On December
9, 2008, the Board met. While not formally engaged, strategic advisors from
Pacific Growth and RBC gave presentations outlining their expertise and the
review process. The Board discussed the MediciNova proposal and Dr. Horovitz
stated that he had contacted MediciNovas Chairman and had proposed a timeline
for discussion. The BVF Group did not provide any supporting material to
Avigens strategic advisors on the mechanism or rationale for a put option.
On December
11, 2008, the BVF Group published an open letter to the Board. In the letter the
BVF Group accused management and the Board of general mismanagement and
reiterated the BVF Groups demand that the Board guaranty an outcome for
stockholders.
On December
18, 2008, Avigen announced the sale of its AV513 product candidate for
$7,000,000 ($0.23 per share) to Baxter Healthcare.
On December
22, 2008, Drs. Horovitz and Chahine issued a letter to stockholders underscoring
the Boards and managements commitment to act in the best interests of Avigens
stockholders and emphasizing the swift and decisive actions already taken to
preserve cash since the AV650 announcement. The letter to stockholders also
reminded stockholders of the significant value of Avigens remaining assets, and
of the Boards and managements commitment to pursue possible strategic
transactions that would be in the best interests of all of Avigens
stockholders. The letter concluded with a pledge to stockholders that Avigen
would continue to use the same fiscally prudent approach that had allowed it to
preserve cash.
On that same
day, Dr. Horovitz received a second (and modified) proposal from MediciNova. In
the letter, MediciNova proposed terms substantially similar to those contained
in MediciNovas December 8 letter, modified to reflect the $7,000,000 received
from the sale of AV513.
The Board
subsequently reviewed the proposal from MediciNova and concluded that the
MediciNova proposal, as revised, should be carefully considered and that due
diligence should commence early in the new year following the engagement of
strategic advisors. Dr. Horovitz again contacted MediciNovas Chairman and
communicated the Boards conclusion.
On December
29, 2008, the BVF Group filed an amended Schedule 13D advocating that Avigen
should consummate the Proposed Merger expeditiously. It was the Boards view
that the BVF Groups publicly-stated support for the MediciNova proposal
weakened Avigens negotiating position, making it more difficult for Avigen to
negotiate a better transaction with MediciNova on behalf of all of Avigens
stockholders.
On January
9, 2009, the BVF Group delivered a notice to Avigen, demanding that Avigen call
a special meeting of stockholders to, among other things, remove the current
members of Avigens Board, without cause, and for the proposed election of the
BVF Group Nominees.
On January
14, 2009, Avigen announced that it had engaged RBC to oversee the review of
merger and acquisition opportunities for Avigen and had engaged Pacific Growth
primarily to assist in monetizing Avigens AV411 assets.
On the very
next day, the BVF Group publicly announced its intention to make a tender offer
to purchase all of the outstanding Common Stock of Avigen. In its offering
documents filed subsequently, the BVF Group incorrectly stated that Avigen had
rejected the MediciNova proposal and expressed the BVF Groups view that, if
elected to the Board of Avigen, the BVF Group Nominees would pursue the
MediciNova proposal.
On January
19, 2009, Avigen sent a confidentiality agreement to MediciNovas Chairman of
the Board, in order to initiate the due diligence process and negotiations
regarding a possible transaction between Avigen and MediciNova. The Board
proposed in the confidentiality agreement that both Avigen and MediciNova share
information with each other in order to permit the Board and, if a transaction
is agreed upon, Avigen stockholders, to understand key aspects of MediciNovas
business, including anticipated expenses, development plans, and
commercialization strategy in order to properly evaluate the proposal and
determine whether it is appropriate to recommend or, if recommended,
approve.
In the days
following, Avigens strategic advisors at RBC met with representatives of the
BVF Group to engage in further discussions.
8
On January
20, 2009, RBC presented various financial analyses and an overview and update of
the process of evaluating Avigens strategic alternatives to the Board. On that
date, Avigen received multiple proposals from companies to engage in strategic
transactions that, on their face, appeared competitive with the MediciNova
proposal. Avigen contacted these companies and initiated discussions to assess
these potential strategic transactions.
Avigens
strategic advisors at RBC sent an email to MediciNovas Chairman on January 22,
2009, stating that efforts to reach MediciNovas CEO and CFO were unsuccessful
and urging him to review and return the confidentiality agreement so that due
diligence could commence as soon as possible. The Chairman responded that he
would remind the MediciNova management. RBC subsequently received a
communication from MediciNovas CFO promising that they would review the draft
and return it with any comments.
In spite of
Avigens continuing efforts to assess potential strategic transactions and the
Boards and managements efforts to engage Mr. Lampert in productive
discussions, on January 23, 2009, BVF Acquisition LLC filed a Schedule TO with
the SEC, formally initiating a tender offer.
At Board
meetings held on January 26 and 29, 2009, at each of which the Board assessed
BVF Acquisition LLCs tender offer, RBC presented various financial analyses and
an overview and update regarding the process of evaluating Avigens strategic
alternatives.
One week
after MediciNovas prior communication, on January 29, 2009, strategic advisors
at RBC once again contacted MediciNovas Chairman reiterating that efforts to
reach MediciNovas CEO and CFO were unsuccessful and urging him to review and
return the confidentiality agreement so that diligence could commence as soon as
possible. The Chairman responded that he would remind the management
again.
On January
30, 2009, RBC received a revised version of the confidentiality agreement from
MediciNova with suggested changes. The draft was reviewed by Avigens counsel
and on February 3, 2009, promptly returned to MediciNova. RBC proposed that
MediciNovas counsel call Avigens counsel to expedite the process and resolve
any issues so that the due diligence process could be initiated as soon as
possible.
On February
9, 2009, MediciNova sent Avigen a letter reaffirming their offer and accusing
Avigen of stalling negotiations.
On February
10, 2009, MediciNova and Avigen discussed the proposed confidentiality
agreement. MediciNova again refused to sign the agreement with a standstill
provision similar to what was signed by other potential strategic parties.
Ultimately, MediciNova and Avigen agreed that they would proceed with high level
due diligence without entering into a confidentiality agreement, and if
discussions adequately progressed they would negotiate a confidentiality
agreement at a later date.
On February
11, 2009, senior management of Avigen hosted a conference call relating to its
fiscal year ended December 31, 2008. Senior management also updated stockholders
on Avigens strategic process and responded to questions and answers.
On February
13, 2009, Dr. Horovitz spoke with Mr. Lampert and attempted to reassure him that
Avigen was preserving its assets and that the competitive process to identify
potential strategic opportunities was proceeding well. Mr. Horovitz indicated to
Mr. Lampert that once the process was complete Avigen would communicate its
findings to stockholders and that the Board did not believe that it would be
prudent to make public commitments until that time.
On February
20, 2009, Mr. Lampert sent a letter to the Board, again demanding downside
protection for all stockholders.
On February
21, 2009, Dr. Chahine was informed by multiple parties that Mr. Nodelman, a BVF
Nominee, had learned of confidential early negotiations Avigen had with a
company, and that during the previous week, Mr. Nodelman contacted one or more
of the members of the board of that company to warn that BVF would withhold its
support for any potential strategic transaction between Avigen and that
company.
9
On February
23, 2009, the Board sent BVF a letter offering to discuss their differences with
a view to arriving at a mutually beneficial outcome for all stockholders. Later
that day, Drs. Horovitz and Chahine met with representatives of BVF to discuss
whether there was a solution to avoid a proxy contest.
On February
24, 2009, MediciNova and Avigen reached a tentative agreement that they would
sign a mutual confidentiality agreement with no standstill, with the
understanding that only information that the companies were comfortable
disclosing without a standstill would be exchanged.
On February
27, 2009, the Board reiterated to BVF its earlier offer to compromise and
conveyed its desire to come to a mutually beneficial outcome for all
stockholders and cease the proxy fight. Although no agreement was reached, the
Board also reiterated its offer to continue to work collaboratively and
professionally with BVF.
**********
As set forth
in its preliminary proxy solicitation materials filed with the SEC, the BVF
Group is asking you to approve the following proposals, if presented by the BVF
Group at the Special Meeting:
Board
Removal Proposal
. To remove, without cause,
all six of the existing directors serving on the Board.
Bylaw
Amendment Proposal
. To amend Avigens Bylaws
to permit stockholders to elect directors to the Board in cases when the entire
Board is vacant.
Election
Proposal
. To elect the BVF Group Nominees to
the Board. Please see the BVF Groups preliminary proxy solicitation materials
filed with the SEC for a description of the BVF Group Nominees.
Repeal
Bylaws Proposal
. To repeal any provision of
the Bylaws effected after January 8, 2009, the date immediately prior to the
date the BVF Group submitted its special meeting request.
Purpose of the Boards Solicitation
The primary
purpose of your Boards proxy solicitation is to seek your vote
AGAINST
the Board Removal
Proposal. By voting
AGAINST
the Board Removal Proposal, whether by telephone or through
the Internet, or by returning to us the
WHITE
proxy card indicating your vote
AGAINST
the
Board Removal Proposal, you will be voting to retain your current Board of
Directors of Avigen.
Avigens
Board recommends that you to vote
AGAINST
the Board Removal Proposal
for, among other things, the following reasons:
-
Avigens
current Board members have extensive experience with Avigens AV411 program
and assets. The Board members, other than Dr. Prendergast, who is also a
member of the MediciNova board of directors, have been intricately involved in
all aspects of the AV411 program. We believe that this, along with their
extensive scientific and/or business development experience in the field,
places the Board in the best position to assess and maximize the value of
AV411 and the other Avigen assets.
-
Avigens current Board members have
extensive experience as directors of public companies. In contrast, based on
the descriptions of the BVF Group Nominees contained in the BVF Groups
preliminary proxy solicitation materials filed with the SEC, the BVF Group
Nominees have little experience as directors of public companies.
-
Avigens current Board members are
implementing a thoughtful plan for your company, and have engaged in an
orderly and competitive process with strategic advisors to enhance stockholder
value.
-
In contrast, BVF has stated that they
believe the proposed transaction with MediciNova is in the best interest of
all stockholders and have shown no indication of intending to negotiate a
better transaction. Further, by having made this announcement, BVF has
weakened Avigens negotiating position with MediciNova, especially if the BVF
Group Nominees are elected, as MediciNova may believe that BVF will
support a transaction with MediciNova on the terms proposed by MediciNova, and
BVF has not espoused an interest in engaging in a competitive process.
This may make it difficult to negotiate a
transaction with MediciNova with terms better than those proposed by
10
MediciNova. Our
stockholders should seriously consider whether they want the BVF Group Nominees
handling the negotiations regarding the fate of Avigen, given what appears to us
to be a lack of judgment by BVF in maximizing stockholder value.
-
Avigens current directors collectively
have held or currently hold senior management positions in well-known and
well-respected pharmaceutical companies including Bristol-Myers Squibb, Chiron
BioPharmaceuticals, APT Pharmaceuticals, Inc., GlaxoSmithKline, Johnson &
Johnson, Genentech, Inc., MediQuest Therapeutics, Inc., ZymoGenetics, Inc. and
Novo-NordiskA/S, which give them experience to assess the strategic
opportunities available to Avigen.
With respect
to the Bylaw Amendment Proposal and the Repeal Bylaws Proposal, we are
soliciting your proxy but are not taking any position on these proposals. The
enclosed WHITE proxy card will enable you to vote FOR or AGAINST each of these
proposals, or to ABSTAIN with respect to one or more of these proposals. We are
not soliciting your proxy with respect to the Election Proposal because it is
only relevant if the Board Removal Proposal passes, in which case the BVF Group
Nominees will be elected regardless of how you vote. This is because the BVF
Group Nominees are the only nominees for the open board positions, and will be
elected by BVF. If you return the WHITE proxy card and do not attend the Special
Meeting in person you will not have the right to vote with respect to the
Election Proposal.
**********
In its proxy
solicitation materials, the BVF Group has stated that, if it is successful in
obtaining control of the Board, its nominees intend to:
-
Remove any obstacles to consummating the proposed merger with
MediciNova;
-
Exempt any prospective merger partners
from the application of Section 203 of the Delaware General Corporation Law,
which prohibits a corporation from engaging in any business combination with
any interested stockholder for a period of three years after such stockholder
became an interested stockholder, thus removing an important conflict of
interest protection for Avigens stockholders; and
-
Redeem the rights outstanding under Avigens Rights Agreement,
which was implemented specifically to protect Avigen and its stockholders
against the predatory attacks of hostile third parties.
QUESTIONS AND ANSWERS ABOUT THIS
PROXY SOLICITATION
Q: Who is making this solicitation?
A: Your Board of Directors.
Q: What are you asking me to do?
A: We are asking you to vote as follows
with respect to the proposals described in the BVF Groups proxy solicitation
statement and, by doing so, preserve your current Board of Directors, which will
continue to act in your best interests.
-
Board Removal Proposal
: With respect
to the BVF Groups proposal to remove, without cause, all six of the current
directors of Avigen, we are asking you to vote
AGAINST
such proposal.
-
Bylaw Amendment
Proposal
: With respect to the BVF Groups
proposal to amend Avigens Bylaws to permit stockholders to elect directors
when the entire Board is vacant, we are not taking any position on this
proposal.
-
Repeal Bylaws
Proposal
: With respect to the BVF Groups
proposal to repeal any provision of the Bylaws effected after January 8, 2009,
we are not taking any position on this proposal, because no amendments to the
Bylaws have been enacted since that date.
-
Election Proposal
. With respect to the Election Proposal (pursuant to which
the BVF Group Nominees would be elected to the Board in the event that the
current directors of Avigen were removed without cause), we are not taking any
position on this proposal. The Election Proposal is only relevant if the Board
Removal Proposal passes, in which case the BVF
Group Nominees will be elected regardless of how you vote. This is because the
BVF Group Nominees
11
are the only
nominees for the open board positions, and will be elected by BVF. As a result,
we are not soliciting your proxy with respect to the Election Proposal, and if
you return the WHITE proxy card and do not attend the Special Meeting in person
you will not have the right to vote with respect to the Election Proposal.
Q: If I have already delivered a gold
proxy to the BVF Group voting for the Board Removal Proposal, is it too late for
me to change my vote?
A: No. Until the vote is taken at the
Special Meeting, any proxy you may have delivered may be revoked. You have the
right to revoke your gold proxy by voting
AGAINST
the Board Removal Proposal by
telephone, by Internet or by signing, dating and returning the
WHITE
proxy card. Even if
you have delivered a gold proxy card but do not revoke your proxy prior to the
deadline, you may still attend the Special Meeting and vote your shares in
opposition to the Board Removal Proposal.
Q: What is the effect of submitting my
proxy using the WHITE proxy card?
A: The delivery of the
WHITE
proxy card will have
the effect of revoking any earlier dated proxy that you may have delivered to
the BVF Group. By marking the
AGAINST
boxes on the
enclosed
WHITE
proxy card and signing, dating and mailing the card in the postage-paid
envelope provided, you will be voting against the BVF Groups proposals. You can
also vote against the BVF proposals by telephone or through the Internet.
Q: What should I do to vote my shares?
A: If you are a stockholder of record, you
may vote your shares in person at the Special Meeting, vote by proxy using the
enclosed
WHITE
proxy card, vote by proxy by telephone or vote by proxy through the Internet.
Whether or not you plan to attend the Special Meeting, we urge you to vote by
proxy to ensure your vote is counted. You may still attend the Special Meeting
and vote in person even if you have already voted by proxy.
-
To vote in person, come to the Special Meeting and
vote using the ballot provided at the Special Meeting.
-
To vote by telephone, or by Internet, please use
the easy-to-follow instructions on your
WHITE
proxy card.
We provide Internet proxy voting to allow you to vote your
shares online, with procedures designed to ensure
the authenticity and correctness of your proxy vote instructions.
However, please be aware that you must bear
any
costs associated with your Internet access, such as usage charges from
Internet access providers and
telephone
companies.
-
To vote using the enclosed
WHITE
proxy card, simply
mark the enclosed
WHITE
proxy card. Then, sign,
date
and return the enclosed
WHITE
proxy card
today
in the envelope provided. It is important that you
date
the
WHITE
proxy card when you sign it. If you return your signed
WHITE
proxy card to us
before the
Special Meeting, we will vote your
shares as you direct. If you do not specify how you wish to vote on any
of
the proposals, your shares will be voted
AGAINST
the Board Removal Proposal, and
ABSTAIN
with
respect to the Bylaw Amendment Proposal and the Repeal
Bylaws Proposal. Your shares will not be voted with
respect to the Election Proposal. The Board recommends that you vote
AGAINST
the Board Removal
Proposal, and makes no
recommendation as to the Bylaw Amendment Proposal, the Repeal Bylaws Proposal
or
the Election Proposal.
Beneficial Owner: Shares
Registered in the Name of Broker or Bank
If you are a
beneficial owner of shares registered in the name of your broker, bank, or other
agent, you should have received a proxy card and voting instructions with these
proxy materials from that organization. Simply sign, date and return the
WHITE
proxy
card to ensure that your vote is counted. Alternatively, you may vote by
telephone or over the Internet as instructed by your broker or bank. To vote in
person at the Special Meeting, you must obtain a valid proxy from your broker,
bank, or other agent. Follow the instructions from your broker or bank included
with these proxy materials, or contact your broker or bank to request a proxy
form.
Q: How many votes do I have?
A: On each matter to be voted upon, you
have one vote for each share of Common Stock you own as of the Record
Date.
12
Q: What if I return a proxy card or
otherwise vote but do not make specific choices?
A: If you return a signed
WHITE
proxy card or
otherwise vote by returning a
WHITE
proxy card without marking
voting selections, your shares will be voted
AGAINST
the Board Removal Proposal,
and
ABSTAIN
with respect to the Bylaw Amendment Proposal and the Repeal Bylaws
Proposal. Your shares will not be voted with respect to the Election Proposal.
Under Avigens Bylaws, only the matters described in the Notice of Special
Meeting may properly be brought before the Special Meeting for a vote. If,
despite these provisions, any other matter is properly presented at the Special
Meeting, your proxyholders will vote your shares using their best
judgment.
Q: What does Avigens Board of
Directors recommend?
A: Your Board of Directors strongly
believes that the solicitation of the removal of the entire Board being
undertaken by the BVF Group is not in the best interests of all of Avigens
stockholders. As a result, your Board of Directors unanimously opposes the Board
Removal Proposal, and urges stockholders to reject this proposal. Your Board of
Directors takes no position on the proposal by the BVF Group to permit
stockholders to elect directors to the Board in cases when the entire Board is
vacant, and takes no position on the proposal by the BVF Group to repeal any
provision of the Bylaws effected after January 8, 2009. Your Board of Directors
also takes no position on the Election Proposal and will not exercise your proxy
with respect to the proposed election of the BVF Group Nominees as
directors.
Q: If the BVF Groups proposals are
approved, will it result in payments under the Management Transition Plan?
A: If the BVF Groups solicitation is
successful and all of Avigens current executive officers were terminated, the
severance provisions of the Management Transition Plan would require payment to
Avigens current executive officers, collectively, of approximately $2.2 million
in severance payments and $125,000 in medical benefits continuation.
Q: What if any matter beyond those in
the BVF Groups proxy is properly brought before the Special Meeting?
A: The Board knows of no other matters
that will be presented for consideration at the Special Meeting. Under Avigens
Bylaws, only the matters described in the Notice of Special Meeting may properly
be brought before the Special Meeting for a vote. If, despite these provisions,
any other matters are properly brought before the Special Meeting, it is the
intention of the persons named in the accompanying proxy to vote on those
matters in accordance with their best judgment.
Q: Who is entitled to vote at the
Special Meeting?
A: Only the stockholders of record of
Avigens Common Stock as of the close of business on the Record Date are
entitled to notice of and to attend and to vote at the Special Meeting. The
Board has set March 6, 2009 as the Record Date for the determination of
stockholders who are entitled to notice of and to attend and to vote at the
Special Meeting. Avigen will be soliciting proxies from stockholders of record
as of the close of business on the Record Date and only such stockholders may
execute, withhold or revoke proxies with respect to the matters to be voted upon
at the Special Meeting. As of the close of business on the Record Date, there
were 29,769,115 shares of Common Stock outstanding and entitled to
vote.
Q: Who is paying for this proxy
solicitation?
A: Avigen will pay for the entire cost of
this proxy solicitation. In addition to these proxy materials, our directors and
employees and Innisfree M&A Incorporated (Innisfree) may also solicit
proxies in person, by telephone, or by other means of communication. Directors
and employees will not be paid any additional compensation for soliciting
proxies, but Innisfree will be paid its customary fee in an amount not to exceed
$75,000 plus out-of-pocket expenses if it solicits proxies. Avigen has also
retained The Abernathy Group (Abernathy) as its investor and media relations
adviser in connection with the proxy solicitation, and Abernathy will be paid
its customary fee in an amount not to exceed $75,000, plus out-of-pocket
expenses in connection with its services. We will also reimburse brokerage
firms, banks and other agents for the cost of forwarding proxy materials to
beneficial owners.
Q: Whom should I call if I have
questions about the solicitation?
A: Stockholders should call Innisfree
M&A Incorporated, toll free at (888) 750-5834. Banks and brokers may call
Innisfree M&A Incorporated collect at (212) 750-5833.
13
Q: When are stockholder proposals due
for the 2009 annual meeting?
A: To be considered for inclusion in the
proxy materials for Avigens 2009 Annual Meeting of Stockholders, your proposal
must have been submitted in writing by December 23, 2008, to Avigens Secretary
at 1301 Harbor Bay Parkway, Alameda California 94502. However, if Avigens 2009
Annual Meeting of Stockholders is held before April 19, 2009 or after June 18,
2009, then the deadline will be a reasonable time prior to the time we begin to
print and mail our proxy materials. If you wish to bring a proposal before the
stockholders at the 2009 Annual Meeting that is not included in the 2009 proxy
materials, you must notify Avigens Secretary, in writing, not later than the
close of business on March 20, 2009 nor earlier than the close of business on
February 18, 2009. However, if Avigens 2009 Annual Meeting of Stockholders is
held before April 19, 2009 or after June 18, 2009, you must notify Avigens
Secretary, in writing, not earlier than 90 days and not later than the later of
60 days prior to Avigens 2009 Annual Meeting of Stockholders or, if we make a
public announcement of the date of Avigens 2009 Annual Meeting of Stockholders
fewer than 70 days prior to the date of Avigens 2009 Annual Meeting of
Stockholders, the close of business on the 10th day following the day on which
we make such public announcement. We also advise you to review Avigens Bylaws,
which contain additional requirements about advance notice of stockholder
proposals and director nominations. If you do not comply with these
requirements, you will not be able to make a stockholder proposal or director
nomination at Avigens 2009 Annual Meeting of Stockholders.
Q: How are votes
counted?
A: Votes will be counted by the inspector
of election appointed for the Special Meeting, who will separately count FOR
and AGAINST votes, abstentions and broker non-votes, and, with respect to the
proposed election of the BVF Group Nominees as directors, FOR and WITHHOLD
votes, and broker non-votes. Abstentions will be counted towards the vote total
for each proposal and will have the effects described below under How many
votes are need to approve each proposal? Broker non-votes will have the effect
of a vote AGAINST each of the proposals on the
WHITE
proxy card.
Q: What are broker non-votes?
A: Broker non-votes occur when a
beneficial owner of shares held in street name does not give instructions to
the broker or nominee holding the shares
as to how to vote on matters deemed
non-routine. Generally, if shares are held in street name, the beneficial
owner of the shares is entitled to give voting instructions to the broker or
nominee holding the shares. If the beneficial owner does not provide voting
instructions, the broker or nominee
can still vote the shares with respect to
matters that are considered to be routine, but not with respect to
non-routine matters. None of the items on the agenda at the Special Meeting
are considered routine under the rules and interpretations of the New York
Stock Exchange.
How many votes are needed to approve
each proposal?
-
To be approved, the Board Removal Proposal must
receive FOR votes from the holders of at least two-thirds of all of Avigens
outstanding shares entitled to vote either in person or by proxy at the
Special Meeting. If you do not vote or ABSTAIN from voting, it will have the
same effect as an AGAINST vote. Broker non-votes will have the same effect
as AGAINST votes.
-
To be approved, the Bylaw Amendment Proposal must
receive FOR votes from the holders of at least two-thirds of all of Avigens
outstanding shares entitled to vote either in person or by proxy at the
Special Meeting.
If you do not vote
or
ABSTAIN from voting, it will have the same effect as an AGAINST
vote. Broker non-votes will have the same effect as AGAINST
votes.
-
To be approved, the Repeal Bylaws Proposal must
receive FOR votes from the holders of at least two-thirds of all of Avigens
outstanding shares entitled to vote either in person or by proxy at the
Special Meeting. If you do not vote or ABSTAIN from voting, it will have the
same effect as an AGAINST vote. Broker non-votes will have the same effect
as AGAINST votes.
-
With respect to the Election Proposal, the four
nominees receiving the most FOR votes (from the holders of votes of shares
present in person or represented by proxy and entitled to vote on the election
of directors) will be elected. Only FOR votes will affect the outcome. (Of
course, the Election Proposal is subject to the effectiveness of the Board
Removal Proposal - if the Board Removal Proposal is not approved, none of the
BVF
Group Nominees will be elected to the
Board, notwithstanding the number of votes that any of them may receive in
connection with the Election Proposal.)
14
Q: What is the quorum requirement?
A: A quorum of stockholders is necessary
to hold a valid meeting. A quorum will be present if stockholders holding at
least a majority of all of Avigens outstanding shares entitled to vote are
present at the Special Meeting in person or represented by proxy. As of the
close of business on the Record Date, there were 29,769,115
shares
outstanding
and entitled to vote. Thus, the holders of 14,884,558 shares must be
present in person or represented by proxy at the Special Meeting to have a
quorum.
Your shares
will be counted towards the quorum only if you submit a valid proxy (or one is
submitted on your behalf by your broker, bank or other nominee) or if you vote
in person at the Special Meeting. Abstentions and broker non-votes will be
counted towards the quorum requirement. If there is no quorum, the chairman of
the Special Meeting or a vote of the holders of a majority of the shares present
at the Special Meeting in person or represented by proxy may adjourn the Special
Meeting to another date, but no other business may be transacted at the Special
Meeting.
Q: How can I find out the results of
the voting at the Special Meeting?
A: Avigen will retain an independent
inspector of election in connection with the Special Meeting. Avigen intends to
notify stockholders of the final voting results as soon as they are available
from the inspector by issuing a press release and will also file the results
with the SEC as an exhibit to a Current Report on Form 8-K.
THE PROXY PROCEDURE
Voting Securities and Record Date
In
accordance with Delaware law and Avigens organizational documents, the Board
has set March 6, 2009 as the Record Date for the determination of stockholders
who are entitled to notice of and to attend and to vote at the Special Meeting.
As of the close of business on the Record Date, there were 29,769,115 shares of
Avigens Common Stock outstanding, each entitled to one vote per
share.
Only
stockholders of record as of the close of business on the Record Date are
eligible to execute, withhold and revoke proxies in connection with the BVF
Groups proposals. Persons beneficially owning shares of Avigens Common Stock
(but who are not stockholders of record), such as persons whose ownership of
Avigens Common Stock is through a broker, bank or other financial institution,
should contact such broker, bank or financial institution to instruct such
person to execute the
WHITE
proxy card on their behalf. You may execute, withhold or
revoke proxies at any time before or after the Record Date, provided that any
such proxy or revocation will be valid only if you were a stockholder of record
of Avigen as of the close of business on the Record Date and the proxy or
revocation was otherwise valid.
Effect of WHITE Proxy Card
A
stockholder may vote FOR or AGAINST, or may ABSTAIN with respect to, the
Board Removal Proposal, the Bylaw Amendment Proposal and the Repeal Bylaws
Proposal by signing, dating and returning to Avigen a
WHITE
proxy card. A gold proxy card
may be revoked by delivery of your
WHITE
proxy card, bearing a later date
than the date on the gold proxy card, in the envelope provided.
By signing
and delivering the
WHITE
proxy card, with a later date than the date on the gold proxy
card, you will be deemed to have revoked any proxy delivered to the BVF Group.
If you return a signed and dated
WHITE
proxy card or otherwise vote by
returning a
WHITE
proxy card without marking voting selections, your shares will be voted
AGAINST
the Board Removal Proposal, and
ABSTAIN
with respect to the Bylaw
Amendment Proposal and the Repeal Bylaws Proposal. Your shares will not be voted
with respect to the Election Proposal. Under Avigens Bylaws, only the matters
described in the Notice of Special Meeting may properly be brought before the
Special Meeting for a vote. If, despite these provisions, any other matter is
properly presented at the Special Meeting, your proxyholder (one of the
individuals named on your proxy card) will vote your shares using her or his
best judgment.
Avigen has
retained Innisfree to assist in communicating with stockholders in connection
with the BVF Groups proxy solicitation and to assist in our efforts to obtain
proxies. If you have any questions about how to complete or submit
your
WHITE
proxy card or any other questions, Innisfree will be pleased to assist you.
Stockholders may call toll-free at (888) 750-5834. Banks and brokers may call
collect at (212) 750-5833.
15
If any
shares of Common Stock that you owned on the Record Date were held for you in an
account with a stock brokerage firm, bank nominee or other similar street name
holder, you are not entitled to vote such shares directly, but rather must give
instructions to the stock brokerage firm, bank nominee or other street name
holder to grant or revoke proxy for the shares of Common Stock held in your
name. Accordingly, you should follow the instructions on the
WHITE
proxy card to vote
your shares. Alternatively, you can contact the person responsible for your
account and direct him or her to execute the enclosed
WHITE
proxy card on your behalf. You
are urged to confirm in writing your instructions to the person responsible for
your account and provide a copy of those instructions to Avigen, c/o Corporate
Secretary, at the address or facsimile number set forth above so that we will be
aware of your instructions and can attempt to ensure your instructions are
followed.
YOU HAVE
THE RIGHT TO REVOKE ANY PROXY YOU MAY HAVE PREVIOUSLY GIVEN TO THE BVF GROUP. TO
DO SO, YOU NEED ONLY SIGN, DATE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE
THE WHITE PROXY CARD ACCOMPANYING THIS PROXY
STATEMENT, OR VOTE BY PHONE OR OVER THE INTERNET AS DESCRIBED ON THE
ENCLOSED PROXY CARD. IF YOU DO NOT
INDICATE A SPECIFIC VOTE ON THE WHITE PROXY CARD WITH RESPECT TO THE BVF GROUPS
PROPOSALS, THE PROXY CARD WILL BE USED IN ACCORDANCE WITH THE BOARDS
RECOMMENDATION WITH RESPECT TO ALL SUCH
PROPOSALS AS DESCRIBED HEREIN.
You
should carefully review this Proxy Statement. YOUR TIMELY RESPONSE IS IMPORTANT.
You are urged not to sign any GOLD proxy cards. Instead, reject the solicitation
efforts of the BVF Group by promptly completing, signing, dating and returning
the enclosed WHITE proxy card in the envelope provided or voting by phone or
over the Internet as described on the enclosed proxy card. Please be aware that
if you sign a gold card but do not check any of the boxes on the card, you will
be deemed to have voted in favor of all of the BVF Groups proposals.
Results of Special Meeting
Avigen will
retain an independent inspector of elections in connection with the Special
Meeting. Avigen intends to notify stockholders of the voting results by issuing
a press release, which it will also file with the SEC as an exhibit to a Current
Report on Form 8-K.
SOLICITATION OF PROXIES
Cost and Method
The cost of
this proxy solicitation will be borne by Avigen. In addition to solicitation by
mail, directors, officers and other employees of Avigen may, without additional
compensation, solicit proxies by mail, in person or by telephone or other forms
of telecommunication.
We have
retained Innisfree M&A Incorporated as proxy solicitor. Innisfree will also
assist in Avigens communications with its stockholders with respect to the
proxy solicitation and such other advisory services as may be requested from
time to time by us. Innisfree has advised us that approximately 50 of its
employees will be involved in the solicitation of proxies by Innisfree on our
behalf. We have agreed to pay Innisfree compensation for its proxy solicitation
services in the amount of up to $75,000 and reimbursement of out of-pocket
expenses in connection with its services. We have also agreed to indemnify
Innisfree and certain related persons against certain liabilities arising out of
or in connection with the engagement.
We have
retained The Abernathy Group (Abernathy) as investor and media relations
adviser in connection with the proxy solicitation. Abernathy has advised us that
approximately three of its employees will be involved in connection with the
proxy solicitation. We have agreed to pay Abernathy compensation for its
services in the amount of up to $75,000 and reimbursement of out-of-pocket
expenses in connection with its services. We have also agreed to indemnify
Abernathy and certain related persons against certain liabilities arising out of
or in connection with the engagement.
We will also
reimburse brokerage houses, banks, custodians and other nominees and fiduciaries
for out-of-pocket expenses incurred in forwarding our proxy materials to, and
obtaining instructions relating to such materials from, beneficial owners of
Avigens Common Stock. We estimate that the total expenditures relating to our
proxy solicitation
16
(other than salaries and wages of officers
and employees, but including the cost of mailing, related legal and advisory
fees and any litigation related to the solicitation) will be approximately
$600,000, plus reasonable out-of-pocket expenses, of which approximately
$350,000 has been incurred as of the date hereof.
Participants in Avigens Solicitation
Under
applicable SEC regulations, the directors and certain executive officers of
Avigen are deemed to be participants in Avigens solicitation of proxies.
Please refer to the sections entitled Security Ownership of Certain Beneficial
Owners and Management and Certain Information Regarding Participants in this
Proxy Solicitation for information about our directors and officers who might
be deemed to be participants in the solicitation.
Except as
set forth above, neither Avigen nor any person acting on its behalf has
employed, retained or agreed to compensate any person to make solicitations or
recommendations to stockholders of Avigen concerning the proxy solicitation.
APPRAISAL RIGHTS
Holders of
shares of Common Stock do not have appraisal rights under Delaware law in
connection with this solicitation of proxies.
CURRENT DIRECTORS OF AVIGEN, INC.
Avigens
Board is divided into three classes. Each class generally consists, as nearly as
possible, of one-third of the total number of directors, with each class having
a three-year term. Vacancies on the Board, including a vacancy created by an
increase in the number of directors, may be filled only by persons elected by a
majority of the remaining directors, unless the Board determines by resolution
that the vacancies shall be filled by stockholders. A director elected to fill a
vacancy in a class, including a vacancy created by an increase in the number of
directors, shall serve for the remainder of the full term of that class and
until the directors successor is elected and has qualified, or until such
directors earlier death, resignation or removal.
It is
Avigens policy to encourage directors and nominees for director to attend the
annual meeting. All of Avigens directors then in office attended the 2008
Annual Meeting of Stockholders.
The names of the current members of
the Board, and certain information about them are set forth below:
Class I Director Continuing in Office
Until the 2011 Annual Meeting of Stockholders
Zola Horovitz,
Ph.D.
Zola
Horovitz, Ph.D., 74, has served as a director of Avigen since November 1994. In
December 2005, Dr. Horovitz was appointed Interim Chairman of the Board of
Directors of Avigen and Chairman of the Board of Directors on February 23, 2006.
Dr. Horovitz has been an independent consultant to pharmaceutical and
biotechnology companies since May 1994. From 1991 to May 1994, Dr. Horovitz
served as Vice President, Business Development and Planning and from 1990 to
1991 as Vice President, Licensing at Bristol-Myers Squibb Company, a
pharmaceutical and healthcare products company. Prior to this, Dr. Horovitz
served from 1959 through 1989 in various positions at the Squibb Institute for
Medical Research, including Vice President, Research, Planning & Scientific
Liaison, Vice President, Drug Development, and Vice President, Biological and
Pharmaceutical R&D. Dr. Horovitz currently serves on the board of directors
of BioCryst Pharmaceuticals, Inc., Genvec, Inc., Genaera Corporation, Palatin
Technologies, Inc., DOV Pharmaceutical Inc., NitroMed, Inc., and Immunicon
Corporation, all of which are biotechnology companies. From 1975 through 1993
Dr. Horovitz served on the Scientific Advisory Council at Princeton University
and from 1976 through 1989 he served on the Advisory Board of Rutgers University
College of Pharmacy. Dr. Horovitz received a Ph.D. and an M.S. in Pharmacology
and a B.S. in Pharmacy from the University of Pittsburgh.
17
Class II Directors Continuing in
Office Until the 2009 Annual Meeting of Stockholders
John K. A. Prendergast,
Ph.D.
John K. A.
Prendergast, Ph.D., 55, has served as a director of Avigen since December 1992.
Since September 2004, Dr. Prendergast has served as our Lead Independent
Director. Since 1993, he has served as President of SummerCloud Bay Inc., a
consulting firm providing services to the biotechnology industry. Dr.
Prendergast is currently chairman of the board of directors of Palatin
Technologies, Inc. and AVAX Technologies, Inc., both of which are
biopharmaceutical companies. Dr. Prendergast also serves as a director of
MediciNova, Inc., a biopharmaceutical company, and is currently serving as the
executive chairman of the board of directors of Antyra, Inc., a privately held
biopharmaceutical company. Dr. Prendergast received M.Sc. and Ph.D. degrees from
the University of New South Wales, Sydney, Australia and a C.S.S. in
Administration and Management from Harvard University.
Richard J. Wallace, B.Com.(Hons)
Richard J.
Wallace, 57, has served as a director of Avigen since March 2006. From 2004 to
January 2008, Mr. Wallace served as Senior Vice President of Global Commercial
Strategy at GlaxoSmithKline (GSK) and a member of GSKs Research and Development
Executive, Commercial Operations Committee and Product Management Board. Since
joining GSK in 1992, Mr. Wallace performed a number of roles including Vice
President Commercial (Canadian Pharmaceuticals), Vice President US Business
Development, and Vice President Sales & Marketing (US Oncology and HIV). Mr.
Wallaces experience prior to joining GSK included eight years with Bristol
Myers Squibb and seven years at Johnson & Johnson (in assignments spanning
marketing, sales, manufacturing and general management). Mr. Wallace currently
serves on the board of directors of ImmunoGen Inc., Clinical Data Inc., and
Bridgehead International Ltd. Mr. Wallace received B.Commerce and B.Com. Honors
degrees from Rhodes University, South Africa.
Class III Directors Continuing in
Office Until the 2010 Annual Meeting of Stockholders
Kenneth G. Chahine, J.D.,
Ph.D.
Kenneth G.
Chahine, J.D., Ph.D., 43, was appointed President, Chief Executive Officer and
director of Avigen in March 2004. Dr. Chahine had previously served as Avigens
Chief Operating Officer since July 2002 and as Vice President, Business
Development and Intellectual Property since 1998. Prior to joining Avigen, Dr.
Chahine worked at the patent law firm of Madson & Metcalf, P.C. in Salt Lake
City, Utah from 1994 to 1998. From 1992 to 1993, he worked as a research
scientist at Parke-Davis Pharmaceuticals, a pharmaceutical company, and held
another research scientist post at the University of Utah Department of Human
Genetics from 1994 to 1996. Dr. Chahine served as western regional news and
legal correspondent for Nature Biotechnology from 1996 to 2002. Dr. Chahine
serves on the board of directors of the Lassonde New Venture Development Center
at the University of Utah School of Business and is an Adjunct Professor at the
University of Utah College of Law. Dr. Chahine holds a J.D. from the University
of Utah and a Ph.D. in biochemistry and molecular biology from the University of
Michigan.
Stephen Dilly, M.B.B.S., Ph.D.
Stephen
Dilly, M.B.B.S., Ph.D., 49, was appointed a director of Avigen in February 2007.
Dr. Dilly is currently Chief Executive Officer of APT Pharmaceuticals, Inc. From
October 2003 to April 2006 he was Senior Vice President, Chief Medical Officer
and Worldwide Head of Development of Chiron BioPharmaceuticals. From September
1998 to September 2003 he held positions as Vice President of Development
Sciences and Vice President of Medical Affairs at Genentech, Inc. Dr. Dilly
graduated as a physician from the University of London in 1982 and received his
Ph.D. in Cardiac Physiology from University of London in 1988. He began his
industry career with Pfizer Central Research in the United Kingdom in 1986 and
since then has held positions of increasing responsibility with Beecham,
SmithKline Beecham, Genentech, Inc. and Chiron.
Jan K. Öhrström, M.D.
Jan K.
Öhrström, M.D., 51, was appointed a director of Avigen in February 2007. Dr.
Öhrström is currently Chief Operating Officer and President of ProFibrix, Inc.,
a biotech company that develops protein drugs within hemostasis and regenerative
medicine. From 2007 to 2008, he was Executive Vice President of MediQuest
Therapeutics, Inc., a specialty
18
pharmaceutical company. From 2000 to July
2007, Dr. Öhrström held various positions at ZymoGenetics, Inc., a biotech
company, including Senior Vice President, Business Development from 2006 to 2007
and prior to that, Senior Vice President of Development and Chief Medical
Officer. From 1990 to 1999, Dr. Öhrström held various positions at Novo Nordisk
A/S, based in Denmark, including Director, Worldwide Development Portfolio,
Director, Strategic Marketing, and Project Director and at Novo Nordisk
Pharmaceuticals, Inc., based in Princeton, New Jersey, the position of Medical
Director. Dr. Öhrström received an M.D. from the University of Copenhagen.
The complete
mailing address of each of Avigens directors is c/o Avigen, Inc., 1301 Harbor
Bay Parkway, Alameda, California 94502.
Each
director holds office until the end of his or her term in office or until his or
her successor has been elected and qualified or until his earlier death,
resignation or removal from office. Officers are appointed by and serve at the
discretion of the Board.
RELATED-PERSON TRANSACTIONS POLICY
AND PROCEDURES
Our Audit
Committee has authority to review and approve all related-person transactions as
set forth in the Audit Committee Charter. Avigen has a simple organizational
structure in which potential transactions with related person are generally
easily recognizable by the members of our Board and management in the ordinary
course of business. In addition, each member of our Board and management is
aware that all related-person transactions must be approved by our Audit
Committee. As such, we rely on each member of our Board and management to report
any potential related-person transactions to our General Counsel, who then would
bring the potential related-person transaction to the Audit Committee for
approval. In addition, we submit and require our directors and officers to
complete Director and Officer Questionnaires identifying any transactions with
us in which the executive officer or director or their family members have an
interest. We review related-person transactions due to the potential for a
conflict of interest. A conflict of interest occurs when an individuals private
interest interferes, or appears to interfere, with our interests. In addition,
our Corporate Governance and Nominating Committee determines, on an annual
basis, which members of our Board are independent (as independence is currently
defined in Rule 4200(a)(15) of the Nasdaq listing standards). Our Corporate
Governance and Nominating Committee reviews and discusses any relationships with
directors that would potentially interfere with his or her exercise of
independent judgment in carrying out the responsibilities of a director. In
cases where the Corporate Governance and Nominating Committee determines it is
likely a particular board member or board members will have a conflict of
interest concerning an aspect of our business, it may recommend the
establishment of a Special Committee of the Board comprised solely of
non-conflicted Directors to act with respect to such business. Such a Special
Committee was formed with respect to our AV411 program. Finally, our Code of
Business Conduct and Ethics establishes the standards of behavior for all
employees, officers, and directors.
One member of our Board, Dr. Prendergast, is currently serving
as a member of the board of directors of MediciNova, which is developing
products that compete with our AV411 program. In addition, as discussed above,
Avigen is currently in discussions with MediciNova regarding a potential
strategic transaction. Dr. Prendergast does not participate in Board discussions
or decisions relating to our AV411 program and has also recused himself from
Board discussions and decisions relating to the potential strategic transaction
with MediciNova. Dr. Prendergast is compensated for his service as a member of
the Board in accordance with Avigens standard policies, and will not receive
any additional compensation in connection with the development or disposition of
our AV411 assets or based on the outcome of any discussions or negotiations with
MediciNova.
INFORMATION REGARDING THE BOARD OF
DIRECTORS AND CORPORATE GOVERNANCE
INDEPENDENCE OF THE BOARD OF DIRECTORS
As required
under the Nasdaq Global Market (Nasdaq) listing standards, a majority of the
members of a listed companys board of directors must qualify as independent,
as affirmatively determined by the board of directors. The Board of Directors
consults with Avigens counsel to ensure that the Board of Directors
determinations are consistent with relevant securities and other laws and
regulations regarding the definition of independent, including those set forth
in pertinent listing standards of the Nasdaq, as in effect from time to
time.
19
Consistent
with these considerations, after review of all relevant transactions or
relationships between each director, or any of his family members, and Avigen,
its senior management and its independent registered public accounting firm, the
Board of Directors has affirmatively determined that all of Avigens directors
are independent directors within the meaning of the applicable Nasdaq listing
standards, except for Dr. Chahine, Avigens President and Chief Executive
Officer. In making this determination, the Board of Directors found that none of
the directors or nominees for director, other than Dr. Chahine, have a material
or other disqualifying relationship with Avigen.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of
Directors met ten times during the last fiscal year. All directors except Dr.
Iwaki attended 75% or more of the aggregate of the meetings of the Board of
Directors and of the committees on which he served, held during the period for
which he was a director or committee member.
Avigens
independent directors met five times in executive sessions at which only
independent directors were present. The Chairman of the Board of Directors, or
in his absence, the Lead Independent Director, presided over the executive
sessions.
INFORMATION REGARDING COMMITTEES OF THE
BOARD OF DIRECTORS
The Board of
Directors has three committees: an Audit Committee, a Compensation Committee and
a Corporate Governance and Nominating Committee. The following table provides
membership information for fiscal year 2008 for each of the Board committees
since January 1, 2008:
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Governance
|
|
|
|
|
|
Compensation
|
|
and
|
Name
|
|
Audit
|
|
(1)(2)
|
|
Nominating
|
Zola Horovitz, Ph.D. Chairman
|
|
X
|
|
|
|
|
|
X
|
|
John
Prendergast, Ph.D. Lead Independent Director
|
|
X
|
*
|
|
X
|
*
|
|
X
|
*
|
Richard Wallace, B.Com. (Hons)
|
|
|
|
|
X
|
|
|
X
|
|
Jan Öhrström,
M.D.
|
|
X
|
|
|
|
|
|
X
|
|
Stephen Dilly, M.B.B.S., Ph.D.
|
|
|
|
|
X
|
|
|
X
|
|
____________________
*
|
|
Committee
Chairperson
|
|
|
|
(1)
|
|
Effective May 19,
2008, Dr. Yuichi Iwaki, a former member of the Board of Directors, ceased
to be a member of the Compensation Committee.
|
|
(2)
|
|
Effective February 6,
2009, Dr. Dilly joined the Compensation
Committee.
|
For fiscal
year 2008, the Audit Committee met eight times, the Compensation Committee met
six times and the Corporate Governance and Nominating Committee met five
times.
Below is a
description of each committee of the Board of Directors. Each of the committees
has authority to engage legal counsel or other experts or consultants, as it
deems appropriate to carry out its responsibilities. The Board of Directors has
determined that each member of each committee meets the applicable Nasdaq rules
and regulations regarding independence and that each member is free of any
relationship that would impair his or her individual exercise of independent
judgment with regard to Avigen.
Audit Committee
The Audit
Committee of the Board of Directors oversees Avigens corporate accounting and
financial reporting process and has the direct responsibility for the
appointment, compensation, retention and oversight of the work of Avigens
independent registered public accounting firm, which reports directly and is
accountable to the Audit Committee. For this purpose, the Audit Committee
performs several functions. The Audit Committee met eight times during the
fiscal year. The Audit Committee: has the sole authority to select, evaluate,
replace and determine the compensation for Avigens independent registered
public accounting firm; evaluates the independent registered public accounting
firms performance and assesses its qualifications; has the sole authority to
approve audit and permissible non-audit services to be performed by Avigens
independent registered public accounting firm; oversees the independence of
Avigens independent registered
20
public accounting firm and is responsible
for receiving written statements from Avigens independent registered public
accounting firm delineating all relationships between Avigens independent
registered public accounting firm and Avigen consistent with Independence
Standards Board Standard No. 1; establishes and maintains procedures, as
required under applicable law, for the receipt, retention and treatment of
complaints received by Avigen regarding accounting, internal accounting controls
or auditing matters and the confidential and anonymous submission by employees
of concerns regarding questionable accounting or auditing matters; reviews with
Avigens independent registered public accounting firm the adequacy and
effectiveness of Avigens internal control over financial reporting; meets to
review Avigens annual audited financial statements and quarterly financial
statements with management and the independent registered public accounting
firm, including reviewing Avigens disclosures under Managements Discussion
and Analysis of Financial Condition and Results of Operations; and has the
specific responsibilities and authority necessary to comply with the Nasdaq
listing standards applicable to audit committees. The Audit Committee is
governed by a written Audit Committee Charter. A current copy is available on
our website at www.avigen.com.
The Board of
Directors annually reviews the Nasdaq listing standards definition of
independence for audit committee members and has determined that all members of
Avigens Audit Committee are independent (as independence is currently defined
in Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq listing standards). Pursuant to
applicable SEC rules, Avigen is required to disclose whether it has an audit
committee financial expert serving on its Audit Committee. Although each member
of the Audit Committee has been selected by the Board of Directors based on the
Board of Directors determination that they are fully qualified to monitor the
performance of management, the public disclosures by Avigen of its financial
condition and results of operations, Avigens internal control over financing
reporting and the performance of Avigens independent registered public
accounting firm, as well as to analyze and evaluate Avigens financial
statements, the Board of Directors has determined that none of the members of
the Audit Committee meet all of the criteria set forth in such rules qualifying
them as an audit committee financial expert. The Board of Directors has
determined that it is not inappropriate for the Audit Committee not to have an
audit committee financial expert because Avigens financial statements are not
overly complex, given the current stage of Avigens development, and the fact
that Avigen does not currently have any regular revenue from operations, such
that, in the judgment of the Board of Directors, the financial sophistication of
the current members of the Audit Committee, as proven by their service on the
Audit Committee over the years as well as in their occupations outside of
Avigen, is sufficient for the Audit Committee to ensure the integrity of
Avigens financial statements and to fully and completely fulfill its role under
its charter. In addition, the Audit Committee has the ability on its own to
retain and determine the compensation for, at Avigens expense, special legal,
accounting or other advisors or consultants whenever it deems necessary or
appropriate.
21
REPORT OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
1
The Audit
Committee of the Board of Directors for the fiscal year ended December 31, 2008
consisted of Drs. Horovitz, Öhrström and Prendergast. All members of Avigens
Audit Committee are independent (as independence is defined in Rules 4200(a)(15)
and 4350(d)(2) of the Nasdaq listing standards). The Audit Committee is governed
by a written Audit Committee Charter adopted by the Board of
Directors.
The Audit
Committee oversees Avigens financial reporting process on behalf of the Board
of Directors. Management has primary responsibility for the financial statements
and the reporting process including the systems of internal controls and
disclosure controls and procedures. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the audited financial statements
in Avigens Annual Report on Form 10-K with management, including a discussion
of the quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements.
The Audit
Committee is responsible for reviewing, approving and managing the engagement of
Avigens independent registered public accounting firm, including the scope,
extent and procedures of the annual audit and compensation to be paid therefor,
and all other matters the Audit Committee deems appropriate, including the
independent registered public accounting firms accountability to the Board of
Directors and the Audit Committee. The Audit Committee reviewed with Avigens
independent registered public accounting firm, which is responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles in the United States, its
judgments as to the quality, not just the acceptability, of Avigens accounting
principles and such other matters as are required to be discussed with the Audit
Committee under generally accepted auditing standards and those matters required
to be discussed by the Statement on Auditing Standards No. 114,
The Auditors Communication with those charged with
Governance
, which superseded the Statement on
Auditing Standards No. 61. In addition, the Audit Committee has discussed with
Avigens independent registered public accounting firm its independence from
management and Avigen, including the matters in the written disclosures and
letter received by the Audit Committee from Avigens independent registered
public accounting firm as required by the Independence Standards Board Standard
No. 1, and has considered the compatibility of non-audit services, if any, with
the independence of Avigens independent registered public accounting
firm.
The Audit
Committee discussed with Avigens independent registered public accounting firm
the overall scope and plans for its audits. The Audit Committee meets with the
independent registered public accounting firm, with and without management
present, to discuss the results of its examinations, its evaluation of Avigens
internal control over financial reporting, and the overall quality of Avigens
financial reporting.
As of the date of this proxy
statement, Avigens financial statements for 2008 had not been completed.
The Audit
Committee has retained, subject to stockholder ratification at the 2009 Annual
Meeting of Stockholders, Odenberg, Ullakko, Muranishi & Co. LLP as Avigens
independent registered public accounting firm for the fiscal year ending
December 31, 2009.
AUDIT COMMITTEE
J
OHN
K.
A.
P
RENDERGAST
,
P
H
.D.
(
C
HAIR
)
Z
OLA
H
OROVITZ
,
P
H
.D.
J
AN
K.
Ö
HRSTRÖM
,
M.D.
____________________
1
The material in
this report is not soliciting material, is not deemed filed with the SEC and
is not to be incorporated by reference into any filing of Avigen under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
22
Compensation Committee
The
Compensation Committee of the Board of Directors for the fiscal year ended
December 31, 2008 consisted of Dr. Prendergast and Mr. Wallace, and Dr. Iwaki
prior to his resignation from the Board of Directors effective May 19, 2008. Dr.
Dilly joined the Compensation Committee effective February 6, 2009. All members
of Avigens Compensation Committee are independent (as independence is currently
defined in Rule 4200(a)(15) of the Nasdaq listing standards. The Compensation
Committee met six times during the 2008 fiscal year. The Compensation Committee
has adopted a written charter. A current copy is available to stockholders on
our website at www.avigen.com.
The
Compensation Committee of the Board of Directors acts on behalf of the Board of
Directors to review, approve and oversee Avigens compensation strategy,
policies, plans and programs, including:
-
establishment of corporate and individual
performance objectives relevant to the compensation of Avigens executive
officers and other senior management and evaluation of performance in light of
these stated objectives;
-
review and recommendation to the Board of
Directors for approval of the compensation and other terms of employment or
service, including severance and change-in-control arrangements, of Avigens
Chief Executive Officer and other senior management;
-
administration of Avigens equity compensation
plans, pension and profit-sharing plans, deferred compensation plans and other
similar plan and programs; and
-
review of Avigens Compensation Discussion and
Analysis with management and consideration of whether to recommend that it be
included in proxy statements and other filings.
Compensation Committee Processes and
Procedures
Typically,
the Compensation Committee meets quarterly and with greater frequency if
necessary. The agenda for each meeting is usually developed by the Committee
Chair, in consultation with the Chief Executive Officer. The Compensation
Committee meets regularly in executive session. However, from time to time,
various members of management may be invited by the Compensation Committee to
make presentations, provide financial or other background information or advice
or otherwise participate in Compensation Committee meetings. The Chief Executive
Officer reviews the performance of each executive officer, other than his own,
with the Compensation Committee and makes compensation recommendations, which
the Compensation Committee considers in its final determination. The Chief
Executive Officer may not participate in or be present during any deliberations
or determinations of the Compensation Committee regarding his compensation or
individual performance objectives. The charter of the Compensation Committee
grants the Compensation Committee full access to all books, records, facilities
and personnel of Avigen, as well as authority to obtain, at the expense of
Avigen, advice and assistance from internal and external legal, accounting or
other advisors and consultants and other external resources that the
Compensation Committee considers necessary or appropriate in the performance of
its duties. In particular, the Compensation Committee has the sole authority to
retain compensation consultants to assist in its evaluation of executive and
director compensation, including the authority to approve the consultants
reasonable fees and other retention terms.
Historically, the Committee evaluates managements and each individuals
performance based on the achievement of corporate goals set by the Chief
Executive Officer and the Board of Directors. During 2008, the Compensation
Committee met in session several times and discussed Avigens performance toward
achieving its established operating objectives, as well as the performance of
individual members of senior management. However, given the companys immediate
efforts to preserve cash in response to the termination of the AV650 program,
the Committee, with the support of management, determined not to take any
immediate actions on compensation for fiscal 2008.
The specific
determinations of the Compensation Committee with respect to executive
compensation for fiscal 2008 are described in greater detail in the Compensation
Discussion and Analysis section of this proxy statement.
23
Compensation Committee Interlocks and
Insider Participation
Dr.
Prendergast, Mr. Wallace and Dr. Iwaki served as members of the Compensation
Committee during the fiscal year ended December 31, 2008. Dr. Dilly joined the
Compensation Committee effective February 6, 2009. No member of the Committee
was, at any time during fiscal 2008, an officer or employee of Avigen. Dr.
Prendergast was an executive officer of Avigen from December 1992 to March 1996.
There are no Compensation Committee interlocks between Avigen and any other
entities involving our executive officers and Board members who serve as
executive officers or Board members of such entities.
Compensation Committee
Report
2
The
Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis contained in this proxy statement. Based on
this review and discussion, the Compensation Committee has recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in
this proxy statement and incorporated into our Annual Report on Form 10-K for
the fiscal year ended 2008.
COMPENSATION COMMITTEE
J
OHN
K.
A.
P
RENDERGAST
,
P
H
.D.
(
C
HAIR
)
R
ICHARD
W
ALLACE
,
B.C
OM
.
(H
ONS
)
S
TEPHEN
D
ILLY
,
M.B.B.S.,
P
H
.D.
Corporate Governance and Nominating
Committee
The
Corporate Governance and Nominating Committee of the Board of Directors, in
consultation with the Chief Executive Officer, has the primary responsibility
for establishing criteria for Board membership and identifying, evaluating,
reviewing and recommending qualified candidates to serve as directors of Avigen.
The Corporate Governance and Nominating Committee also has the primary
responsibility for evaluating, reviewing and considering the recommendation for
nomination of current directors for election to the Board of Directors as well
as monitoring the size of the Board of Directors, has the power and authority to
consider Board nominees and proposals submitted by Avigens stockholders and to
establish any procedures to facilitate stockholder communication with the Board
of Directors. In this regard, the Corporate Governance and Nominating Committee
recommended to the Board of Directors that each director be nominated in his
class at the Annual Meeting of Stockholders. The Corporate Governance and
Nominating Committee also periodically reviews, discusses and assesses the
performance of the Board of Directors and Board committees; annually recommends
to the Board of Directors the chairmanship and membership of each Board
committee; develops corporate governance principles and periodically reviews and
assesses these principles and their application; oversees and reviews the
processes and procedures used by Avigen to provide information to the Board of
Directors and its committees; and periodically reviews the compensation paid to
non-employee directors for their service on the Board of Directors and its
committees, and recommends any changes to the full Board of Directors for its
approval. Avigens Corporate Governance and Nominating Committee charter is
available on our website at www.avigen.com. All members of the Corporate
Governance and Nominating Committee are independent (as independence is
currently defined in Rule 4200(a)(15) of the Nasdaq listing
standards).
____________________
2
The material in
this report is not soliciting material, is not deemed filed with the SEC and
is not to be incorporated by reference into any filing of Avigen under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
The
Corporate Governance and Nominating Committee believes that candidates for
director should have certain minimum qualifications, including being able to
read and understand basic financial statements, being over 21 years of age and
having the highest personal integrity and ethics. The Corporate Governance and
Nominating Committee
also intends to consider such factors as possessing
relevant expertise upon which to be able to offer advice and guidance to
management, having sufficient time to devote to the affairs of Avigen,
demonstrated excellence in his or her field, having the ability to exercise
sound business judgment and having the commitment to rigorously represent the
long-term interests of Avigens stockholders. However, the Corporate Governance
and Nominating Committee retains the right to modify
24
these qualifications from time to time.
Candidates for director nominees are evaluated by the Corporate Governance and
Nominating Committee in the context of the current composition of the Board of
Directors, the operating requirements of Avigen and the long-term interests of
Avigens stockholders. In conducting this assessment, the Corporate Governance
and Nominating Committee considers the criteria for director qualifications set
by the Board of Directors, as well as diversity, age, skills, and such other
factors as it deems appropriate given the current needs of the Board of
Directors and Avigen to maintain a balance of knowledge, experience and
capability. In the case of incumbent directors whose terms of office are set to
expire, the Corporate Governance and Nominating Committee reviews such
directors overall service to Avigen during their term, including the number of
meetings attended, level of participation, quality of performance, and any other
relationships and transactions that might impair such directors independence.
In the case of new director candidates, the Corporate Governance and Nominating
Committee will also determine whether the nominee must be independent for Nasdaq
purposes, which determination is based upon applicable Nasdaq listing standards,
applicable SEC rules and regulations and the advice of counsel, if necessary.
The Corporate Governance and Nominating Committee may also use its network of
contacts to compile a list of potential candidates, but may also engage, if it
deems appropriate, a professional search firm. The Corporate Governance and
Nominating Committee conducts any appropriate and necessary inquiries into the
backgrounds and qualifications of possible candidates after considering the
function and needs of the Board of Directors. The Corporate Governance and
Nominating Committee meets to discuss and consider such candidates
qualifications and then selects, by majority vote, a nominee for recommendation
to the Board of Directors.
The
Corporate Governance and Nominating Committee will consider director candidates
recommended by stockholders. The Corporate Governance and Nominating Committee
does not intend to alter the manner in which it evaluates candidates based on
whether the candidate was recommended by a stockholder. Stockholders who wish to
recommend individuals for consideration by the Corporate Governance and
Nominating Committee to become nominees for election to the Board of Directors
may do so by delivering a written recommendation to the Corporate Governance and
Nominating Committee at the following address: 1301 Harbor Bay Parkway, Alameda,
California 94502, not less than six months prior to any meeting at which
directors are to be elected. Submissions must include the full name of the
proposed nominee, a description of the proposed nominees business experience
for at least the previous five years, complete biographical information, a
description of the proposed nominees qualifications as a director and a
representation that the nominating stockholder is a beneficial or record owner
of Avigens stock. Any such submission must be accompanied by the written proxy
of the proposed nominee to be named as a nominee and to serve as a director if
elected. To date, the Corporate Governance and Nominating Committee has not
received a timely director nominee from a stockholder of Avigen.
STOCKHOLDER COMMUNICATIONS WITH THE
BOARD OF DIRECTORS
Avigens
Board of Directors has adopted a formal process by which stockholders may
communicate with the Board of Directors or any of its directors. Stockholders
who wish to communicate with the Board of Directors or an individual director
may send a written communication addressed as follows: Avigen Board
Communication, 1301 Harbor Bay Parkway, Alameda, California 94502.
Communications may also be sent by e-mail to the following address:
board@avigen.com. Each communication sent must state the number of shares owned
by the stockholder making the communication. Each communication will be reviewed
by the Corporate Secretary of Avigen who will forward such communication to the
Board of Directors or to any individual director to whom the communication is
addressed unless the communication is unduly frivolous, hostile, threatening or
similarly inappropriate, in which case, the Corporate Secretary will discard the
communication.
CODE OF BUSINESS CONDUCT AND ETHICS
Avigen has
adopted a Code of Business Conduct and Ethics that applies to all officers,
directors and employees. The Code of Business Conduct and Ethics is available on
our website at www.avigen.com. The Code of Business Conduct and Ethics may be
found as follows:
-
From our main Web page, first hover over
Investors.
-
Next, click on Corporate
Governance.
-
Next, click on Conduct.
-
Finally, click on Code of Business Conduct and
Ethics.
25
Avigen
intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K
regarding an amendment to, or waiver from, a provision of the Code of Business
Conduct and Ethics by posting such information on its website at the address and
the location specified above.
CERTAIN LEGAL PROCEEDINGS
There are no
material proceedings to which any current director or executive officer or any
associate of any such director or officer is a party adverse to Avigen or has a
material interest adverse to Avigen.
SECURITY OWNERSHIP
OF
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information regarding the ownership of
Avigens Common Stock as of January 31, 2009 by: (1) each director and nominee
for director; (2) each of the executive officers named in the Summary
Compensation Table; (3) all executive officers and directors of Avigen as a
group; and (4) all those known by Avigen to be beneficial owners of more than
five percent of its Common Stock. Percentage ownership amounts are based on
29,769,115 outstanding shares as of January 31, 2009.
|
|
Beneficial Ownership (1)
|
|
|
Number
of
|
|
Percent of
|
Beneficial Owner
|
|
Shares
|
|
Total
|
Kenneth Chahine, J.D., Ph.D. (2)
|
|
743,155
|
|
2.44
|
%
|
Andrew Sauter
(3)
|
|
277,955
|
|
*
|
|
Michael Coffee (2)
|
|
348,997
|
|
1.16
|
%
|
Kirk Johnson,
Ph.D. (2)
|
|
333,859
|
|
1.11
|
%
|
M. Christina Thomson, J.D. (2)
|
|
350,344
|
|
1.16
|
%
|
Stephen Dilly,
M.B.B.S., Ph.D. (2)
|
|
22,300
|
|
*
|
|
Zola Horovitz, Ph.D. (4)
|
|
147,500
|
|
*
|
|
Jan Öhrström,
M.D. (2)
|
|
22,300
|
|
*
|
|
John Prendergast, Ph.D. (5)
|
|
141,608
|
|
*
|
|
Richard Wallace
(2)
|
|
39,950
|
|
*
|
|
All executive officers and directors as a group (10 persons)
(6)
|
|
2,427,968
|
|
7.55
|
%
|
|
5% Stockholders
|
|
|
|
|
|
BVF, Inc.
(7)
|
|
8,819,600
|
|
29.63
|
%
|
900 North Michigan Avenue, Suite 1100
|
|
|
|
|
|
Chicago, IL 60611
|
|
|
|
|
|
|
HealthCor Management, L.P. (8)
|
|
2,258,500
|
|
7.59
|
%
|
Carnegie Hall Tower
|
|
|
|
|
|
152 West 57th Street, 47th
Floor
|
|
|
|
|
|
New York, NY 10019
|
|
|
|
|
|
____________________
*
|
|
Less than one
percent.
|
|
|
|
(1)
|
|
This table is based
upon information supplied by officers, directors and principal
stockholders and Schedules 13G and 13D filed with the SEC. Unless
otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, Avigen believes that each of the
stockholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned. Applicable
percentages are based on 29,769,115 shares outstanding on January 31,
2009, adjusted as required by rules promulgated by the SEC. Unless
otherwise indicated, the address of each of the individuals and entities
listed in this table is c/o Avigen at the address on the first page of
this proxy statement.
|
|
(2)
|
|
Consists solely of
shares issuable upon the exercise of options that are exercisable within
60 days of the date of this table.
|
|
26
|
(3)
|
|
Includes 273,830
shares issuable upon the exercise of options held by Mr. Sauter that are
exercisable within 60 days of the date of this table.
|
|
(4)
|
|
Includes 142,500
shares issuable upon the exercise of options held by Dr. Horovitz that are
exercisable within 60 days of the date of this
table.
|
(5)
|
|
Includes 102,500
shares issuable upon the exercise of options held by Dr. Prendergast that
are exercisable within 60 days of the date of this table.
|
|
(6)
|
|
Includes an aggregate
of 2,379,735 shares issuable upon exercise of options which executive
officers and directors of Avigen have the right to acquire within 60 days
of the date of this table.
|
|
(7)
|
|
Based upon a Schedule
13D/A filed with the SEC on January 12, 2009 by Biotechnology Value Fund,
L.P. and includes shares owned by the following affiliated entities: (a)
Biotechnology Value Fund, L.P. (Fund I) 1,975,340 shares; (b)
Biotechnology Value Fund II, L.P. (Fund II) 1,364,911 shares; (c) BVF
Investments, L.L.C. (Investments) 4,969,764 shares; and (d) Investment
10, L.L.C. (Investment 10) 509,585 shares. BVF, Inc. (BVF) and BVF
Partners (Partners and, together with Fund I, Fund II, Investments and
BVF, the BVF Entities) beneficially own 8,819,600 aggregate
shares.
|
|
|
|
(8)
|
|
Based upon a Schedule
13G filed with the SEC on February 17, 2009. Collectively, HealthCor,
L.P., Healthcor Offshore Master Fund, L.P. and HealthCor Hybrid Offshore
Master Fund, L.P. (each a Fund and together, the Funds) are the
beneficial owners of a total of 2,258,500 shares of the Common Stock of
the Issuer. By virtue of their position as feeder funds, HealthCor
Offshore, Ltd. and HealthCor Hybrid Offshore, Ltd. may be deemed
beneficial owners of the shares of Common Stock owned by HealthCor
Offshore Master Fund, L.P., and HealthCor Hybrid Offshore Master Fund,
L.P., respectively. HealthCor Offshore GP, LLC is the general partner of
HealthCor Offshore Master Fund, L.P. Accordingly, HealthCor Offshore GP,
LLC may be deemed to beneficially own the shares of Common Stock that are
beneficially owned by HealthCor Offshore Master Fund, L.P. HealthCor
Group, LLC is the general partner of HealthCor Offshore GP, LLC and,
therefore, may be deemed to beneficially own the shares of Common Stock
that are beneficially owned by HealthCor Offshore Master Fund, L.P.
HealthCor Hybrid Offshore GP, LLC is the general partner of HealthCor
Hybrid Offshore Master Fund, L.P. Accordingly, HealthCor Hybrid Offshore
GP, LLC may be deemed to beneficially own the shares of Common Stock that
are beneficially owned by HealthCor Hybrid Offshore Master Fund, L.P.
HealthCor Group, LLC is the general partner of HealthCor Hybrid Offshore
GP, LLC and, therefore, may be deemed to beneficially own the shares of
Common Stock that are beneficially owned by HealthCor Hybrid Offshore
Master Fund, L.P. By virtue of its position as the investment manager of
the Funds, HealthCor Management, L.P. may be deemed a beneficial owner of
all the shares of Common Stock owned by the Funds. HealthCor Associates,
LLC is the general partner of HealthCor Management, L.P. and thus may also
be deemed to beneficially own the shares of Common Stock that are
beneficially owned by the Funds. HealthCor Group LLC is the general
partner of HealthCor Capital, L.P., which is in turn the general partner
of HealthCor, L.P. Accordingly, each of HealthCor Capital L.P. and
HealthCor Group, LLC may be deemed to beneficially own the shares of
Common Stock that are beneficially owned by HealthCor, L.P. As the
Managers of HealthCor Associates, LLC, Arthur Cohen and Joseph Healey
exercise both voting and investment power with respect to the shares of
Common Stock reported herein, and therefore each may be deemed a
beneficial owner of such Common Stock. Each of the Reporting Persons
hereby disclaims any beneficial ownership of any such Shares in excess of
their actual pecuniary interest therein. The address for all entities
other than Arthur Cohen is set forth in the table, and the address of
Arthur Cohen is 12 South Main Street, #203 Norwalk, CT
06854.
|
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 (the 1934 Act) requires Avigens
directors and executive officers, and persons who own more than ten percent of a
registered class of Avigens equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of Avigen. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish Avigen with
copies of all Section 16(a) forms they file.
To Avigens
knowledge, based solely on a review of the copies of such reports furnished to
Avigen and written representations that no other reports were required, during
the fiscal year ended December 31, 2008, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
27
CHANGE IN CONTROL OF AVIGEN, INC.
Since
January 1, 2008, based on Form 4s filed with the SEC starting in October 2008,
BVF has increased the number of shares it beneficially owns from 1,596,837
aggregate shares, or 5.4%, to 8,819,600 aggregate shares, or 29.63% -- an
increase in BVFs ownership of 24.3%. Such shares are owned by the following
entities affiliated with BVF and BVF Partners, L.P.: (a) Fund I - 1,975,340
shares; (b) Fund II - 1,364,911 shares; (c) Investments - 4,969,764 shares; and
(d) Investment 10 - 509,585 shares.
Based on a
Schedule 13D/A filed on January 12, 2009 by Biotechnology Value Fund, L.P., on
January 9, 2009, the BVF Entities, Mark N. Lampert, Matthew D. Perry, Oleg
Nodelman Robert M. Coppedge entered into a Joint Filing and Solicitation
Agreement (the Joint Filing and Solicitation Agreement) in which, among other
things, (a) the parties agreed to the joint filing and solicitation on behalf of
each of them of statements on Schedule 13D with respect to Avigens securities
to the extent required under applicable securities laws and (b) the parties
agreed to form a group for the purpose of soliciting proxies or written consents
in support of the election of Messrs. Lampert, Nodelman, Perry and Coppedge and
certain other proposals at the Special Meeting and for the purpose of taking all
other actions incidental to the foregoing. Additionally, pursuant to a letter
agreement, BVF has agreed to indemnify Mr. Coppedge against claims arising from
the solicitation of proxies from Avigens stockholders at the Special Meeting
and any related transactions.
EXECUTIVE OFFICERS
Our executive officers and their
respective ages and positions as of January 31, 2009, are as follows:
Name
|
|
Age
|
|
Position
|
Kenneth G. Chahine, J.D., Ph.D.
|
|
43
|
|
President, Chief Executive Officer and
Director
|
|
|
|
|
|
Michael D. Coffee
|
|
63
|
|
Chief Business Officer
|
|
|
|
|
|
Kirk Johnson, Ph.D.
|
|
49
|
|
Vice President, Research and Development
|
|
|
|
|
|
Andrew A. Sauter
|
|
41
|
|
Chief Financial Officer
|
|
|
|
|
|
M. Christina Thomson, J.D.
|
|
37
|
|
Vice President, General Counsel and Secretary
|
All of our
officers are elected annually by the Board of Directors. There is no family
relationship between or among any of the officers or directors.
Kenneth
G. Chahine, J.D., Ph.D.,
was appointed
President, Chief Executive Officer and director of Avigen in March 2004. Dr.
Chahine had previously served as Avigens Chief Operating Officer since July
2002 and as Vice President, Business Development and Intellectual Property since
1998. Prior to joining Avigen, Dr. Chahine worked at the patent law firm of
Madson & Metcalf, P.C. in Salt Lake City, Utah from 1994 to 1998. From 1992
to 1993, he worked as a research scientist at Parke-Davis Pharmaceuticals, a
pharmaceutical company, and held another research scientist post at the
University of Utah Department of Human Genetics from 1994 to 1996. Dr. Chahine
served as western regional news and legal correspondent for
Nature Biotechnology
from
1996 to 2002. Dr. Chahine holds a J.D. from the University of Utah and a Ph.D.
in biochemistry and molecular biology from the University of
Michigan
.
Michael
D. Coffee
has served as Avigens Chief
Business Officer since February 2005. Prior to joining Avigen, Mr. Coffee
co-founded the Alekta Group, LLC in 2004, a consulting firm, to provide a
comprehensive range of pharmaceutical development consulting services to
emerging pharmaceutical companies. From 2001 to 2004 Mr. Coffee served as
President and Chief Operating Officer of Amarin Pharmaceuticals, Inc., the U.S.
drug development and marketing subsidiary of Amarin Corporation PLC. Mr. Coffee
also served as President and Chief Operating Officer of Elan Pharmaceuticals,
North America from 1998 to 2001 and held marketing and executive management
positions, including President and Chief Operating Officer, of Athena
Neurosciences, Inc. between 1991 and 1998. Mr. Coffee received a B.S. in biology
from Siena College.
28
Kirk
Johnson, Ph.D.,
was appointed Vice President,
Research and Development in December 2006. Dr. Johnson joined Avigen in January
2004 and was appointed Vice President, Preclinical Development in June 2004 and
has played a major role in redirecting the company and establishing the
pipeline. Prior to joining Avigen, Dr. Johnson was Senior Director, Pharmacology
& Preclinical Development and a member of the executive management team of
Genesoft Pharmaceuticals, a pharmaceutical company, from 2001 to 2004. From 1991
to 2001, Dr. Johnson was employed in both protein and small molecule therapeutic
research and development at Chiron Corporation, a biopharmaceutical company, and
eventually served as Director, Pharmacology and Preclinical Research. Dr.
Johnson was involved in leading IND-enabling programs, supporting clinical
development, and contributing to successful IND and NDA filings at Chiron and
Genesoft. In addition to general pharmacology and other preclinical development
responsibilities, he has led research and clinical development projects for
diverse indications including neuropathic pain, hemophilia, antibacterials,
diabetes, obesity, acute inflammation and cardiovascular disease and has
published more than 60 manuscripts and holds 5 U.S. patents. Dr. Johnson earned
a B.S. in toxicology from U.C. Davis, and a Ph.D. in pharmacology and toxicology
from the Medical College of Virginia. He completed postdoctoral fellowships
studying the mechanism of action of IL-2 from 1986-1991 at both Dartmouth
Medical School and the University of California, Berkeley.
Andrew A.
Sauter
was appointed Chief Financial Officer
in February 2008 after having served as Vice President, Finance since January
2006. Mr. Sauter joined Avigen as Controller in November 1999. Mr. Sauter
oversees the financial reporting obligations of Avigen and its information
technology needs. From 1992 to 1999, Mr. Sauter worked for BankAmerica
Corporation in a variety of positions, including most recently as a vice
president in the Capital Markets Finance organization. From 1989 to 1992, he
worked for Ernst & Young LLP. Mr. Sauter is a certified public accountant
and holds a B.A. degree in economics from Claremont McKenna College.
M.
Christina Thomson, J.D.,
was appointed Vice
President, General Counsel in January 2009. Ms. Thomson joined Avigen in
February 2000 and was appointed Vice President, Corporate Counsel in June 2004.
She has also served as our Chief Compliance Officer since March 2004 and
Corporate Secretary since January 2006. Ms. Thomson is a registered patent
attorney, and has managed significant growth in Avigens patent portfolio over
the last seven years. Ms. Thomson also oversees the companys litigation and
administrative patent proceedings, as well as contract administration. Prior to
joining Avigen, Ms. Thomson worked as a patent attorney with the law firm Knobbe
Martens Olson & Bear LLP in Newport Beach, California, as a patent agent
with Madson & Metcalf, P.C. in Salt Lake City, Utah, and as a scientist for
Myriad Genetic Laboratories. Ms. Thomson holds a J.D. from the University of
Utah College of Law and an M.S. in biology from the University of Utah.
EXECUTIVE COMPENSATION
C
OMPENSATION
D
ISCUSSION
A
ND
A
NALYSIS
Compensation Philosophy
Our
compensation approach is designed to reward the achievement of corporate
objectives and individual performances that contribute toward building a
sustainable business that develops differentiated products to improve the health
and quality of life of patients and creates value for our stockholders. To this
end, the Board of Directors and management establish annual and long-term
corporate goals that reflect the priorities of our product and business
development plans. Our Board of Directors and management review these goals on a
regular basis and our Compensation Committee (the Committee) uses these
objectives to determine levels of compensation for executive officers to ensure
management incentives are aligned with the interests of stockholders.
Avigens
compensation practice is designed to provide remuneration packages that are
commensurate with the marketplace in which we compete to attract and motivate
our executive officers, management and staff to achieve our strategic
objectives. Specifically, we review base salaries annually and, along with a
comprehensive array of medical, health, life insurance and disability plans
generally available to all our employees,, set salaries at levels that are
intended to attract, engage and retain executive officers whose abilities are
critical to our long-term success and competitiveness. We vary bonus payments
annually based on a performance structure designed to reward results and balance
individual accountability with team-oriented collaboration that fosters
integrity and a high-performance culture. Historically, we also issue
equity-based compensation annually in varying amounts that are intended to
represent a significant portion of each executives total compensation package
because we believe it promotes innovation and calculated assessment and
management of risk designed to achieve Avigens long-term objectives.
29
Drug
development is slow, costly and associated with a high failure rate. Therefore,
successful drug development can extend over many years and requires our
executives to employ their judgment in developing long-term operating plans
that:
-
identify meaningful treatments for patients,
-
effectively demonstrate the safety and
efficacy of our products, and
-
protect our intellectual property and
optimize the use of our financial resources in order to maximize value
retention for our stockholders.
The
Committee believes that in determining compensation, management performance
should be evaluated against specific strategic objectives that create
stockholder value. Complete achievement of these strategic objectives may extend
beyond a given compensation period; therefore, the Committee must use its
discretionary judgment based on the experience and knowledge within the industry
of its members, in assessing the quality of managements performance within an
established framework of general parameters for annual compensation.
Compensation Components
The
Committee draws on a number of reference sources to assist in the evaluation of
the various components of executive compensation. One source is industry data
compiled in the Radford Biotechnology Survey which represents a nationally-based
assessment of executive compensation widely used within the pharmaceutical and
biotechnology industry sectors. The Committee generally focuses on regional data
from companies in the San Francisco Bay Area and targets compensation levels
that fall within the 50
th
and 70
th
percentiles reported for
comparable positions based on the Committees subjective determination as to the
appropriate range to attract and retain our executives given the size of our
company. In addition, the Committee examines performance compensation packages
of a number of selected companies that develop products for similar neurological
indications or that are at a similar employee size and development stage. In
2007, this group consisted of Acorda Therapeutics, Inc., XenoPort, Inc.,
Renovis, Inc., Pain Therapeutics, and Palatin Technologies, Inc., however, in
2008, given the companys immediate efforts to preserve cash in response to the
termination of the AV650 program, the Committee, with the support of management,
determined not to take any immediate actions on compensation for fiscal 2008,
and so the Committee did not conduct a competitive analysis of compensation
packages from other companies.
To establish
the relationship between executive compensation and the creation of stockholder
value, the Committee subjectively evaluates the success of the management team
as a whole and each individual executives performance in contributing to
achieving the companys strategic objectives. The Committee applies its
assessment within the framework of our compensation program which defines a
discretionary range in which to determine individual compensation adjustments
for each executive officer. Our compensation program consists of three principal
components: salary, short-term incentive compensation consisting of incentive
bonus payments, and long-term incentive compensation consisting of equity
grants. Each year, the Committee reviews executive officer compensation using
summary tally sheets that show for each of the executive officers the
following: (a) summary of total compensation; (b) each element of current
compensation; and (c) cumulative amount of all previously issued equity awards.
Base
Salary
.
The
Committee reviews each executives base salary annually. Among the factors taken
into consideration are (1) individual performance, (2) corporate performance
measured against strategic objectives, (3) levels of responsibility, (4) prior
experience, (5) breadth of knowledge of the industry, and (6) competitive pay
practices examined from industry source material discussed above. The Committee
does not assign any specific weighting to these various factors when determining
base salary.
Incentive
Bonus.
The Committee sets target incentive
levels annually for each executive officer in consultation and discussion with
Dr. Chahine, other than for his own target incentive level. Ordinarily, the
Committee considers industry data compiled by Radford and determines the
appropriate level of target incentive bonus award for our chief executive
officer and for our other executive officers as a percentage of their respective
base salaries based on the Committees subjective determination as to the
appropriate range to attract and retain our executive officers given the size of
the company, assigning the actual percentage within this range based upon the
level of each executive officers responsibility and experience. The Committee
determines actual bonus payments based on subjective assessments of the
performance of management and individual officers in achieving the companys
strategic objectives, applied to these target incentive
30
levels. As a function of this process, the
Committee met several times throughout the year with Dr. Chahine to review the
status of the management teams individual contributions. The 2008 strategic
objectives against which corporate performance was intended to be measured are
discussed below under 2008 Performance.
The
Committee establishes the companys strategic objectives in discussions with Dr.
Chahine at the beginning of the compensation period to ensure that its
performance evaluations at the end of the compensation period reflect the
strategic priorities of the company to create value for our stockholders.
Ordinarily, Dr. Chahine reviews the performance of the company and of each
executive officer, other than his own, with the Committee at the end of the
compensation period and makes recommendations to the Committee for its review
and final determination.
Equity
Incentives.
The Committee is responsible for
making stock option grants under Avigens 2006 Equity Incentive Plan (the 2006
Plan), and believes that long-term stockholder value is best achieved through
an ownership culture among all our employees, particularly our executives,
through grants of stock-based awards.
The
Committee grants stock-based awards under the 2006 Plan with multi-year vesting
periods designed as incentives to retain key employees to continue in the employ
of Avigen. Through option grants, executives receive significant equity
incentives to build long-term stockholder value. The exercise price of options
granted under the 2006 Plan is 100% of fair market value of the underlying stock
on the date of grant. Employees receive value from these grants only if Avigens
Common Stock appreciates over the long-term. The size of option grants is
determined based primarily on Avigens philosophy of significantly linking
executive compensation with stockholder interests, the individual criteria set
forth below, and the Committees use of industry sources in order to be
knowledgeable of compensation practices for companies of a similar size and
development stage in the biotechnology and pharmaceutical industries.
Historically, the Committee does not target any specific level as compared to
industry average in determining stock option grants.
Change in Control Arrangements.
The Board of Directors, upon the
recommendation of the Committee, established a Management Transition Plan (the
Transition Plan) in 1998, which was amended in March 2005 and again in October
2008. The Transition Plan is intended to retain key employees and enable
executive officers to represent stockholder interests during periods involving a
possible change in control of the company, and to provide severance benefits in
the event of termination of employment without cause. The Transition Plan is
designed to protect the earned benefits of key employees, including executive
officers, against adverse changes that may result from a change in control of
the company or termination without cause. The level of payments provided under
the agreement for executives reflects the
Committees subjective view, based upon its experience, of comparable
benefits offered to executives under change of control arrangements at other
companies within the industry in a similar development stage.
In October
2008, the Board amended the Transition Plan to comply with certain changes in
federal tax regulations that were required to be made before December 31, 2008,
and at the same time, the Committee reviewed benefit levels offered by other
companies within the industry similar to Avigen. Based on this review, the
Committee adjusted the benefits included in the Transition Plan by adding an
additional three months of severance benefits for each executive officer and
extending those benefits to circumstances in which an executive officer was
terminated without cause. The amendments were adopted to make the Transition
Plan comparable to benefits offered by companies similar to Avigen, as without
this security, we were at risk of losing executive talent necessary to preserve
the value of the companys assets.
Each of our
named executive officers are participants in the plan and will receive the
following benefits if their employment is involuntarily terminated, or they
resign as a result of a constructive termination, as defined under the Plan:
-
15 months base salary (21 months in the
case of Dr. Chahine);
-
extended option exercisability of two
years;
-
full accelerated vesting of outstanding
stock options; and
-
15 months (18 months in the case of Dr.
Chahine) health benefits payments, or until such earlier date as the executive
officer secures subsequent employment that provides substantially similar
health benefits.
31
2008 Performance
At the
beginning of the year, the Committee determined to base its assessment of
Avigens overall performance for the fiscal year ended December 31, 2008 on the
following strategic objectives:
-
Quality data from Phase II clinical development progress of AV650;
-
Responsible management of finances;
-
Clinical development progress of AV411;
-
Development and progress toward clinical testing of AV513;
-
Evaluation, identification and
development of new product candidates for clinical testing, including
proprietary analogs for AV411; and
-
Execution of a strategic plan that
efficiently manages financial and staffing resources to support the research
and development needs of the company, including raising additional capital for
clinical testing.
Historically, the Committee applies
its discretion in determining a subjective evaluation of the overall performance
of the company. For fiscal 2008, the Committee took into consideration the
performance of management against all the 2008 strategic objectives, including
the quality execution of the AV650 Phase II clinical trial, responsible
management of finances, and the successful sale of companys early-stage AV513
program for $7 million, and authorized the accrual of $250,000 for bonus payouts
to executive officers. In discussions with Dr. Chahine, and given the companys
immediate efforts to preserve cash in response to the termination of the AV650
program, the Committee, with the support of management, has not authorized the
payout of any bonuses from that pool.
2009 Compensation
The
Committee, with the support of management, has determined (given the current
business environment) not to adjust base salaries for 2009, other than in
connection with the promotion of Ms. Thomson to Vice President, General Counsel.
Effective January 1, 2009. Ms. Thomsons base salary was increased to $267,931.
The Committee has not yet finalized or determined the relative weighting of
strategic objectives to be used as the basis for its evaluation of managements
performance for fiscal 2009.
S
UMMARY
C
OMPENSATION
T
ABLE
The
following table shows for the fiscal years ended December 31, 2008, 2007 and
2006, compensation awarded to or paid to, or earned by, Avigens Chief Executive
Officer, Chief Financial Officer and its three other most highly compensated
executive officers at December 31, 2008 (the Named Executive Officers).
32
Summary Compensation
Table
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
All
Other
|
|
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Compensatio
n
|
|
|
|
Name and Principal
Position
|
|
|
Year
|
|
($)
|
|
($)
|
|
($)
(2
)
|
|
($)
(3
)
|
|
Total ($)
|
Kenneth G. Chahine,
|
|
|
2008
|
|
$
|
443,251
|
|
|
(1
)
|
|
$
|
341,318
|
|
$
|
4,552
|
|
$
|
789,120
|
President and Chief Executive Officer
|
|
2007
|
|
|
426,613
|
|
$
|
158,380
|
|
|
333,763
|
|
|
4,299
|
|
|
923,055
|
|
|
|
2006
|
|
|
407,239
|
|
|
95,000
|
|
|
271,027
|
|
|
4,199
|
|
|
777,465
|
Andrew A.
Sauter,
|
|
|
2008
|
|
|
267,931
|
|
|
(1
)
|
|
|
208,961
|
|
|
3,378
|
|
|
480,270
|
Chief Financial
Officer
|
|
|
2007
|
|
|
238,625
|
|
|
68,903
|
|
|
166,461
|
|
|
3,558
|
|
|
477,547
|
|
|
|
2006
|
|
|
229,017
|
|
|
28,000
|
|
|
98,733
|
|
|
3,458
|
|
|
359,208
|
Michael D. Coffee,
|
|
|
2008
|
|
|
313,903
|
|
|
(1
)
|
|
|
281,150
|
|
|
4,712
|
|
|
599,765
|
Chief Business Officer
|
|
|
2007
|
|
|
302,120
|
|
|
90,636
|
|
|
237,876
|
|
|
4,711
|
|
|
635,343
|
|
|
|
2006
|
|
|
288,400
|
|
|
69,000
|
|
|
152,547
|
|
|
4,711
|
|
|
514,658
|
Kirk W. Johnson,
Ph.D.,
|
|
|
2008
|
|
|
278,528
|
|
|
(1
)
|
|
|
249,062
|
|
|
4,451
|
|
|
532,040
|
Vice President
Research and
|
|
|
2007
|
|
|
248,824
|
|
|
74,025
|
|
|
282,000
|
|
|
4,091
|
|
|
608,940
|
Development
|
|
|
2006
|
|
|
237,524
|
|
|
46,000
|
|
|
192,092
|
|
|
4,091
|
|
|
479,707
|
M. Christina Thompson, J.D.,
|
|
2008
|
|
|
221,524
|
|
|
(1
)
|
|
|
242,283
|
|
|
3,366
|
|
|
467,174
|
Vice President, General
|
|
|
2007
|
|
|
239,861
|
|
|
65,062
|
|
|
234,067
|
|
|
3,466
|
|
|
542,456
|
Counsel and Secretary
|
|
|
2006
|
|
|
239,444
|
|
|
46,000
|
|
|
162,436
|
|
|
3,466
|
|
|
451,346
|
____________________
(1)
|
|
The Compensation Committee
authorized the accrual of $250,000 for bonus payouts to executive officers
for 2008, but has not authorized the allocation or payout of any bonuses
from that pool.
|
|
|
|
(2)
|
|
The amounts shown in this column
represent the dollar amounts recognized for financial statement reporting
purposes for each fiscal year ended December 31, in accordance with FAS
123(R), excluding an estimate of forfeitures related to service-based
vesting conditions, and thus include amounts from awards granted in and
prior to 2008. Assumptions used in the calculation of these amounts are
described in the notes to Avigens audited financial statements for the
fiscal year ended December 31, 2008, which will be included in Avigens
Annual Report on Form 10-K expected to be filed with the SEC on March 16,
2009. All grants were made subject to individual award agreements, the
form of which was previously filed with the SEC.
|
|
|
|
(3)
|
|
Except as otherwise indicated,
represents insurance premiums paid by Avigen with respect to supplemental
long-term care insurance for the benefit of the Named Executive Officer
and up to $2,500 of matching contributions to Avigens 401(k) savings
plan.
|
G
RANTS
O
F
P
LAN
-B
ASED
A
WARDS
There were
no grants of plan-based awards to the Named Executive Officers for the fiscal
year ended December 31, 2008.
O
UTSTANDING
E
QUITY
A
WARDS AT
F
ISCAL
Y
EAR
E
ND
The
following table shows for the fiscal year ended December 31, 2008, certain
information regarding outstanding equity awards at fiscal year end for the Named
Executive Officers.
33
Outstanding Equity Awards at December
31, 2008
|
|
Option Awards
(1)
|
|
|
Number
of
|
|
Number
of
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
|
Options
(#)
|
|
Options
(#)
|
|
Exercise
|
|
Expiration
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Price ($)
(2)
|
|
Date
|
Kenneth
Chahine (3)
|
|
37,500
|
|
-
|
|
$
|
5.88
|
|
01/16/09
|
|
|
17,500
|
|
-
|
|
|
5.38
|
|
07/01/09
|
|
|
25,000
|
|
-
|
|
|
29.00
|
|
05/19/10
|
|
|
75,000
|
|
-
|
|
|
38.19
|
|
06/14/10
|
|
|
100,000
|
|
-
|
|
|
14.63
|
|
03/09/11
|
|
|
37,500
|
|
-
|
|
|
8.53
|
|
07/02/12
|
|
|
75,000
|
|
-
|
|
|
3.53
|
|
05/20/13
|
|
|
125,000
|
|
-
|
|
|
3.38
|
|
06/25/14
|
|
|
26,812
|
|
6,188
|
|
|
3.14
|
|
07/01/15
|
|
|
137,500
|
|
12,500
|
|
|
5.06
|
|
02/22/16
|
|
|
52,500
|
|
37,500
|
|
|
5.50
|
|
01/03/17
|
|
|
37,775
|
|
75,549
|
|
|
4.42
|
|
12/05/17
|
Andrew Sauter
(4)
|
|
25,000
|
|
-
|
|
$
|
17.50
|
|
11/01/09
|
|
|
5,000
|
|
-
|
|
|
29.00
|
|
05/19/10
|
|
|
13,333
|
|
-
|
|
|
14.63
|
|
03/09/11
|
|
|
7,500
|
|
-
|
|
|
8.53
|
|
07/02/12
|
|
|
13,000
|
|
-
|
|
|
3.53
|
|
07/11/13
|
|
|
20,000
|
|
-
|
|
|
3.13
|
|
08/10/14
|
|
|
14,062
|
|
938
|
|
|
3.25
|
|
01/03/15
|
|
|
8,187
|
|
2,813
|
|
|
3.45
|
|
07/12/15
|
|
|
34,375
|
|
15,625
|
|
|
3.63
|
|
01/18/16
|
|
|
45,833
|
|
4,167
|
|
|
5.06
|
|
02/22/16
|
|
|
37,917
|
|
27,083
|
|
|
5.50
|
|
01/03/17
|
|
|
27,282
|
|
54,563
|
|
|
4.42
|
|
12/05/17
|
Michael
Coffee (5)
|
|
140,625
|
|
9,375
|
|
$
|
2.86
|
|
02/23/15
|
|
|
5,687
|
|
1,313
|
|
|
3.14
|
|
07/01/15
|
|
|
105,416
|
|
9,584
|
|
|
5.06
|
|
02/22/16
|
|
|
37,917
|
|
27,083
|
|
|
5.50
|
|
01/03/17
|
|
|
27,282
|
|
54,563
|
|
|
4.42
|
|
12/05/17
|
Kirk Johnson
(6)
|
|
70,000
|
|
-
|
|
$
|
6.31
|
|
01/12/14
|
|
|
50,000
|
|
-
|
|
|
3.38
|
|
06/25/14
|
|
|
13,406
|
|
3,094
|
|
|
3.14
|
|
07/01/15
|
|
|
105,416
|
|
9,584
|
|
|
5.06
|
|
02/22/16
|
|
|
40,833
|
|
29,167
|
|
|
5.50
|
|
01/03/17
|
|
|
29,381
|
|
58,760
|
|
|
4.42
|
|
12/05/17
|
M.
Christina Thomson (7)
|
|
20,000
|
|
-
|
|
$
|
47.63
|
|
02/07/10
|
|
|
18,333
|
|
-
|
|
|
14.63
|
|
03/09/11
|
|
|
10,000
|
|
-
|
|
|
8.53
|
|
07/02/12
|
|
|
12,500
|
|
-
|
|
|
3.53
|
|
07/11/13
|
|
|
92,000
|
|
-
|
|
|
3.38
|
|
06/25/14
|
|
|
8,406
|
|
3,094
|
|
|
3.14
|
|
07/01/15
|
|
|
105,416
|
|
9,584
|
|
|
5.06
|
|
02/22/16
|
|
|
37,917
|
|
27,083
|
|
|
5.50
|
|
01/03/17
|
|
|
22,968
|
|
45,935
|
|
|
4.42
|
|
12/05/17
|
34
____________________
(1)
|
|
All option awards were
granted on a date 10-years prior to the expiration date, with option
awards that were granted prior to February 22, 2006 vesting in 16 equal
quarterly installments from the date of grant and option awards granted on
or after February 22, 2006 vesting in 12 equal quarterly installments from
the date of grant.
|
|
(2)
|
|
Option exercise price
subtotals represent the weighted average of all outstanding equity awards
including both exercisable and unexercisable.
|
|
(3)
|
|
In the aggregate,
these options are to purchase 878,824 shares of our Common Stock at a
weighted average exercise price of $9.37 per share.
|
|
(4)
|
|
In the aggregate,
these options are to purchase 356,678 shares of our Common Stock at a
weighted average exercise price of $6.14 per share.
|
|
|
|
(5)
|
|
In the aggregate,
these options are to purchase 418,845 shares of our Common Stock at a
weighted average exercise price of $4.18 per share.
|
|
(6)
|
|
In the aggregate,
these options are to purchase 409,641 shares of our Common Stock at a
weighted average exercise price of $4.93 per share.
|
|
(7)
|
|
In the aggregate,
these options are to purchase 413,236 shares of our Common Stock at a
weighted average exercise price of $7.12 per
share.
|
O
PTION
E
XERCISES AND
S
TOCK
V
ESTED
There were
no option exercises or stock vested to the Named Executive Officers for the
fiscal year ended December 31, 2008.
P
OTENTIAL
P
AYMENTS
U
PON
T
ERMINATION OR
C
HANGE IN
C
ONTROL
Avigen
initially adopted its Transition Plan (the Transition Plan) in July 1998. In
May 2005, Avigens Board, upon the recommendation of the Compensation Committee
of the Board, amended the Transition Plan to retain key employees and enable
executive officers to represent stockholder interests during periods involving a
possible change in control. The Transition Plan is designed to protect the
earned benefits of key employees, including executive officers, against adverse
changes that may result from a change in control of Avigen. In October 2008, the
Board amended the Transition Plan to comply with certain changes in federal tax
regulations that were required to be made before December 31, 2008 and to
provide each participant with severance benefits in the event she or he was
terminated other than for cause or was constructively terminated. At that time,
the Compensation Committee took the opportunity to assess whether the benefits
included in the Transition Plan were comparable to such plans in companies
similar to Avigen and determined to add an additional three months of severance
benefits for each executive officer.
An employee
of Avigen becomes a participant in the Transition Plan only if Avigen delivers
to that employee a Transition Plan Eligibility Notice, in which case the
employee becomes a Participant in the Transition Plan. Each of Dr. Chahine,
Mr. Coffee, Ms. Thomson, Dr. Johnson, and Mr. Sauter is a participant in the
Transition Plan.
A Participant in the Transition Plan
will receive, if the Participants employment with Avigen terminates due to an
involuntary termination or a constructive termination, as those terms are
defined in the Transition Plan, the following benefits:
|
(a)
|
|
salary continuation for the
number of months designated in the Transition Plan Eligibility Notice
given to the Participant;
|
|
|
|
(b)
|
|
accelerated stock option vesting
and extended exercisability as provided in the Transition Plan Eligibility
Notice given to the Participant; and
|
|
|
|
(c)
|
|
Avigen will pay the COBRA
premiums for the Participant for the number of months designated in the
Transition Plan Eligibility Notice given to the Participant, up to 18
months, or until such earlier date as the Participant becomes covered by a
health plan of a subsequent employer.
|
35
The current named executive officers
of Avigen who are Participants, and the terms of their participation, are:
|
|
|
Option
|
|
|
Salary
|
Option
|
Extended
|
COBRA
|
Name/Position
|
Continuation
|
Acceleration
|
Exercisability
|
Payments
|
Kenneth G.
Chahine, J.D., Ph.D.
|
21
months
|
Full
|
2
years
|
18
months
|
Andrew A. Sauter
|
15
months
|
Full
|
2
years
|
15
months
|
Michael D. Coffee
|
15
months
|
Full
|
2
years
|
15
months
|
Kirk Johnson, Ph.D.
|
15
months
|
Full
|
2
years
|
15
months
|
M.
Christina Thomson, J.D.
|
15 months
|
Full
|
2 years
|
15 months
|
If an
involuntary termination or a constructive termination of a Participant
occurred on December 31, 2008, that Participant would have received the
following benefits:
|
|
Salary
|
|
COBRA
|
Name
|
|
Continuation
|
|
Payments
|
Kenneth Chahine
|
|
$
|
775,689
|
|
|
$
|
28,881
|
|
Andrew
Sauter
|
|
|
334,914
|
|
|
|
24,464
|
|
Michael Coffee
|
|
|
392,379
|
|
|
|
26,752
|
|
Kirk
Johnson
|
|
|
348,160
|
|
|
|
26,752
|
|
M. Christina Thomson
|
|
|
334,914
|
|
|
|
18,295
|
|
An
involuntary termination is the dismissal or discharge by Avigen other than for
cause, where cause is defined to include: commission of an intentional act to
materially injure Avigen; intentional refusal or failure to follow lawful and
reasonable directions of the Board or the appropriate individual to whom the
participant reports; willfully and habitually neglected duties for Avigen; or
conviction of a felony involving moral turpitude that is likely to inflict or
has inflicted material injury on Avigen. The termination of a Participants
employment will not be deemed to be an involuntary termination if the
termination occurs as a result of that Participants death or
disability.
A
constructive termination occurs when a Participant voluntarily terminates
employment with Avigen in the event that, without the participants consent, any
of specified events occur, including: the assignment of duties or
responsibilities which result in a diminution in position or function; a
reduction by Avigen in annual base salary; failure by Avigen to continue in
effect any benefit plan or program or the taking of any action by Avigen that
would adversely affect participation in or reduce benefits under the benefit
plans or deprive the participant of any fringe benefit enjoyed at the time of a
change in control; relocation by Avigen, or the relocation of Avigens principal
executive offices if the participants principal office is at such offices, to a
location more than thirty (30) miles from the location at which the participant
was performing duties prior to the change in control; a material breach of the
Transition Plan or a material breach of a written agreement with the participant
regarding the terms and conditions of employment; or any failure by Avigen to
obtain the assumption of the Transition Plan or any material agreement with the
participant regarding the terms and conditions of employment by any successor or
assign of Avigen.
No amounts
are attributable to vesting of stock options, as the exercise price of all stock
options was in excess of the closing price of our Common Stock on December 31,
2008.
E
QUITY
I
NCENTIVE
P
LANS
In the event
of a dissolution or liquidation of Avigen, the Board of Directors may accelerate
vesting on some or all of the outstanding Stock Awards, as defined in Avigens
2006 Equity Incentive Plan (the Plan), so that such Stock Awards become fully
vested, exercisable and/or no longer subject to repurchase or forfeiture (to the
extent such Stock Awards have not previously expired or terminated) before the
dissolution or liquidation is completed but contingent on its
completion.
In the event
of a Corporate Transaction, as defined in the Plan, in which the surviving
corporation or acquiring corporation (or its parent company) does not assume or
continue outstanding stock awards or substitute similar stock awards for such
outstanding stock awards, the vesting of such stock awards shall (contingent
upon the effectiveness of the Corporate Transaction) be accelerated in full to a
date prior to the effective time of such Corporate Transaction as the Board
shall determine. No amounts are attributable to accelerated vesting of stock
options, as the exercise price of all stock options was in excess of the closing
price of our Common Stock on December 31, 2008.
36
D
IRECTOR
C
OMPENSATION
Compensation of
Directors
Effective
January 1, 2006, each of Avigens non-employee directors receives an annual
retainer of $28,000. Any non-employee director who serves as Chairman of
Avigens Board of Directors receives, in addition to regular payments for
service rendered as a member of the Board of Directors, an additional annual
retainer of $28,000. Dr. Zola Horovitz is currently designated as Chairman of
the Board of Directors. Any non-employee director who serves as the Lead
Independent Director of Avigens Board of Directors receives, in addition to
regular payments for service rendered as a member of the Board of Directors, an
additional annual retainer of $14,000 to be paid in equal quarterly
installments. Dr. John K. A. Prendergast is currently designated as the Lead
Independent Director. There are no additional fees for attendance at Board of
Directors or committee meetings; however, Avigen reimburses members of the Board
of Directors for their expenses incurred in connection with attendance at Board
and committee meetings in accordance with Avigens policy. In the fiscal year
ended December 31, 2008, the total compensation paid to non-employee directors
was $193,667.
Each of
Avigens non-employee directors is qualified to receive stock option grants
under Avigens 2006 Equity Incentive Stock Option Plan. The Board of Directors
has determined that non-employee directors of Avigen, not serving as Chairman,
will be granted options to purchase 20,000 shares of Avigens Common Stock at
each annual meeting of Avigens stockholders if such non-employee director has
served for the entire preceding year. An option to purchase a prorated number of
shares is granted to each non-employee director who has served for less than the
full preceding year. In addition, each director who is elected for the first
time to be a non-employee director of Avigen will be granted an option to
purchase 30,000 shares upon the date of initial election to the Board of
Directors whether by the Board of Directors or stockholders of
Avigen.
The Board of
Directors has also determined that any non-employee director that serves as
Chairman of Avigens Board of Directors will be granted options to purchase
40,000 shares of Avigens Common Stock at each annual meeting of Avigens
stockholders.
The
following table shows for the fiscal year ended December 31, 2008 certain
information with respect to the compensation of all non-employee directors of
Avigen:
D
IRECTOR
C
OMPENSATION
F
OR
F
ISCAL
2008
|
|
Fees Earned or
|
|
Option
|
|
|
|
|
|
Paid in Cash
|
|
Awards ($)
|
|
|
|
Name
|
|
($)
|
|
(2)(3)(4)
|
|
Total ($)
|
Zola Horovitz, Ph.D.
|
|
$
|
56,000
|
|
$
|
110,301
|
|
$
|
166,301
|
Stephen Dilly,
M.B.B.S., Ph.D.
|
|
|
28,000
|
|
|
45,570
|
|
|
73,570
|
Yuichi Iwaki M.D., Ph.D. (1)
|
|
|
11,667
|
|
|
85,412
|
|
|
97,079
|
Jan Öhrström,
M.D.
|
|
|
28,000
|
|
|
45,570
|
|
|
73,570
|
John Prendergast, Ph.D.
|
|
|
42,000
|
|
|
47,501
|
|
|
89,501
|
Richard
Wallace
|
|
|
28,000
|
|
|
63,302
|
|
|
91,302
|
____________________
(1)
|
|
Includes $47,356
attributable to an extension of the exercise period for Dr. Iwakis
options.
|
|
(2)
|
|
The amounts shown in
this column represent the dollar amounts recognized for financial
statement reporting purposes for the fiscal year ended December 31, 2008
in accordance with FAS 123(R), excluding an estimate of forfeitures
related to service-based vesting conditions, and thus include amounts from
awards granted in and prior to 2008. Assumptions used in the calculation
of these amounts are described in the notes to Avigens audited financial
statements for the fiscal year ended December 31, 2008, which will be
included in Avigens Annual Report on Form 10-K expected to be filed with
the SEC on or about March 16, 2009. All grants were made subject to
individual award agreements, the form of which was previously filed with
the SEC.
|
|
(3)
|
|
The following options
were outstanding as of December 31, 2008: Z. Horovitz: 222,500; S. Dilly:
56,667; Y. Iwaki: 115,000; J. Öhrström: 56,667; J. Prendergast: 142,500;
and R. Wallace: 75,000.
|
|
|
|
(4)
|
|
The following table
sets forth each grant of options to Avigens non-employee directors during
2008 under the 2006 Plan, together with the exercise price per share and
grant fair value of each award computed in accordance with FAS 123(R)
using the Black-Scholes model.
|
37
|
|
Options
|
|
|
|
|
|
|
|
Grant
Date
|
|
|
Granted
|
|
|
|
Exercise
|
|
Fair
Value
|
|
|
in
|
|
Grant
|
|
Price Per
|
|
of
Option
|
Non-employee Director
|
|
2008 (#)
|
|
Date
|
|
Share ($)
|
|
Award ($)
|
Zola Horovitz, Ph.D.
|
|
40,000
|
|
05/19/08
|
|
$
|
2.96
|
|
|
62,660
|
Stephen G.
Dilly, M.B.B.S., Ph.D.
|
|
20,000
|
|
05/19/08
|
|
|
2.96
|
|
|
31,330
|
Jan K. Öhrström, M.D.
|
|
20,000
|
|
05/19/08
|
|
|
2.96
|
|
|
31,330
|
John K. A.
Prendergast, Ph.D.
|
|
20,000
|
|
05/19/08
|
|
|
2.96
|
|
|
31,330
|
Richard Wallace
|
|
20,000
|
|
05/19/08
|
|
|
2.96
|
|
|
31,330
|
HOUSEHOLDING OF PROXY
MATERIALS
The SEC has
adopted rules that permit companies and intermediaries (e.g., brokers) to
satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by delivering a
single proxy statement addressed to those stockholders. This process, which is
commonly referred to as householding, potentially means extra convenience for
stockholders and cost savings for companies.
A single
proxy statement may be delivered to multiple stockholders sharing an address
unless contrary instructions have been received from the affected stockholders.
Once you have received notice from your broker that it will be householding
communications to your address, householding will continue until you are
notified otherwise or until you notify your broker or Avigen that you no longer
wish to participate in householding. If, at any time, you no longer wish to
participate in householding and would prefer to receive a separate proxy
statement and annual report in the future you may (1) notify your broker, (2)
direct your written request to: Investor Relations, Avigen, Inc., 1301 Harbor
Bay Parkway, Alameda, California 94502, or (3) contact our Chief Financial
Officer, Andrew Sauter, at (510) 748-7150. Stockholders who currently receive
multiple copies of the proxy statement at their address and would like to
request householding of their communications should contact their broker. In
addition, Avigen will promptly deliver, upon written or oral request to the
address or telephone number above, a separate copy of the annual report and
proxy statement to a stockholder at a shared address to which a single copy of
the documents was delivered.
A copy of
Avigens Annual Report to the Securities and Exchange Commission on Form 10-K
for the fiscal ended December 31, 2008 will be available after March 16, 2009
without charge upon written request to: Investor Relations, Avigen, Inc., 1301
Harbor Bay Parkway, Alameda, California 94502.
DIRECTIONS TO SPECIAL MEETING
LOCATION
The Special
Meeting will be held at Avigens offices at 1301 Harbor Bay Parkway, Alameda,
California at 9:00 a.m. (local time) on Friday, March 27, 2009. Directions to
this location are available at http://www.avigen.com/contactus.php.
OTHER MATTERS
The Board of
Directors knows of no other matters that will be presented for consideration at
the Special Meeting of Stockholders, and the Avigen Bylaws provide that only
matters specified in the notice of the Special Meeting may properly be brought
before the Special Meeting. If any other matters are properly brought before the
Special 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
Sincerely,
M.
C
HRISTINA
T
HOMSON
Vice President, General Counsel and Secretary
March 9, 2009
38
YOUR VOTE IS IMPORTANT
Please take a moment now to vote your
shares of Avigen, Inc.
Common Stock for the upcoming Special Meeting of
Stockholders.
PLEASE REVIEW THE PROXY STATEMENT AND
VOTE TODAY IN ONE OF THREE WAYS:
1.
|
|
Vote by Telephone
Please call toll-free in the U.S. or Canada at
1-866-252-6933
, on a touch-tone telephone. If outside the U.S. or
Canada, call
1-215-521-1349
. Please follow the simple instructions.
You will be required to provide the unique control number printed
below.
|
OR
2.
|
|
Vote by Internet
Please access
https://www.proxyvotenow.com/avgn
, and follow
the simple instructions. Please note you must type an s after http. You
will be required to provide the unique control number printed
below.
|
You may vote by telephone or Internet 24 hours a day, 7 days a
week.
Your telephone or Internet vote
authorizes the named proxies to vote your shares in the same
manner
as if you had marked,
signed and returned a WHITE proxy
card.
|
OR
3.
|
|
Vote by Mail
If you do not wish to vote by telephone or over the Internet, please
complete, sign, date and return the WHITE proxy card in the envelope
provided, or mail to: Avigen, Inc., c/o Innisfree M&A Incorporated,
FDR Station, P.O. Box 5155, New York, NY
10150-5155
|
6
TO VOTE BY MAIL PLEASE DETACH PROXY CARD HERE AND SIGN, DATE AND
RETURN IN THE ENVELOPE PROVIDED
6
|
AVIGENS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE AGAINST THE BOARD REMOVAL PROPOSAL, AND TAKES NO POSITION WITH
RESPECT TO THE BYLAW AMENDMENT PROPOSAL OR THE REPEAL BYLAWS
PROPOSAL.
|
|
|
|
|
|
|
|
BOARD REMOVAL
PROPOSAL:
|
|
AGAINST
|
|
FOR
|
|
ABSTAIN
|
To remove all of the current
directors serving on Avigens Board of Directors, without cause.
|
|
¨
|
|
¨
|
|
¨
|
|
|
|
|
|
|
|
BYLAW AMENDMENT
PROPOSAL:
|
|
AGAINST
|
|
FOR
|
|
ABSTAIN
|
To amend Avigens Amended and
Restated Bylaws (Bylaws) to permit stockholders to elect directors to
the Board in cases when the entire board is vacant.
|
|
¨
|
|
¨
|
|
¨
|
|
|
|
|
|
|
|
REPEAL BYLAWS
PROPOSAL:
|
|
AGAINST
|
|
FOR
|
|
ABSTAIN
|
To repeal any provision of the
Bylaws that was effected since January 8, 2009.
|
|
¨
|
|
¨
|
|
¨
|
|
|
|
|
|
|
|
ELECTION
PROPOSAL:
The Election Proposal is subject to the
effectiveness of the Board Removal Proposal. This proxy will not be voted
on the Election Proposal. If you return this proxy and do not attend the
Special Meeting in person you will not have the right to vote with respect
to the Election Proposal.
|
|
These items of business are more
fully described in the Proxy Statement accompanying this proxy
card.
|
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
Signature (if
jointly held)
|
|
|
|
|
|
|
|
|
Title(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 sign, date and
promptly return this proxy card in the enclosed postage-paid
envelope.
PLEASE VOTE TODAY!
SEE REVERSE SIDE
FOR THREE EASY WAYS TO VOTE!
6
TO VOTE BY MAIL PLEASE DETACH PROXY CARD HERE, AND SIGN,
DATE AND RETURN IN THE ENVELOPE PROVIDED
6
|
W
H
I
T
E
P
R
O
X
Y
|
|
AVIGEN, INC. PROXY SOLICITED BY THE
BOARD OF DIRECTORS FOR THE SPECIAL MEETING
OF STOCKHOLDERS TO BE HELD
ON March 27, 2009
The undersigned hereby appoints
KENNETH G. CHAHINE and M. CHRISTINA THOMSON, and each of them, as
attorneys and proxies of the undersigned, with full power of substitution,
to vote any or all of the shares of stock of Avigen, Inc. which the
undersigned may be entitled to vote at the Special Meeting of Stockholders
of Avigen, Inc. to be held at Avigens offices at 1301 Harbor Bay Parkway,
Alameda, California, on Friday, March 27, 2009 at 9:00 a.m. (local
time), and at any and all postponements, continuations and adjournments
thereof, with all powers that the undersigned would possess if personally
present, upon and in respect of the matters listed on the reverse side and
in accordance with the instructions designated on the reverse side, with
discretionary authority as to any and all other matters that may properly
come before the Special Meeting.
Your shares will be voted as
directed. If no direction is made on the Board Removal Proposal, your
shares will be voted AGAINST such proposal. If no direction is made on
the Bylaw Amendment Proposal or the Repeal Bylaws Proposal, your shares
will be voted ABSTAIN with respect to such proposal. Your shares will
not be voted with respect to the Election Proposal.
THE UNDERSIGNED, A HOLDER OF
SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE, OF AVIGEN, INC. (THE
COMMON STOCK), ACTING WITH RESPECT TO ALL OF THE SHARES OF COMMON STOCK
HELD BY THE UNDERSIGNED,
HEREBY REVOKES ALL PROXIES PREVIOUSLY GIVEN BY THE
UNDERSIGNED TO VOTE AT THE SPECIAL MEETING OF STOCKHOLDERS OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
|
(continued and to be signed on the
reverse)
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