, Biological and
Pharmaceutical R&D. Dr. Horovitz currently serves on the Board of Directors of
Biocryst Pharmaceuticals, Diacrin, Inc., Magainin Pharmaceuticals, Procept
Corp., Synaptic Pharmaceuticals and Clinicor, Inc., all of which are
biotechnology companies. 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., 48, 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.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended June 30, 1997 the Board of Directors held four
meetings. During this period, all of the directors attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors.
The Board has an Audit Committee and a Compensation Committee. During the
fiscal year ended June 30, 1997, the Audit Committee met twice and the
Compensation Committee met three times. During this period, all of the directors
except two attended or participated in at least 75% of the total number of
meetings held by all committees of the Board on which each such director served.
Drs. Horovitz and Prendergast attended 50% of the meetings of the Audit
Committee.
The Audit Committee meets with the Company's independent auditors to review
the results of the annual audit and discuss the financial statements, it
recommends to the Board the independent auditors to be retained and receives and
considers 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.
The Board of Directors has no standing Nominating Committee or any
committee performing the functions of such committee.
PROPOSAL 2
APPROVAL OF THE 1996 EQUITY INCENTIVE PLAN, AS AMENDED
In March 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1996 Equity Incentive Plan (the "Incentive
Plan") under which 600,000 shares of the Company's Common Stock were reserved
for issuance.
At June 30, 1997, options (net of canceled or expired options) covering an
aggregate of 550,658 shares of the Company's Common Stock had been granted under
the Incentive Plan, and only 49,342 shares (plus any shares that might in the
future be returned to the plans as a result of cancellations or expiration of
options) remained available for future grant under the Incentive Plan. During
the last fiscal year, under the Incentive Plan, the Company granted to all
current executive officers as a group options to purchase 315,000 shares at
exercise prices of $3.625 to $4.00 per share and to all employees (excluding
executive officers) as a group options to purchase 236,127 shares at exercise
prices of $3.625 to $4.00 per share. Each Named Executive Officer received
options as set forth in the table on page 20.
In September 1997, the Board approved an amendment to the Incentive Plan,
subject to stockholder approval, to enhance the flexibility of the Board and the
Compensation Committee in granting stock options to the Company's employees and
to modify the requirements related to stockholder approval of amendments to the
Incentive Plan to bring the Incentive Plan into conformity with and take
advantage of new regulations under Section 16 of the Exchange Act. The amendment
increases the number of shares authorized for issuance under the Incentive Plan
from a total of 600,000 shares to 1,300,000 shares. The Board adopted this
amendment to ensure that the Company can continue to grant stock options to
employees at levels determined appropriate by the Board and the Compensation
Committee.
Stockholders are requested in this Proposal 2 to approve the Incentive
Plan, as amended. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and voting at the
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meeting will be required to approve the Incentive Plan, as amended. For purposes
of this vote, abstentions and broker non-votes will not be counted for any
purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Incentive Plan are outlined below:
GENERAL
Under the 1996 Equity Incentive Plan (the "Incentive Plan") incentive stock
options and stock appreciation rights appurtenant thereto may be granted to
employees, and nonstatutory stock options, stock appreciation rights, restricted
stock purchase awards, and stock bonuses may be granted to employees, directors
and consultants. To date only incentive stock options and nonstatutory stock
options 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.
ADMINISTRATION
The Incentive Plan is administered by the Board unless and until the Board
delegates administration to a committee composed of two or more Board members,
who may be non-employee directors (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 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
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delegated the administration of the Incentive Plan to the Compensation
Committee, and references to the Board include 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
Pursuant to the September 12, 1997 amendment, the Common Stock that may be
sold pursuant to awards under the Incentive Plan shall not exceed in the
aggregate one million three hundred thousand (1,300,000) 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 to
employees, directors or consultants.
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. In addition, 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.
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 generally 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 such longer or shorter period specified in the option agreement
at the time of grant), 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 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, 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
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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 at the time of grant) 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.
TRANSFERABILITY
An incentive stock option will 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 generally
will not be transferable except by will or by the laws of descent and
distribution or pursuant to a domestic relations order. Some nonstatutory stock
option agreements may provide for very limited transferability. In addition, 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.
8
<PAGE> 11
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 require stockholder approval in order for
the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3
promulgated under Section 16 of the Exchange Act or any Nasdaq or securities
exchange requirements.
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 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, mid-term or shortterm depending on how long the
optionee holds the stock. Capital gains are generally subject to lower tax rates
than ordinary income. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16 of the Exchange Act.
9
<PAGE> 12
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 tax 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-term, mid-term or short-term depending on how long the optionee
holds the stock. 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. Section 162(m) of the Code
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.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that: (i) the stock award plan contains a per-employee limitation on
the number of shares for which stock options and stock appreciation rights may
be granted during a specified period; (ii) the per-employee limitation is
approved by the stockholders; (iii) the award is granted by a compensation
committee comprised solely of "outside directors;" and (iv) the exercise price
of the award is no less than the fair market value of the stock on the date of
grant. Compensation attributable to restricted stock will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors"; and (ii) the
purchase price of the award is no less than the fair market value of the stock
on the date of grant. Stock bonuses qualify as performance-based compensation
under the Treasury regulations only if: (i) the award is granted by a
compensation committee comprised solely of "outside directors;" (ii) the award
is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain; (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied; and (iv) prior to the granting (or
exercisability) of the award, stockholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria on which the performance goal is based, and the maximum amount
(or formula used to calculate the amount) payable upon attainment of the
performance goal).
PROPOSAL 3
APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
In September 1997, the Board of Directors adopted the Company's 1997
Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan authorizes
the issuance of 360,000 shares of Common Stock
10
<PAGE> 13
pursuant to purchase rights (each, an "Offering") granted to employees of the
Company and is intended to be an "employee stock purchase plan" as defined in
section 423 of the Code.
The Purchase Plan was adopted by the Board to provide a means by which
employees of the Company and its affiliates will be given an opportunity to
purchase stock in the Company, to assist in retaining the services of its
employees, to secure and retain the services of new employees and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
Stockholders are requested in this Proposal 3 to approve the Purchase Plan.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the meeting will be required to
approve the Purchase Plan. For purposes of this vote, abstentions and broker
non-votes will not be counted for any purpose in determining whether this matter
has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Purchase Plan are outlined below.
ADMINISTRATION
The Purchase Plan is administered by the Compensation Committee of the
Board (the "Committee"). The Committee has the power to construe and interpret
the Purchase Plan and, subject to the provisions of the Purchase Plan, to
determine when and how rights to purchase Common Stock will be granted and the
provisions of each offering of such rights. As used herein with respect to the
Purchase Plan, the "Board" refers to such Committee as well as to the Board
itself.
OFFERINGS
The Purchase Plan is implemented by Offerings to all eligible employees
from time to time by the Board. Generally, each Offering is of 24 months'
duration (the "Offering Period"). The initial Offering is scheduled to commence
on December 1, 1997, with purchases to occur at the end of each February, May,
August and November during the Offering Period. In the event the fair market
value of the Company's stock on any Purchase Date during an Offering is less
than the fair market value on the date the Offering began, then the Offering
shall terminate immediately following the Purchase Date and a new Offering shall
commence.
ELIGIBILITY
Any person whose customary employment with the Company or an affiliate is
at least 20 hours per week and at least five months per calendar year, and who
has been employed by the Company or an affiliate for such continuous period
preceding an Offering as the Board may require, which period shall not be more
than two years, is eligible to participate in Offerings under the Purchase Plan
unless otherwise determined by the Board. All of the Company's 34 employees are
eligible to participate in the Purchase Plan. The Board may provide that, if an
employee becomes eligible to participate in the Purchase Plan during the course
of an Offering, the employee may enroll in that Offering on specified dates.
Such employee's rights shall have the same characteristics as any rights
originally granted under that Offering, except that (i) the Offering Date (as
defined below) shall be the date such rights are granted for purposes of
determining the purchase price and (ii) the Offering Period for such rights
shall begin on such employee's Offering Date and end coincident with the end of
such Offering.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing five percent or more of the
total combined voting power or value of all classes of stock of the Company or
of any parent or subsidiary (including any stock which such employee may
purchase under all outstanding rights and stock options), nor will any employee
be granted rights that would permit such employee to purchase more than $25,000
worth of stock (determined at the fair market value of the shares at the time
such rights are granted) under all employee stock purchase plans of the Company
in any calendar year.
11
<PAGE> 14
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering
to the Company, prior to the date or dates selected by the Board as the offering
date (each, an "Offering Date") for the Offering, an agreement authorizing
payroll deductions of up to 15% of such employee's earnings during the Offering
Period.
PURCHASE PRICE
The price per share at which shares are purchased for an employee in an
Offering under the Purchase Plan is the lower of: (1) 85% of the fair market
value of a share of Common Stock on such employee's Offering Date, or (2) 85% of
the fair market value of a share of Common Stock on the date of purchase (each,
a "Purchase Date").
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the Offering. After the beginning of any Offering, a participant may change or
terminate his or her payroll deductions or begin such payroll deductions only to
the extent specified by the Board for such Offering. All payroll deductions made
for a participant are credited to his or her account under the Purchase Plan and
deposited with the general funds of the Company. A participant may not make any
additional payments into such account.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to have shares purchased under the Purchase Plan. In connection with
Offerings made under the Purchase Plan, the Board specifies a maximum number of
shares any employee may be granted the right to purchase and the maximum
aggregate number of shares which may be purchased pursuant to such Offering by
all participants. If the aggregate number of shares to be purchased upon
exercise of rights granted in the Offering would exceed the maximum aggregate
number, the Board would make a pro rata allocation of shares available in a
uniform and equitable manner. Unless the employee's participation is
discontinued, his or her right to purchase shares is exercised automatically on
each Purchase Date at the applicable price. See "Withdrawal" below.
Notwithstanding the foregoing, no stock will be purchased under the Purchase
Plan unless such plan is covered by an effective registration statement under
the Securities Act.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given Offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable Offering Period,
except during the 10 days immediately preceding a Purchase Date (or such shorter
period determined by the Board and communicated to employees).
Following any withdrawal from an Offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, and such employee's interest in the Offering will be automatically
terminated. In addition, by withdrawing, the employee is not entitled to again
participate in such Offering. However, an employee's withdrawal from an Offering
will not have any effect upon such employee's eligibility to participate in
subsequent Offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any Offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
12
<PAGE> 15
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time.
The Board or the Committee at any time, and from time to time, may amend
the Purchase 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 require stockholder approval
in order for the Plan to satisfy the requirements of Section 423 of the Code or
any Nasdaq or securities exchange requirements.
Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment or termination of the Purchase Plan
without consent of the person to whom such rights were granted.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Purchase Plan or subject
to any rights granted under the Purchase Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, change in
corporate structure or otherwise), the Purchase Plan and rights outstanding
thereunder will be appropriately adjusted as to the class and the maximum number
of shares subject to such plan and the class, number of shares and price per
share of stock subject to such outstanding rights.
In the event of a dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving corporation, a reverse
merger in which the Company is the surviving corporation but the shares of
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 any other capital reorganization in which more than 50% of
the shares of the Company entitled to vote are exchanged, then, as determined by
the Board in its sole discretion, any successor corporation may assume such
outstanding rights or substitute similar rights for those outstanding under the
Purchase Plan, such rights may continue in full force and effect or
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the participant's
rights under the ongoing Offering terminated.
FEDERAL INCOME TAX INFORMATION
Participation in the Purchase Plan is intended to qualify for the favorable
federal tax treatment accorded "employee stock purchase plans" under Section 423
of the Code. Under these provisions, a participant will be taxed on amounts
withheld as if actually received, but, except for this, no income will be
taxable to a participant until disposition of the shares acquired.
If the stock is disposed of at least two years after the beginning of the
Offering and at least one year after the stock is transferred to the
participant, the lesser of (i) the excess of the fair market value of the stock
at the time of such disposition over the price paid for the stock or (ii) the
excess of the fair market value of the stock as of the beginning of the Offering
over the purchase price (determined as of the beginning of the Offering) will be
treated as ordinary taxable income. Any further gain or any loss will be taxed
as a capital gain or loss. Capital gains currently are generally subject to
lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, the excess of the fair market value of the
stock on the Purchase Date over the purchase price paid will be treated as
ordinary taxable income at the time of such disposition, and the Company may, in
the future, be required to withhold income taxes relating to such ordinary
income from other payments made to the participant. The balance of any gain will
be treated as capital gain. Even if the stock is later disposed of for less
13
<PAGE> 16
than its fair market value on the Purchase Date, the same amount of ordinary
income is attributed to the participant, and a capital loss is recognized equal
to the difference between the sales price and the fair market value of the stock
on such Purchase Date. Any such capital gain or loss will be long-term, mid-term
or short-term depending on how long the stock is held.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent such amounts are taxed as ordinary income to a
participant upon disposition by a participant of stock before the expiration of
the holding periods described above (subject to the satisfaction of a tax
reporting obligation).
PROPOSAL 4
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, 1998, 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 4.
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>
John Monahan, Ph.D. 50 President, Chief Executive Officer and Director
Thomas J. Paulson 51 Vice President, Finance and Chief Financial Officer and
Secretary
Wanda deVlaminck 55 Vice President, Clinical and Regulatory Affairs
Gary J. Kurtzman, M.D. 42 Vice President, Research and Development
Robert M. Maurer 45 Vice President, Business Development
</TABLE>
Biographical information for Dr. Monahan 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. 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
14
<PAGE> 17
Corporation. From 1971 to 1984, Mr. Paulson held various financial management
positions at Abbott Laboratories. Mr. Paulson holds a M.B.A. from the University
of Chicago Graduate School of Business and a B.B.A. 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 from March 1996 to
September 1996 she served 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 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.
Robert M. Maurer was appointed Vice President, Business Development
effective November 1996. From 1995 to 1996, Mr. Maurer served as Vice President
of Strategic Marketing at Promega Corporation. Mr. Maurer co-founded Molecular
Geriatrics Corporation and served as Chief Operating Officer, Secretary and
Treasurer from 1992 to 1995, as well as Chief Financial Officer from 1992 to
1993. From 1974 to 1992, Mr. Maurer held various management positions at Abbott
Laboratories. Mr. Maurer holds a M.B.A. from Harvard Graduate School of Business
Administration with emphasis on industrial and international marketing and sales
and a B.A. degree in economics and mathematics from Carleton College in
Minnesota.
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<PAGE> 18
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 1, 1997 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 1,
1997; (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
Philip J. Whitcome, Ph.D.(3)......................... 386,436 5.03
c/o Avigen, Inc.
1201 Harbor Bay Parkway, #1000
Alameda, CA 94502
John Monahan, Ph.D.(4)............................... 240,699 3.30
Wanda deVlaminck(5).................................. 86,863 1.19
Gary J. Kurtzman, M.D.(6)............................ 54,823 *
Robert M. Maurer(7).................................. 18,750 *
Thomas J. Paulson(8)................................. 27,693 *
Zola Horovitz, Ph.D.(9).............................. 6,348 *
Yuichi Iwaki, M.D., Ph.D.(10)........................ 118,618 1.62
Richard T. Pratt, D.B.A.(11)......................... 9,969 *
John K.A. Prendergast, Ph.D. ........................ 58,608 *
Leonard P. Shaykin(12)............................... 46,723 *
All executive officers and directors as a group (12
persons)(13)....................................... 1,619,641 20.64
======== =======
</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
7,288,582 shares outstanding on September 1, 1997, 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.
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<PAGE> 19
(3) Includes 386,436 shares issuable upon the exercise of options held by Dr.
Whitcome that are exercisable within 60 days of the date of this table.
(4) Includes 9,395 shares issuable upon the exercise of options held by Dr.
Monahan that are exercisable within 60 days of the date of this table.
(5) Includes 26,892 shares issuable upon the exercise of options held by Ms.
deVlaminck that are exercisable within 60 days of the date of this table.
(6) Includes 54,823 shares issuable upon the exercise of options held by Dr.
Kurtzman that are exercisable within 60 days of the date of this table.
(7) Includes 18,750 shares issuable upon the exercise of options held by Mr.
Maurer that are exercisable within 60 days of the date of this table.
(8) Includes 26,693 shares issuable upon the exercise of options held by Mr.
Paulson that are exercisable within 60 days of the date of this table.
(9) Includes 6,348 shares issuable upon the exercise of options held by Dr.
Horovitz that are exercisable within 60 days of the date of this table.
(10) Includes 15,380 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.
(11) 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.
(12) Includes 4,655 shares issuable upon the exercise of options held by Mr.
Shaykin that are exercisable within 60 days of the date of this table.
(13) Includes shares described in the notes above, as applicable. Includes an
aggregate of 559,341 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, 1997, 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
The members of the Board of Directors do not currently receive any cash
compensation for their services as members of the Board of Directors although
they are eligible for reimbursement for their expenses incurred in connection
with attendance at Board and committee meetings in accordance with Company
policy.
Each non-employee director of the Company also receives stock option grants
under the 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). The maximum number of shares of Common Stock that may be issued pursuant
to options granted under the Directors' Plan is 200,000. The Directors' Plan is
administered by the Board of Directors, unless the Board delegates
administration to a committee comprised of not less than two members of the
Board.
17
<PAGE> 20
Option grants under the Directors' Plan are non-discretionary. On the date
of the annual meeting of stockholders each year, each member of the Company's
Board of Directors who is not an employee of the Company and has served as a
non-employee director since the previous year's annual meeting of stockholders
is automatically granted under the Directors' Plan, without any further action
by the Company, the Board of Directors or the stockholders of the Company, an
option to purchase 5,000 shares of Common Stock of the Company. If the
non-employee director has not served as a director since the previous year's
annual meeting of stockholders he or she shall be automatically granted an
option to purchase the number of shares of Common Stock of the Company (rounded
up to the nearest whole share) determined by multiplying 5,000 shares by a
fraction, the numerator of which is the number of days the person continuously
has been a non-employee director as of the date of such grant and the
denominator of which is 365. No other options may be granted at any other time
under the Directors' Plan.
The exercise price of options under the Directors' Plan is equal to 100% of
the fair market value of the Common Stock subject to the option on the date of
the grant. Options granted under the Directors' Plan may not be exercised until
the date upon which such optionee, or the affiliate of such optionee, as the
case may be, has provided one year of continuous service as a non-employee
director following the date of grant of such option, whereupon such option shall
become exercisable as to 33% of the option shares, 34% of the option shares
shall become exercisable two years after the date of grant, and 33% shall become
exercisable three years after the date of grant, in accordance with its terms.
The term of option granted under the Directors' Plan is ten years. The
Directors' Plan will terminate in March 2006, unless earlier terminated by the
Board.
In the event of a merger, consolidation, reverse reorganization,
dissolution, sale of substantially all of the assets of the Company, or certain
changes in the beneficial ownership of the Company's securities representing at
least a 50% change of such ownership, the options outstanding under the
Directors' Plan will automatically become fully vested and will terminate if not
exercised prior to such event.
In the fiscal year ended June 30, 1997, the compensation of the
non-employee directors included options to Drs. Whitcome, Horovitz, Iwaki,
Prendergast and Rosenwald and Messrs. Pratt and Shaykin to purchase 5,000 shares
each, of Common Stock at an exercise price of $6.00 per share the fair market
value of such Common Stock on the date of grant. As of September 1, 1997, no
options had been exercised under the Directors' Plan. In addition, Dr. Whitcome
received a one-time payment of $150,000 in connection with his services as
Chairman of the Board.
In October 1996, Dr. Whitcome entered into a consulting agreement with the
Company. Pursuant to the agreement, Dr. Whitcome performs consulting services
for which he receives a fee of $8,333 per month. During the fiscal year ended
June 30, 1997, Dr. Whitcome received payments totalling $75,000 under this
agreement. The agreement terminates, unless terminated sooner by the Company, on
October 1, 1997.
18
<PAGE> 21
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended June 30, 1997, 1996
and 1995, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its other four most highly compensated executive officers
at June 30, 1997 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL AWARDS(1)
COMPENSATION --------------------------
------------------ SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS UNDERLYING COMPENSATION
POSITION YEAR ($) ($) OPTIONS(#) ($)(2)
- --------------------------------------- ---- ------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C>
John Monahan, Ph.D. 1997 200,000 -- 15,000 2,236
President and Chief 1996 163,274 -- 11,286 576
Executive Officer 1995 159,935 -- -- 576
Thomas Paulson(3) 1997 160,000 -- 100,000 22,319(4)
Chief Financial
Officer
Wanda deVlaminck 1997 185,000 -- 50,000 --
Vice President, Clinical 1996 132,017 -- 16,930 492
and Regulatory Affairs 1995 127,200 -- 7,900 491
Gary J. Kurtzman, M.D. 1997 180,000 -- 50,000 --
Vice President, Research 1996 125,000 -- 16,930 461
and Development 1995 120,000 -- 22,573 461
Robert Maurer(5) 1997 160,000 -- 100,000 52,926(6)
Vice President,
Business Development
</TABLE>
- ---------------
(1) The Company has no restricted stock awards, stock appreciation rights (SARs)
or long-term incentive plans (LTIPs).
(2) Represents insurance premiums paid by the Company with respect to term life
insurance for the benefit of the named executive.
(3) Mr. Paulson became an executive officer of the Company on September 20,
1996. His annualized salary for fiscal year ended June 30, 1997 was
approximately $124,000.
(4) Represents reimbursement of $22,319 in relocation expenses in connection
with Mr. Paulson's relocation to California.
(5) Mr. Maurer became an executive officer of the Company on November 4, 1996.
His annualized salary for fiscal year ended June 30, 1997 was approximately
$104,000.
(6) Represents reimbursement of $52,926 in relocation expenses in connection
with Mr. Maurer's relocation to California.
19
<PAGE> 22
STOCK OPTION GRANTS AND EXERCISES
The Company has granted options to its executive officers under its 1993
Stock Option Plan (the "1993 Plan") and in the future will grant options to
executive officers under its 1996 Equity Incentive Plan (the "1996 Plan")
(collectively the "Plans"). As of June 30, 1997, options to purchase a total of
550,658 shares were outstanding under the Plans and options to purchase 49,342
shares remained available for grant under the 1996 Plan. In March 1996, the
Board of Directors determined that no further options would be granted under the
1993 Plan.
The following tables show for the fiscal year ended June 30, 1997, certain
information regarding options granted to, exercised by, and held at year end by,
the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION
OPTIONS EXERCISE FOR
OPTIONS GRANTED TO OR OPTION TERM(1)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME (#)(2) FISCAL YEAR%(3) ($/SH) DATE 5%($) 10%($)
- -------------------------- ------- ---------------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
John Monahan.............. 15,000 3.01% $3.625 10/25/06 34,196 86,660
Thomas Paulson............ 100,000 20.06% $3.625 10/25/06 228,375 576,375
Wanda deVlaminck.......... 50,000 10.03% $3.625 10/25/06 113,987 288,866
Gary J. Kurtzman, M.D..... 50,000 10.03% $3.625 10/25/06 113,987 288,866
Robert Maurer............. 100,000 20.06% $ 4.00 11/4/06 251,558 637,497
</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 stock price on the date
of grant 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. No gain to the optionee is possible unless the
stock price increases over the option term.
(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 498,627 options granted to employees and directors of, and
consultants to, the Company during the fiscal year ended June 30, 1997.
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 OPTIONS AT
SHARES FY-END(#) FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(2)
-------------------------- ----------- ----------- ---------------- --------------
<S> <C> <C> <C> <C>
John Monahan.............. -- -- 6,813/19,472 19,125/14,874
Thomas Paulson............ -- -- 19,384/84,002 4,465/5,734
Wanda deVlaminck.......... -- -- 19,090/55,739 38,922/36,229
Gary J. Kurtzman, M.D..... -- -- 44,974/62,587 57,151/118,058
Robert Maurer............. -- -- 12,500/87,500 --/--
</TABLE>
- ---------------
(1) Reflects shares vested and unvested at June 30, 1997. 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, 1997 ($3.50)
minus the exercise price of the options.
20
<PAGE> 23
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.
In August and October 1996, the Company entered into employment agreements
with Thomas J. Paulson, the Company's Vice President and Chief Financial
Officer, and with Robert M. Maurer, the Company's Vice President, Business
Development. The employment agreements provide for, among other items, (i) a
minimum base salary of $160,000 per year for Messrs. Paulson and Maurer, and
(ii) options on 100,000 shares of common stock of Avigen at a price and vesting
schedule to be determined by the Board for Messrs. Paulson and Maurer.
21
<PAGE> 24
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, bonus 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, 1997. 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 uses for products which are currently
under development
- ---------------
1The 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.
22
<PAGE> 25
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. The Committee set
Dr. Monahan's base annual salary through the fiscal year ended June 30, 1997 at
$200,000. Dr. Monahan's salary for the fiscal year ending June 30, 1998 will be
$210,000.
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 "performance based
compensation."
From the disinterested members of the Board of Directors and Compensation
Committee:
Zola Horovitz, Ph.D.
Richard T. Pratt, D.B.A.
Leonard P. Shaykin
23
<PAGE> 26
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on June 30, 1997 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 22nd and June of each year:
"COMPARISON OF CUMULATIVE RETURNS"(2)
<TABLE>
<CAPTION>
AMEX
MEASUREMENT PERIOD BIOTECHNOLOGY NASDAQ COMPOSITE
(FISCAL YEAR COVERED) AVIGEN, INC. INDEX INDEX
<S> <C> <C> <C>
5/22/96 100 100 100
6/28/96 88 90 95
6/30/97 44 92 116
</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.
(2) Cumulative returns for the period May 22, 1996 through June 30, 1997.
24
<PAGE> 27
CERTAIN TRANSACTIONS
In October 1996, the Company entered into an Independent Consultant
Agreement with Phillip J. Whitcome. Pursuant to the agreement, Dr. Whitcome
performs consulting services for which he receives a fee of $8,333 per month.
The agreement terminates, unless terminated sooner by the Company, on October 1,
1997.
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
/s/ Thomas J. Paulson
Thomas J. Paulson
Secretary
October 23, 1997
25
<PAGE> 28
AVIGEN, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1997
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 Thursday, November 20, 1997, 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 PROPOSALS 2, 3 AND 4 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 ON THE REVERSE
SIDE OF THIS PROXY CARD.
(Continued on other side)
See Reverse Side
<PAGE> 29
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
PROPOSAL 1: To elect three directors to hold office until the 2000 Annual
Meeting of Stockholders.
FOR all nominees WITHHOLD
listed at right AUTHORITY to NOMINEES:
(except as marked vote for all Philip J. Whitcome, Ph.D.
to the contrary nominees listed Richard T. Pratt, D.B.A
below). at right. John K.A. Prendergast, 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 3 AND PROPOSAL 4.
PROPOSAL 2: To approve the amendment of the Company's FOR AGAINST ABSTAIN
1996 Equity Incentive Plan to increase the [ ] [ ] [ ]
number of shares from 600,000 to 1,300,000.
PROPOSAL 3: To approve the Company's 1997 Employee FOR AGAINST ABSTAIN
Stock Purchase Plan. [ ] [ ] [ ]
PROPOSAL 4: To ratify the appointment by the Board FOR AGAINST ABSTAIN
of Directors of Ernst & Young LLP as [ ] [ ] [ ]
the auditors for the fiscal year ending
June 30, 1998.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
SIGNATURE(S): Dated , 1997
-------------------------------------- -----------------
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.
