SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
[X] Definitive proxy statement Commission only (as permitted by
[ ] Definitive additional materials Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule 14a-11(C)or Rule 14a-12
AVANT IMMUNOTHERAPEUTICS, INC.
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(Name of Registrant as specified in Its Charter)
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(Name of Person[s] Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined.):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement number:
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(3) Filing party:
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(4) Date filed:
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[GRAPHIC OMITTED]
April 1, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
AVANT Immunotherapeutics, Inc. This year's meeting will be held on Wednesday,
May 8, 2002 at 2:00 p.m., local time, at our offices located at 119 Fourth
Avenue, Needham, Massachusetts.
The attached proxy statement, with formal notice of the meeting on the
first page, describes the matters expected to be acted upon at the meeting. We
urge you to review these materials carefully and to use this opportunity to
take part in the affairs of AVANT by voting on the matters described in this
proxy statement. We hope that you will be able to attend the meeting. At the
meeting we will review our operations, report on 2001 financial results and
discuss our plans for the future. Our directors and management team will be
available to answer questions.
Your vote is important. Whether or not you plan to attend the meeting,
please complete the enclosed proxy card and return it as promptly as possible
or vote electronically via the Internet or by telephone. The enclosed proxy
card contains instructions regarding voting. If you attend the meeting, you may
continue to have your shares voted as instructed in the proxy or you may
withdraw your proxy at the meeting and vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
[GRAPHIC OMITTED]
J. Barrie Ward, Ph.D
Chairman of the Board
[GRAPHIC OMITTED]
AVANT Immunotherapeutics, Inc.
119 Fourth Avenue
Needham, MA 02494
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Notice of Annual Meeting of Stockholders
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The annual meeting of stockholders of AVANT Immunotherapeutics, Inc. will
be held at 2:00 p.m. on May 8, 2002, at our offices located at 119 Fourth
Avenue, Needham, Massachusetts, for the following purposes:
1. To amend the AVANT Immunotherapeutics, Inc. 1999 Stock Option and
Incentive Plan (the "Plan"), as described herein.
2. To elect seven directors to serve until the 2003 annual meeting of
stockholders and until their successors are duly elected and qualified.
3. To transact any other business which may properly come before the
meeting.
Stockholders of record at the close of business on March 15, 2002 will be
entitled to notice of and to vote at the meeting and any adjournment or
postponement thereof. Stockholders who are unable to attend the meeting in
person are requested to complete, sign, date and return the enclosed form of
proxy in the envelope provided. No postage is required if mailed in the United
States. If you would like to vote electronically via the Internet or by
telephone, please follow the instructions on the proxy card. Any proxy may be
revoked at any time prior to its exercise at the annual meeting.
A copy of our annual report to stockholders for the fiscal year ended
December 31, 2001 is being mailed to you with this notice and proxy statement.
By Order of the Board of Directors
[GRAPHIC OMITTED]
/s/ Avery W. Catlin
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AVERY W. CATLIN
Secretary
Needham, Massachusetts
April 1, 2002
YOUR VOTE IS IMPORTANT.
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WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO DATE,
SIGN AND PROMPTLY RETURN YOUR PROXY, OR TO VOTE ELECTRONICALLY OR BY TELEPHONE
IN ACCORDANCE WITH THE INSTRUCTIONS ON THE PROXY CARD.
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TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING ....................................... 1
What is the purpose of the annual meeting? .......................................... 1
Who is entitled to vote? ............................................................ 1
Can I attend the meeting? ........................................................... 1
What constitutes a quorum? .......................................................... 1
How do I vote? ...................................................................... 2
Will other matters be voted on at the annual meeting? ............................... 2
Can I revoke my proxy instructions? ................................................. 2
What other information should I review before voting? ............................... 2
PROPOSAL 1: AMENDMENT OF 1999 STOCK OPTION AND INCENTIVE PLAN ........................ 3
Proposal ............................................................................ 3
Reasons for Amendment ............................................................... 3
Summary of the 1999 Plan ............................................................ 3
New 1999 Plan Benefits .............................................................. 6
Tax Aspects under the U.S. Internal Revenue Code .................................... 6
Vote Required ....................................................................... 7
Recommendation ...................................................................... 7
PROPOSAL 2: ELECTION OF DIRECTORS .................................................... 7
Introduction ........................................................................ 7
Vote Required ....................................................................... 7
Recommendation ...................................................................... 7
Information Regarding the Nominees and Executive Officers ........................... 8
The Board of Directors and Its Committees ........................................... 9
Section 16(a) Beneficial Ownership Reporting Compliance ............................. 10
Certain Relationships and Related Transactions ...................................... 10
PRINCIPAL AND MANAGEMENT STOCKHOLDERS ................................................ 10
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS ..................................... 13
Director Compensation ............................................................... 13
Executive Compensation .............................................................. 13
Summary Compensation Table .......................................................... 13
Options Granted in Last Fiscal Year ................................................. 14
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values ... 14
Employment Contracts, Termination of Employment and Change-of-Control Arrangements .. 14
REPORT OF THE COMPENSATION COMMITTEE ................................................. 15
Compensation Committee Interlocks and Insider Participation ......................... 16
REPORT OF THE AUDIT COMMITTEE ........................................................ 16
INDEPENDENT ACCOUNTANTS .............................................................. 17
Audit Fees .......................................................................... 17
Financial Information Systems Design and Implementation Fees ........................ 17
All Other Fees ...................................................................... 17
STOCK PERFORMANCE GRAPH .............................................................. 18
OTHER MATTERS ........................................................................ 19
Expenses of Solicitation ............................................................ 19
Stockholder Proposals for 2003 Annual Meeting ....................................... 19
[GRAPHIC OMITTED]
April 1, 2002
AVANT IMMUNOTHERAPEUTICS, INC.
119 Fourth Avenue
Needham, Massachusetts 02494
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PROXY STATEMENT
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This proxy statement is furnished to the holders of common stock, par
value $.001 per share, of AVANT Immunotherapeutics, Inc. in connection with the
solicitation of proxies by and on behalf of the Board of Directors of AVANT for
the 2002 annual meeting of stockholders to be held at our offices located at
119 Fourth Avenue, Needham, Massachusetts on May 8, 2002, and at any
adjournments or postponements thereof. This proxy statement and the
accompanying notice of annual meeting of stockholders and proxy card are first
being mailed to stockholders on or about April 1, 2002.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What is the purpose of the annual meeting?
At the annual meeting, stockholders will act upon the matters set forth in
the accompanying notice of meeting, including the amendment of the AVANT
Immunotherapeutics, Inc. 1999 Stock Option and Incentive Plan and the election
of directors.
Who is entitled to vote?
If our records show that you are a stockholder as of the close of business
on March 15, 2002, which is referred to as the record date, you are entitled to
receive notice of the annual meeting and to vote the shares of common stock
that you held on the record date. Each outstanding share of common stock
entitles its holder to cast one vote for each matter to be voted upon.
Can I attend the meeting?
All stockholders of record of shares of common stock of AVANT at the close
of business on the record date, or their designated proxies, are authorized to
attend the annual meeting. Each stockholder or proxy will be asked to present a
form of valid picture identification, such as a driver's license or passport.
What constitutes a quorum?
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of common stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the annual
meeting. As of the record date, there were 60,458,397 shares of common stock
outstanding and entitled to vote at the annual meeting. Shares that reflect
votes withheld for director nominees, abstentions or "broker non-votes" (i.e.,
shares represented at the meeting held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and the broker or nominee does not have
discretionary voting power to vote such shares) will be counted for purposes of
determining whether a quorum is present for the transaction of business at the
annual meeting.
1
How do I vote?
Voting by Proxy Holders for Shares Registered Directly in the Name of the
Stockholder. If you hold your shares in your own name as a holder of record,
you may instruct the proxy holders named in the enclosed proxy card how to vote
your common shares by signing, dating and mailing the proxy card in the
postage-paid envelope that has been provided to you by AVANT.
Voting by Proxy Holders for Shares Registered in the Name of a Brokerage
Firm or Bank. If your common shares are held by a broker, bank or other nominee
(i.e., in "street name"), you will receive instructions from your nominee which
you must follow in order to have your common shares voted.
Vote by Mail. If you would like to vote by mail, mark your proxy card,
sign and date it, and return it to ADP Financial Services, Inc. in the
postage-paid envelope provided.
Vote in Person. If you are a registered stockholder and attend the annual
meeting, you may deliver your completed proxy card in person. "Street name"
stockholders who wish to vote at the meeting will need to obtain a proxy form
from the broker, bank or other nominee that holds their common shares of
record.
Vote by Telephone. If you hold your common shares in your own name as
holder of record, you may vote by telephone by calling the toll-free number
listed on the accompanying proxy card. Telephone voting is available 24 hours a
day until 11:59 p.m. Eastern Time on May 7, 2002. When you call you will
receive a series of voice instructions which will allow you to vote your common
shares. A control number, located above the registration line of your proxy
card, verifies your identity as a stockholder and allows you to vote your
common shares and confirm that your voting instructions have been recorded
properly. If you vote by telephone, you do not need to return your proxy card.
Vote by Internet. You also have the option to vote via the Internet. The
website for Internet voting is printed on your proxy card. Internet voting is
available 24 hours a day until 11:59 p.m. Eastern Time on May 7, 2002. As with
telephone voting, you will be given the opportunity to confirm that your voting
instructions have been properly recorded. If you vote by Internet, you do not
need to return your proxy card.
Will other matters be voted on at the annual meeting?
We are now not aware of any other matters to be presented at the annual
meeting other than those described in this proxy statement. If any other
matters not described in the proxy statement are properly presented at the
meeting, proxies will be voted in accordance with the best judgment of the
proxy holders.
Can I revoke my proxy instructions?
You may revoke your proxy at any time before it has been exercised by:
o filing a written revocation with the Secretary of AVANT at the address
set forth below;
o filing a duly executed proxy bearing a later date; or
o appearing in person and voting by ballot at the annual meeting.
Any stockholder of record as of the record date attending the annual
meeting may vote in person whether or not a proxy has been previously given,
but the presence (without further action) of a stockholder at the annual
meeting will not constitute revocation of a previously given proxy.
What other information should I review before voting?
For your review, our 2001 annual report, including financial statements
for the fiscal year ended December 31, 2001, is being mailed to stockholders
concurrently with this proxy statement. The annual report, however, is not part
of the proxy solicitation material. For your further review, a copy of our
annual report filed with the Securities and Exchange Commission (the "SEC") on
Form 10-K, including the financial statements and the financial statement
schedule, may be obtained without charge by writing to the Secretary of AVANT
at the following address: 119 Fourth Avenue, Needham, Massachusetts 02494-2725.
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PROPOSAL 1: AMENDMENT OF 1999 STOCK OPTION AND INCENTIVE PLAN
Proposal
In February 2002, our Board of Directors voted to amend the 1999 Stock
Option and Incentive Plan (the "1999 Plan") effective as of May 8, 2002, and is
recommending this amendment to our stockholders for approval.
The amendment to the 1999 Plan would authorize the Company to issue up to
an additional 1,500,000 shares of common stock pursuant to various stock
incentive awards under the 1999 Plan, bringing the total reserved shares
authorized to be issued under the 1999 Plan (including previously issued shares
of restricted stock and shares issuable under outstanding options) from
2,000,000 shares to 3,500,000 shares. No more than 500,000 shares of common
stock will be available for grants in the form of unrestricted stock awards,
restricted stock awards and performance share awards. The number of shares of
common stock reserved for issuance under the 1999 Plan is subject to adjustment
for stock splits, stock dividends and similar events.
Based solely on the closing price of common stock as reported on the
NASDAQ National Market on March 15, 2002 of $1.69 per share, the maximum
aggregate market value of the additional 1,500,000 shares of common stock
reserved for issuance under the 1999 Plan would be $2,535,000.
The amendment to the 1999 Plan will become effective only if Proposal 1 is
approved by our stockholders.
Reasons for Amendment
Our Board of Directors believes that stock options and other stock-based
awards play an important roll in the success of the Company by encouraging and
enabling the officers and other employees of the Company and its Subsidiaries
upon whose judgment, initiative and efforts the Company largely depends for the
successful conduct of its business to acquire a proprietary interest in the
Company. Our Board anticipates that providing such persons with a direct stake
in the Company will assure a closer identification of the interests of
participants in the 1999 Plan with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.
The amendment to the 1999 Plan is necessary to provide for an adequate
number of shares of common stock available for grant under the 1999 Plan.
Accordingly, our Board of Directors has voted, subject to shareholder approval,
to amend the 1999 Plan.
Summary of the 1999 Plan
The following description of the material terms of the 1999 Plan is
intended to be a summary only and does not describe every provision of the 1999
Plan. This summary is qualified in its entirety by the full text of the 1999
Plan.
1999 Plan Administration. The 1999 Plan provides for administration by a
committee of not fewer than two non-employee directors (the "Administrator"),
as appointed by our Board of Directors from time to time.
The Administrator has full power to select, from among the individuals
eligible for awards, the individuals to whom awards will be granted, to make
any combination of awards to participants, and to determine the specific terms
and conditions of each award, subject to the provisions of the 1999 Plan. The
Administrator may permit common stock, and other amounts payable pursuant to an
award, to be deferred. In such instances, the Administrator may permit
interest, dividend or deemed dividends to be credited to the amount of
deferrals.
Eligibility and Limitations on Grants. All officers, employees, directors
and other key persons of the Company are eligible to participate in the 1999
Plan, subject to the discretion of the Administrator. In no event may any one
participant receive options or stock appreciation rights with respect to more
than
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500,000 shares of common stock (subject to adjustment for stock splits and
similar events) during any one calendar year period. In addition, the maximum
award of restricted stock, performance shares or deferred stock (or combination
thereof) for any one individual that is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code will not
exceed 250,000 shares of common stock (subject to adjustment for stock splits
and similar events) for any performance cycle. The number of individuals
potentially eligible to participate in the 1999 Plan is approximately 80
persons.
Stock Options. Options granted under the 1999 Plan may be either Incentive
Stock Options ("Incentive Options") (within the meaning of Section 422 of the
Code) or Non-Qualified Stock Options ("Non-Qualified Options"). Options granted
under the 1999 Plan will be Non-Qualified Options if they (i) fail to meet such
definition of Incentive Options, (ii) are granted to a person not eligible to
receive Incentive Options under the Code, or (iii) otherwise so provide.
Incentive Options may be granted only to officers or other employees of the
Company. Non-Qualified Options may be granted to persons eligible to receive
Incentive Options and to non-employee directors and other key persons.
Other Option Terms. The Administrator has authority to determine the terms
of options granted under the 1999 Plan. Generally, options are granted with an
exercise price that is not less than the fair market value of the shares of
common stock on the date of the option grant.
The term of each option will be fixed by the Administrator and may not
exceed ten years from date of grant. The Administrator will determine at what
time or times each option may be exercised and, subject to the provisions of
the 1999 Plan, the period of time, if any, after retirement, death, disability
or termination of employment during which options may be exercised. Options may
be made exercisable in installments, and the exercisability of options may be
accelerated by the Administrator. In general, unless otherwise permitted by the
Administrator, no option granted under the 1999 Plan is transferable by the
optionee other than by will or by the laws of descent and distribution, and
options may be exercised during the optionee's lifetime only by the optionee,
or by the optionee's legal representative or guardian in the case of the
optionee's incapacity.
Options granted under the 1999 Plan may be exercised for cash or, if
permitted by the Administrator, by transfer to the Company (either actually or
by attestation) of shares of common stock which are not then subject to
restrictions under any Company stock plan, which have been held by the optionee
for at least six months or were purchased on the open market, and which have a
fair market value equivalent to the option exercise price of the shares being
purchased, or by compliance with certain provisions pursuant to which a
securities broker delivers the purchase price for the shares to the Company.
At the discretion of the Administrator, stock options granted under the
1999 Plan may include a "re-load" feature pursuant to which an optionee
exercising an option by the delivery of shares of common stock would
automatically be granted an additional stock option (with an exercise price
equal to the fair market value of the common stock on the date the additional
stock option is granted) to purchase that number of shares of common stock
equal to the number delivered to exercise the original stock option. The
purpose of this feature is to enable participants to maintain any equity
interest in the Company without dilution.
To qualify as Incentive Options, options must meet additional federal tax
requirements, including a $100,000 limit on the value of shares subject to
Incentive Options which first become exercisable in any one calendar year, and
a shorter term and higher minimum exercise price in the case of certain large
stockholders.
Stock Options Granted to Non-Employee Directors. The 1999 Plan provides
for the automatic grant of Non-Qualified Options to non-employee directors.
Each non-employee director who is serving as a director of the Company on the
fifth business day after each annual meeting of stockholders will automatically
be granted on such day a Non-Qualified Option to acquire 10,000 shares of
common stock. The exercise price of each such Non-Qualified Option is the fair
market value of common stock on the date of grant. Each such Non-Qualified
Option is exercisable on the first anniversary of the grant date. Such
Non-Qualified Options will expire ten years from the date of grant. The
Administrator may also make discretionary grants of Non-Qualified Options to
non-employee directors.
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Stock Appreciation Rights. The Administrator may award a stock
appreciation right ("SAR") either as a freestanding award or in tandem with a
stock option. Upon exercise of the SAR, the holder will be entitled to receive
an amount equal to the excess of the fair market value on the date of exercise
of one share of common stock over the exercise price per share specified in the
related stock option (or, in the case of a freestanding SAR, the price per
share specified in such right) times the number of shares of common stock with
respect to which the SAR is exercised. This amount may be paid in cash, common
stock, or a combination thereof, as determined by the Administrator.
Restricted Stock Awards. The Administrator may grant shares (at par value
or for a higher purchase price determined by the Administrator) of common stock
to any participant subject to such conditions and restrictions as the
Administrator may determine. These conditions and restrictions may include the
achievement of pre-established performance goals and/or continued employment
with the Company through a specified vesting period. The vesting period shall
be determined by the Administrator. The purchase price of shares of restricted
stock will be determined by the Administrator. If the applicable performance
goals and other restrictions are not attained, the participant will forfeit his
or her award of restricted stock. In addition, restricted stock may be granted
to any participant by the Administrator in lieu of cash compensation due to
such participant.
Unrestricted Stock Awards. The Administrator may also grant shares (at no
cost or for a purchase price determined by the Administrator) of common stock
which are free from any restrictions under the 1999 Plan. Unrestricted stock
may be granted to any participant in recognition of past services or other
valid consideration, and may be issued in lieu of cash compensation due to such
participant.
Dividend Equivalent Rights. The Administrator may grant dividend
equivalent rights which entitle the recipient to receive credits for dividends
that would be paid if the recipient had held specified shares of common stock.
Dividend equivalent rights may be granted as a component of another award or as
a freestanding award. Dividend equivalent rights credited under the 1999 Plan
may be paid currently or be deemed to be reinvested in additional shares of
common stock, which may thereafter accrue additional dividend equivalent rights
at fair market value at the time of deemed reinvestment or on the terms then
governing the reinvestment of dividends under our dividend reinvestment plan,
if any. Dividend equivalent rights may be settled in cash, shares of common
stock or a combination thereof, in a single installment or installments, as
specified in the award.
Deferred Stock Awards. The Administrator may also award phantom stock
units as deferred stock awards to participants. The deferred stock awards are
ultimately payable in the form of shares of common stock and may be subject to
such conditions and restrictions as the Administrator may determine. These
conditions and restrictions may include the achievement of certain performance
goals and/or continued employment with the Company through a specified vesting
period. During the deferral period, subject to terms and conditions imposed by
the Administrator, the deferred stock awards may be credited with dividend
equivalent rights. Subject to the consent of the Administrator, a participant
may make an advance election to receive a portion of his or her compensation or
restricted stock award otherwise due in the form of a deferred stock award.
Performance Share Awards. The Administrator may grant performance share
awards to any participant which entitles the recipient to receive shares of
common stock upon the achievement of individual or company performance goals
and such other conditions as the Administrator shall determine.
Tax Withholding. Participants under the 1999 Plan are responsible for the
payment of any federal, state or local taxes which we are required by law to
withhold upon any option exercise or vesting of other awards. Participants may
elect to have the minimum tax withholding obligations satisfied either by
authorizing us to withhold shares of common stock to be issued pursuant to an
option exercise or other award, or by transferring to the Company shares of
common stock having a value equal to the amount of such taxes.
Change of Control Provisions. The 1999 Plan provides that in the event of
a "change of control" as defined in the 1999 Plan, all stock options, SARs and
dividend equivalent rights will automatically become fully exercisable. The
restrictions and conditions on all other awards will automatically be deemed
waived.
5
Adjustments for Stock Dividends, Mergers, etc. The 1999 Plan authorizes
the Administrator to make appropriate adjustments to the number of shares of
common stock that are subject to the 1999 Plan and to any outstanding stock
options and SARs to reflect stock dividends, stock splits and similar events.
In the event of certain transactions, such as a merger, consolidation,
dissolution or liquidation of the Company, the 1999 Plan and all awards will
terminate unless the parties to the transaction, in their discretion, provide
for appropriate substitutions or adjustments of outstanding of outstanding
stock options or awards. Before any outstanding stock options and awards will
terminate, the option holder will have an opportunity to exercise all
outstanding options, and holders of all other awards will a cash or in kind
payment of such appropriate consideration as determined by the Administrator in
its sole discretion after taking into account the consideration payable per
share of common stock pursuant to the business combination.
Amendments and Termination. Our Board of Directors may at any time amend
or discontinue the 1999 Plan and the Administrator may at any time amend or
cancel any outstanding award for the purpose of satisfying changes in law or
for any other lawful purpose, but no such action shall adversely affect the
rights under any outstanding awards without the holder's consent. To the extent
required by the Code to ensure that options granted under the 1999 Plan qualify
as Incentive Options or that compensation earned under stock options granted
under the 1999 Plan qualify as performance-based compensation under the Code,
1999 Plan amendments shall be subject to approval by our stockholders.
Repricing Awards. Without the prior approval of our stockholders, the
exercise price of any stock options or SARs may not be reduced after the date
of the award, other than to appropriately reflect changes in the capital
structure of the Company.
New 1999 Plan Benefits
No grants have been made with respect to the additional shares of common
stock to be reserved for issuance under the 1999 Plan. The number of shares of
common stock that may be granted to executive officers and non-executive
officers is indeterminable at this time, as such grants are subject to the
discretion of the Administrator.
Tax Aspects under the U.S. Internal Revenue Code
The following is a summary of the principal federal income tax
consequences of transactions under the 1999 Plan. It does not describe all
federal tax consequences under the 1999 Plan, nor does it describe state or
local tax consequences.
Incentive Options. No taxable income is generally realized by the optionee
upon the grant or exercise of an Incentive Option. If shares of common stock
issued to an optionee pursuant to the exercise of an Incentive Option are sold
or transferred after two years from the date of grant and after one year from
the date of exercise, then (i) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) will be taxed to
the optionee as a long-term capital gain, and any loss sustained will be a
long-term capital loss, and (ii) there will be no deduction for the Company for
federal income tax purposes. The exercise of an Incentive Option will give rise
to an item of tax preference that may result in alternative minimum tax
liability for the optionee.
If shares of common stock acquired upon the exercise of an Incentive
Option are disposed of prior to the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition"), generally (i)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of the shares of
common stock at exercise (or, if less, the amount realized on a sale of such
shares of common stock) over the option price thereof, and (ii) the Company
will be entitled to deduct such amount. Special rules will apply where all or a
portion of the exercise price of the Incentive Option is paid by tendering
shares of common stock.
If an Incentive Option is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a Non-Qualified
Option. Generally, an Incentive Option will not be eligible for the tax
treatment described above if it is exercised more than three months following
6
termination of employment (or one year in the case of termination of employment
by reason of disability). In the case of termination of employment by reason of
death, the three-month rule does not apply.
Non-Qualified Options. With respect to Non-Qualified Options under the
1999 Plan, no income is realized by the optionee at the time the option is
granted. Generally (i) at exercise, ordinary income is realized by the optionee
in an amount equal to the difference between the option price and the fair
market value of the shares of common stock on the date of exercise, and the
Company receives a tax deduction for the same amount, and (ii) at disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss depending on how long the shares
of common stock have been held. Special rules will apply where all or a portion
of the exercise price of the Non-Qualified Option is paid by tendering shares
of common stock.
Parachute Payments. The vesting of any portion of any option or other
award that is accelerated due to the occurrence of a change of control may
cause a portion of the payments with respect to such accelerated awards to be
treated as "parachute payments" as defined in the Code. Any such parachute
payments may be non-deductible to the Company, in whole or in part, and may
subject the recipient to a non-deductible 20% federal excise tax on all or a
portion of such payment (in addition to other taxes ordinarily payable).
Limitation on the Company's Deductions. As a result of Section 162(m) of
the Code, the Company's deduction for certain awards under the 1999 Plan may be
limited to the extent that a Covered Employee receives compensation in excess
of $1,000,000 in such taxable year of the Company (other than performance-based
compensation that otherwise meets the requirements of Section 162(m) of the
Code).
Vote Required
A quorum must be present and the holders of a majority of shares present
or represented by proxy and entitled to vote and voting on such matter must
vote in favor of approval of the amendment to the 1999 Plan.
Recommendation
Our Board of Directors unanimously recommends a vote FOR the approval of
the amendment to the 1999 Plan.
PROPOSAL 2: ELECTION OF DIRECTORS
Introduction
Seven directors, constituting the entire Board of Directors, are to be
elected at the annual meeting. Each of the nominees listed below is currently a
director of AVANT and has consented to be nominated and to serve if elected. In
the event that a vacancy may occur during the year, such vacancy may be filled
by the Board of Directors for the remainder of the full term. All nominees will
be elected to serve until the next annual meeting of stockholders and until
their successors are duly elected and qualified. In the event any of these
nominees shall be unable to serve as a director, the shares represented by the
proxy will be voted for the person, if any, who is designated by the Board of
Directors to replace the nominee.
Vote Required
Directors must be elected by a plurality of the votes of the shares of
common stock present in person or represented by proxy and entitled to vote on
the issue at the annual meeting. Votes may be cast for or withheld from each
nominee. Votes cast for the nominees will count as "yes votes"; votes that are
withheld from the nominees or broker non-votes will be excluded entirely from
the vote and will have no effect.
Recommendation
The Board of Directors unanimously recommends a vote FOR their nominees.
Proxies solicited by the Board will be voted FOR each of the nominees unless
instructions to withhold or to the contrary are given.
7
Information Regarding the Nominees and Executive Officers
The following table sets forth the nominees for the Board of Directors,
their ages and the year in which each first became a director.
Year First
Nominee Age Became Director
------- ----- ----------------
J. Barrie Ward, Ph.D. .......... 63 1998
Una S. Ryan, Ph.D. ............. 60 1996
Frederick W. Kyle .............. 69 1998
Thomas R. Ostermueller ......... 53 1994
Harry H. Penner, Jr. ........... 56 1997
Peter A. Sears ................. 63 1999
Karen Shoos Lipton ............. 48 2001
The following biographical descriptions set forth certain information with
respect to the nominees for election as directors at the annual meeting and the
executive officers who are not directors, based on information furnished to
AVANT by each nominee and executive officer. The following information is
correct as of March 01, 2002.
Nominees for Election as Directors
J. Barrie Ward, Ph.D. Dr. Ward has served as Chairman of the Board of
Directors of AVANT since August 1998. Currently Dr. Ward is Chief Executive
Officer of KuDOS Pharmaceuticals Ltd. in Cambridge, England. Previously, he was
Chairman of the Board of Directors and Chief Executive Officer of Virus
Research Institute, Inc. from July 1994 to August 1998. From 1984 to 1994, Dr.
Ward was Director of the Microbiology Division of Glaxo Research and
Development Ltd. He currently serves as Chairman of the Board of Directors of
Sense Proteomics Ltd.
Una S. Ryan, Ph.D. Dr. Ryan has been Chief Executive Officer of AVANT
since August 1996 and President, Chief Operating Officer and a director of
AVANT since May 1996. Dr. Ryan joined us as Vice President, Research and Chief
Scientific Officer in May 1993. She is also Research Professor of Medicine at
the Whitaker Cardiovascular Institute of the Boston University School of
Medicine. Prior to joining AVANT, Dr. Ryan was Director of Health Sciences at
Monsanto Company from January 1990 to November 1992 and Research Professor of
Surgery, Medicine and Cell Biology at Washington University School of Medicine
from 1990 to 1993. Dr. Ryan is a member of the Governing Body of Biotechnology
Industry Organization's (BIO) Emerging Companies Section and serves on the
Board of BIO and the Massachusetts Biotechnology Council. She is currently a
director of U.S. Biosystems, Inc. and IQUUM, Inc.
Frederick W. Kyle. Mr. Kyle has been a director since August 1998. He was
a director of VRI from July 1996 to August 1998. He has been a consultant to
companies in the healthcare field since January 1994. From December 1991 until
January 1994 he was Senior Vice President of the American Red Cross. For eleven
years prior to that he was with SmithKline Beecham Pharmaceuticals (now
GlaxoSmithKline), most recently as President of Worldwide Pharmaceutical
Operations and as a member of the Board of Directors of SmithKline Beecham plc.
He is currently a director of Computerized Medical Systems, Inc., Arrail Dental
Limited and Cytometrics, Inc.
Thomas R. Ostermueller. Mr. Ostermueller has been a director since May
1994. He is currently an Independent Management Consultant, having previously
served as a Management Consultant with A.T. Kearney, Inc. from March 1998 to
February 2002. Previously, he served as President, Chief Executive Officer and
a director of V.I. Technologies, Inc. from February 1995 to September 1997, and
Executive Vice President, Chief Operating Officer and member of the Board of
Trustees of the New York Blood Center from February 1993 to 1995. He was
Executive Vice President of the Mead Johnson Nutritional Group, Bristol-Myers
Squibb from 1990 to 1993, and Vice President of Bristol-Myers from July 1988
until 1990.
8
Harry H. Penner, Jr. Mr. Penner has been a director since January 1997. He
is currently President and Chief Executive Officer of Nascent BioScience, LLC,
a firm engaged in the creation and development of new biotechnology companies.
In December 2001, he was appointed BioScience Advisor to the Governor and the
State of Connecticut. From 1993 to 2001 he was President, Chief Executive
Officer and a director of Neurogen Corporation. Previously, he served as
Executive Vice President of Novo Nordisk A/S and President of Novo Nordisk of
North America, Inc. from 1988 to 1993. From 1985 to 1988 he was Executive Vice
President and General Counsel of Novo Nordisk A/S. He has served as Chairman of
the Board of Directors for the Connecticut Technology Council, Co-Chairman of
Connecticut United for Research Excellence, and Director of the Connecticut
Business and Industry Associates. He currently serves on the Boards of
Genaissance Pharmaceuticals, Inc, BioStratum, Inc. and Rib-X Pharmaceuticals,
Inc.
Peter A. Sears. Mr. Sears has been a director since May 1999. He recently
retired as Vice President, Business Investments, SmithKline Beecham Corporation
(now GlaxoSmithKline), and President and Founder of S.R. One, Limited,
SmithKline's venture capital fund. He was with SmithKline from 1963 and S.R.
One, Limited from 1985 to 1999. Since 1997, Mr. Sears has been Adjunct
Professor of Management, Johnson School of Management, Cornell University. He
currently serves on the Board of Directors of Alere Medical, Inc., Viral
Therapeutics, Inc. and Pinnacle Pharmaceuticals, Inc.
Karen Shoos Lipton. Ms. Lipton was appointed Chief Executive Officer of
the American Association of Blood Banks in October 1994. Previously she has
held senior positions at the American Red Cross since 1984, including Acting
Senior Vice President, Biomedical Services (1993-1994) and Secretary and
General Counsel (1990-1993). Prior to the American Red Cross, Ms. Lipton was a
lawyer in private practice. Ms. Lipton currently serves on the Department of
Health and Human Services, Advisory Committee on Blood Safety and Availability.
Executive Officers
The following persons are executive officers who are not directors of
AVANT. Officers are elected annually by the Board of Directors until their
successors are duly elected and qualified.
Name of Individual Age Position and Office
- ------------------ ----- -------------------
Avery W. Catlin ...................... 53 Senior Vice President, Chief Financial Officer and
Secretary
Henry C. Marsh, Jr., Ph.D. ........... 51 Vice President, Research
Alistair W.E. Wheeler, M.D. .......... 42 Vice President, Medical Affairs
Avery W. Catlin. Mr. Catlin joined AVANT in January 2000. Prior to joining
us, he served as Vice President, Operations and Finance, and Chief Financial
Officer of Endogen, Inc., a public life science research products company, from
1996 to 1999. From 1992 to 1996, Mr. Catlin held various financial positions at
Repligen Corporation, a public biopharmaceutical company, serving the last two
years as Chief Financial Officer. Earlier in his career, Mr. Catlin held the
position of Chief Financial Officer at MediSense, Inc., a Massachusetts-based
medical device company.
Henry C. Marsh, Jr., Ph.D. Dr. Marsh joined AVANT as Senior Scientist in
1986 and has been Vice President, Research since May 1998. Prior to joining us,
he was employed as a scientist at Abbott Laboratories of North Chicago and the
Research Triangle Institute in North Carolina.
Alistair W.E. Wheeler, M.D. Dr. Wheeler joined AVANT in July 1999.
Previously, Dr. Wheeler was an independent consultant to major pharmaceutical
companies and clinical research organizations from 1997 to 1999. From 1994 to
1997, Dr. Wheeler was employed by Astra USA as Director of Clinical Research
and Senior Director, Clinical Operations. From 1991 to 1994, Dr. Wheeler was
employed by Hoffman-La Roche as Director, Respiratory Medicine. Prior to that,
Dr. Wheeler was Clinical Research Physician at Glaxo Group Research.
The Board of Directors and Its Committees
Board of Directors. AVANT is managed by a seven member Board of Directors,
a majority of whom are independent of our management. Our Board of Directors
met seven times in 2001. Each of the
9
Directors attended at least 75% of the aggregate of (i) the total number of
meetings of our Board of Directors (held during the period for which such
directors served on the Board of Directors) and (ii) the total number of
meetings of all committees of our Board of Directors on which the Director
served (during the periods for which the director served on such committee or
committees).
Audit Committee. The Board of Directors has established an Audit Committee
consisting of Harry H. Penner, Jr., Peter A. Sears and Karen S. Lipton. The
Audit Committee makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the scope
and results of the audit engagement, approves professional services provided by
the independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees, and
reviews the adequacy of our internal accounting controls. Our Board has adopted
an Audit Committee Charter. Each member of the audit committee is "independent"
as that term is defined in the rules of the Securities and Exchange Commission
and the applicable listing standards of Nasdaq. The Audit Committee met five
times during 2001.
Compensation Committee. The Board of Directors has established a
Compensation Committee consisting of J. Barrie Ward, Thomas R. Ostermueller and
Frederick W. Kyle. The primary function of the Compensation Committee is to
assist the Board in the establishment of compensation for the Chief Executive
Officer and, upon her recommendation, to approve the compensation of other
officers and senior employees and to approve certain other personnel and
employee benefit matters. The Compensation Committee met twice during 2001.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
AVANT's directors, officers and key employees, and persons who are beneficial
owners of more than 10% of a registered class of our equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% beneficial
owners are required by SEC regulations to furnish AVANT with copies of all
Section 16(a) forms they file. To our knowledge, based solely on review of the
copies of such reports furnished to us, and written representations that no
other reports were required during the fiscal year ended December 31, 2001, all
Section 16(a) filing requirements applicable to such persons were satisfied.
Certain Relationships and Related Transactions
Mr. Sears, a director since May 1999 and current nominee for director,
purchased 50,000 shares of common stock of AVANT at $1.92 per share, having an
aggregate value of $96,000, in connection with our private placement of stock
in September 1999 and purchased an additional 12,739 shares of common stock of
AVANT at $7.85 per share, having an aggregate value of $100,001, in connection
with our private placement of stock in July 2000. See "Beneficial Ownership of
Common Stock."
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth the amount of common stock beneficially
owned as of March 1, 2002 by the following people:
o each director and nominee for director;
o the Chief Executive Officer and the other most highly compensated
executive officers whose total salary and bonus exceeded $100,000 during
2001;
o all directors and officers as a group; and
o each person known by AVANT to hold more than 5% of our outstanding
common stock.
10
Amount and
Nature of
Beneficial Percentage of
Name and Business Address of Beneficial Owners* Ownership(1) Common Stock(2)
- ----------------------------------------------- ------------ ---------------
Directors and Executive Officers
J. Barrie Ward, Ph.D. ................................... 561,364 (3) **
Una S. Ryan, Ph.D. ...................................... 933,258 (4) 1.5%
Frederick W. Kyle ....................................... 41,000 (5) **
Thomas R. Ostermueller .................................. 62,500 (6) **
Harry H. Penner, Jr. .................................... 55,000 (7) **
Peter A. Sears .......................................... 92,739 (8) **
Karen Shoos Lipton ...................................... 10,000 (9) **
Henry C. Marsh, Jr., Ph. D. ............................. 110,239 (10) **
Avery W. Catlin ......................................... 105,000 (11) **
Alistair W.E. Wheeler, M.D. ............................. 39,780 (12) **
5% Holders
Forstmann-Leff Associates LLC ........................... 3,888,500 (13) 6.4%
All Directors and executive officers as a group ......... 2,010,880 3.2%
(Consisting of 10 persons)
- ----------
* Unless otherwise indicated, the address is c/o AVANT Immunotherapeutics,
Inc., 119 Fourth Avenue, Needham Massachusetts 02494-2725.
** Less than 1%.
(1) Unless otherwise indicated, the persons shown have sole voting and
investment power over the shares listed.
(2) Common stock includes all outstanding common stock plus, as required for
the purpose of determining beneficial ownership (in accordance with Rule
13d-3(d)(1) of the Securities Exchange Act of 1934, as amended), all
common stock subject to any right of acquisition, through exercise or
conversion of any security, within 60 days of the record date.
(3) Includes 450,974 shares of common stock issuable upon exercise of
options which are vested or will vest within 60 days of the record date
and 4,616 shares issuable with respect to immediately exercisable
warrants.
(4) Includes 845,345 shares of common stock issuable upon exercise of
options which are vested or will vest within 60 days of the record date.
Includes options to purchase 288,218 shares of common stock held by the
Una S. Ryan Grantor Retained Annuity Trust. The trust was created in
January 25, 2001, for the benefit of Dr. Ryan's children. Dr. Ryan is
the trustee of the trust.
(5) Consists of 36,600 shares of common stock issuable upon exercise of
options which are vested or will vest within 60 days of the record date
and 2,400 shares issuable with respect to immediately exercisable
warrants. The business address of Mr. Kyle is 1900 Rittenhouse Square,
15B, Philadelphia, Pennsylvania 19103.
(6) Includes 60,000 shares of common stock issuable upon exercise of options
which are vested or will vest within 60 days of the record date. The
business address of Mr. Ostermueller is 35 Fallow Field Road, Fairfield,
Connecticut 06430.
(7) Includes 50,000 shares of common stock issuable upon exercise of options
which are vested or will vest within 60 days of the record date. The
business address of Mr. Penner is Nascent BioScience LLC, 35 Northeast
Industrial Road, Branford, Connecticut 06405.
(8) Includes 30,000 shares of common stock issuable upon exercise of options
which are vested or will vest within 60 days of the record date. The
business address of Mr. Sears is 8 Paul Road, St. Davids, Pennsylvania
19087.
11
Includes 10,000 shares of common stock issuable upon exercise of options
which are vested or will vest within 60 days of the record date. The
business address of Ms. Lipton is Association of American Blood Banks,
8101 Glenbrook Road, Bethesda, MD 20814.
(10)Includes 104,404 shares of common stock issuable upon exercise of
options which are vested or will vest within 60 days of the record date.
(11)Includes 100,000 shares of common stock issuable upon exercise of
options which are vested or will vest within 60 days of the record date.
(12)Includes 27,500 shares of common stock issuable upon exercise of options
which are vested or will vest within 60 days of the record date.
(13)On February 13, 2002, Forstmann-Leff Associates LLC ("Forstmann-Leff")
filed a Schedule 13G with the SEC reporting its beneficial ownership of
common stock of AVANT. This Schedule 13G was filed jointly with FLA
Advisors L.L.C. ("FLA Advisors"). Each of the two entities reported
beneficial ownership as of December 31, 2001 of 3,888,500 shares of
common stock consisting of: (i) shared voting power with respect to
3,888,500 shares of common stock; and (ii) shared dispositive power with
respect to 3,888,500 shares of common stock. The business address of
Forstmann-Leff and FLA Advisors is 590 Madison Avenue, New York, New
York 10022.
(14)Includes 1,714,823 shares of Common Stock issuable upon exercise of
options which are vested or will vest within 60 days of the record date
and 7,016 shares issuable with respect to immediately exercisable
warrants.
12
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Director Compensation
Directors who are not employees of AVANT are each entitled to receive a
retainer fee of $5,000 each fiscal year. Each Board committee Chairman receives
an additional retainer fee of $5,000. In addition, each non-employee director
is entitled to receive $1,000 for attendance at each meeting of the Board of
Directors and $500 for attendance at each meeting of a Board committee. The
AVANT 1999 Stock Option and Incentive Plan provides for annual automatic grants
to each independent director of an option to purchase 10,000 shares of common
stock with vesting after one year, a ten year term, and an exercise price equal
to the fair market value of the common stock on the day of grant. As of the
record date, the current independent directors had the following stock options
outstanding: Frederick W. Kyle--46,600; Thomas R. Ostermueller--70,000; Harry
H. Penner, Jr.--60,000; Peter A. Sears--40,000, and Karen S. Lipton--20,000.
Executive Compensation
Summary Compensation Table. The following table shows, for the fiscal
years ended December 31, 2001, December 31, 2000 and December 31, 1999, the
cash compensation paid by AVANT, as well as other compensation paid or accrued
for these fiscal years, to the Chief Executive Officer and the other most
highly compensated officers whose total compensation for 2001 exceeded
$100,000.
Summary Compensation Table
Annual Long-Term
Compensation Compensation Awards
------------ -------------------
Securities All Other
Salary Bonus Underlying Options Compensation(1)
Name and Principal Position Year ($) ($) (#) ($)
- ------------------------------------- ------ --------- -------- -------------------- ----------------
Una S. Ryan, Ph.D. .................. 2001 315,000 37,800 100,000 3,000
President and Chief 2000 278,066 55,057 245,000 3,000
Executive Officer 1999 269,535 60,000 350,000 2,720
Avery W. Catlin ..................... 2001 189,000 15,120 25,000 2,431
Senior Vice President and Chief 2000 178,615 23,760 200,000 2,166
Financial Officer 1999 -- -- -- --
Henry C. Marsh, Jr., Ph.D. .......... 2001 160,036 12,803 10,000 1,900
Vice President, Research 2000 150,835 19,910 35,000 1,877
1999 146,152 20,000 -- 1,679
Alistair W.E. Wheeler, M.D. ......... 2001 208,586 17,285 10,000 1,167
Vice President, Medical Affairs 2000 146,577 20,122 40,000 1,232
1999 53,365 -- 50,000 656
- ----------
(1) Includes AVANT's matching cash contribution to the 401(k) Savings Plan of
each named executive officer and premiums paid for life insurance under
the Company's nondiscriminatory group plan for each named executive
officer.
13
Options Granted in Last Fiscal Year
The following table sets forth each grant of stock options made during the
2001 fiscal year to each of the executive officers named in the Summary
Compensation Table above:
Potential
Realizable
Individual Grants Value at Assumed
----------------------------------------------------- Annual
Number of Percent of Rates of
Securities Total Options Exercise Price Appreciation
Underlying Granted to Per Share for Option Term
Options Employees in Price Expiration ------------------
Granted(#) Fiscal Year(1) ($/Sh)(2) Date 5%($) 10%($)
------------ ---------------- ----------- ----------- --------- --------
Una S. Ryan, Ph.D. .............. 100,000 20% 2.9900 11/08/11 188,039 476,529
Avery W. Catlin ................. 25,000 5% 2.9900 11/08/11 47,010 119,132
Henry C. Marsh, Jr., Ph.D. ...... 10,000 2% 2.9900 11/08/11 18,804 47,653
Alistair W.E. Wheeler, M.D. ..... 10,000 2% 2.9900 11/08/11 18,804 47,653
- ----------
(1) During 2001, a total of 499,000 options were granted to employees of
AVANT. The percentages were calculated as if those options granted in
2001, which were subsequently canceled, remained outstanding as of the
end of 2001. For a description of each option grant, see "Report of the
Compensation Committee."
(2) Equal to the average of the high and low market prices of the common
stock on the grant date.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth, for each of the executive officers named
in the Summary Compensation Table above, the shares of common stock acquired
and the value realized in each exercise of stock options during the 2001 fiscal
year and the fiscal year end number and value of unexercised options:
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Value Options at Fiscal Year End(#) at Fiscal Year End(1)($)
on Exercise Realized ----------------------------- ----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------- ------------- --------- ------------- --------------- ------------- --------------
Una S. Ryan, Ph.D. .............. -- -- 691,595 483,750 863,852 524,054
Avery W. Catlin ................. -- -- 50,000 175,000 86,400 284,700
Henry C. Marsh, Jr., Ph.D. ...... 4,000 21,840 92,154 46,000 135,654 27,363
Alistair W.E. Wheeler, M.D. ..... 1,500 5,769 22,500 65,000 9,948 15,505
- ----------
(1) Based on the $4.010 per share closing price of AVANT's common stock on
December 31, 2001.
Employment Contracts, Termination of Employment and Change-of-Control
Arrangements
Dr. Ryan entered into an agreement with AVANT on August 20, 1998 providing
for an annual base salary of at least $259,584 and under which, in the event
that she terminates her employment for good reason (as defined in the
agreement) within one year of a change in control (as defined in the AVANT
Immunotherapeutics, Inc. 1999 Stock Option and Incentive Plan) or she is
terminated by AVANT other than for cause (as defined by the agreement), she is
eligible for a lump sum payment of one year's salary, at the rate then in
effect, and continuation of health insurance benefits for a period of up to
twelve (12) months.
Mr. Catlin has an agreement with AVANT under which he is eligible for a
severance payment of six month's base salary, continuation of health insurance
benefits and 100% vesting of all stock option grants in the event of his
termination following a change-of-control, as defined in the AVANT
Immunotherapeutics, Inc. 1999 Stock Option and Incentive Plan.
14
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors, which is comprised
of non-employee directors, is responsible for establishing and administering
the policies governing the compensation of AVANT's employees, including salary,
bonus and stock option grants. The policy of the Compensation Committee is to
compensate our employees with competitive salaries based on their level of
experience and job performance. All permanent employees, including executive
officers, are eligible for annual bonus awards based on achievement of AVANT's
strategic corporate goals, and participation in our stock option program. The
bonus awards and stock option grants are made in accordance with the AVANT
Performance Plan and 1999 Stock Option and Incentive Plan. The Compensation
Committee is also responsible for the administration of our 1994 Employee Stock
Purchase Plan, in which employees participate on a voluntary basis.
In order to both attract and retain experienced and qualified executives
to manage AVANT, the Compensation Committee's policy on executive compensation
is to (i) pay salaries which are competitive with the salaries of executives in
comparable positions in the biotechnology industry, and (ii) allow for
additional compensation upon achievement of goals under the Performance Plan
and through the appreciation of stock-based incentive awards. This policy is
designed to have a significant portion of each executive's total compensation
be tied to AVANT's progress in order to incentivize the executive to fully
dedicate himself or herself to achievement of corporate goals, and to align the
executive's interest with those of our stockholders through equity incentive
compensation.
Each executive officer (except the Chief Executive Officer whose
performance is reviewed by the Compensation Committee) has an annual
performance review with the Chief Executive Officer who makes recommendations
on salary increases, promotions and stock option grants to the Compensation
Committee. The recommended salary increases are based on the average salary
increases expected in the biotechnology industry in the Boston, Massachusetts
area, with the salaries in 2001 either at or slightly above the average of the
salaries paid to persons in comparable positions using an independently
prepared 2001 employee compensation survey of approximately 400 biotechnology
companies.
The bonus award is based on achievement of AVANT's strategic goals which
are set at the beginning of each fiscal year and measured against performance
at the end of the year by AVANT in accordance with the Performance Plan. For
2001 two sets of goals were applicable to all employees, including the
executive officers: (i) overall corporate goals and (ii) goals applicable to
the therapeutic programs. Both sets of goals were allocated between specific
product and financial performance targets. The Compensation Committee
determined that, based on AVANT's performance compared to the stated goals, 40%
of the eligible cash payout would be made under the Performance Plan for 2001.
In 2001, the stock option awards for the executive officers other than the
Chief Executive Officer consisted of grants made in conjunction with a review
of the executives' performance during the year. The Compensation Committee
believes the number of underlying shares are consistent with the stock option
grant practices of other companies in the biotechnology industry.
Dr. Una Ryan, our President and Chief Executive Officer, received a salary
increase of 13% in 2001. Dr. Ryan's current base salary, which reflects the
salary increase, is within the range of base salaries paid to other Chief
Executive Officers in similar sized, publicly traded companies in the
biotechnology industry, based on the previously referenced 2001 employee
compensation survey. As discussed above, the Compensation Committee determined
that Dr. Ryan had met certain milestones in 2001 and that a cash payout of
$37,800 would be made to Dr. Ryan under the Performance Plan for 2001.
On November 8, 2001, Drs. Ryan, Marsh and Wheeler and Mr. Catlin were
granted options to purchase 100,000 shares, 10,000 shares, 10,000 shares and
25,000 shares, respectively, of AVANT common stock at an exercise price of
$2.99. These options vest over four years and have a ten-year term.
COMPENSATION COMMITTEE
Thomas R. Ostermueller, Chairman
Frederick W. Kyle
J. Barrie Ward
15
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors was composed of three
non-employee directors during the year, Messrs. Thomas Ostermueller, Frederick
W. Kyle and J. Barrie Ward. None of these Compensation Committee members has
been an officer or employee of AVANT. Dr. Ward was formerly an employee of
AVANT and presently serves as a consultant for the Company. Dr. Ward does not
participate in actions or discussions with respect to his own compensation. No
Compensation Committee interlocks between AVANT and another entity exist.
REPORT OF THE AUDIT COMMITTEE
The undersigned members of the Audit Committee of the Board of Directors
of AVANT submit this report in connection with the committee's review of the
financial reports for the fiscal year ended December 31, 2001 as follows:
1. The Audit Committee has reviewed and discussed with management the
audited financial statements for AVANT for the fiscal year ended December
31, 2001.
2. The Audit Committee has discussed with representatives of
PricewaterhouseCoopers LLP the matters which are required to be discussed
with them under the provisions of SAS 61. That Statement of Accounting
Standards requires the auditors to ensure that the Audit Committee
received information regarding the scope and results of the audit.
3. The Audit Committee has discussed with PricewaterhouseCoopers LLP, the
independent auditors, the auditors' independence from management and
AVANT including the matters in the written disclosures and the letter
from the independent auditors required by the Independence Standards
Board, Standard No. 1.
In addition, the Audit Committee considered whether the provision of
information technology services or other non-audit services by
PricewaterhouseCoopers LLP is compatible with maintaining its independence. In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in AVANT's Annual Report on Form 10-K
for the fiscal year ended December 31, 2001 for filing with the Securities and
Exchange Commission.
AUDIT COMMITTEE
Harry H. Penner, Jr., Chairman
Peter A. Sears
Karen S. Lipton
16
INDEPENDENT ACCOUNTANTS
On February 10, 1994, our Board of Directors approved the engagement of
PricewaterhouseCoopers, LLP as its independent accountants. We expect that a
representative from PricewaterhouseCoopers, LLP will be present at the annual
meeting to make a statement if he or she desires to do so and to respond to
appropriate questions.
Audit Fees
Fees for the fiscal year 2001 audit and the review of Forms 10-Q during
fiscal 2001 are $68,500, of which an aggregate amount of $33,500 has been
billed through December 31, 2001.
Financial Information Systems Design and Implementation Fees
PricewaterhouseCoopers LLP did not render any services related to
financial information systems design and implementation for the fiscal year
ended December 31, 2001.
All Other Fees
Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers LLP for the fiscal year ended December 31, 2001 are
$80,800 and represent the following accounting-related services: $18,200 for
audit fees associated with benefit plans, $40,100 for merger and acquisition
services and $22,500 for tax services.
17
STOCK PERFORMANCE GRAPH
The graph below represents a comparison of the cumulative shareholder
return on the common stock for AVANT's last five fiscal years, including the
fiscal year ended December 31, 2001, with the cumulative total stockholder
return of the Nasdaq Stock Market (U.S.) Index and Nasdaq Pharmaceutical Stock
Index (which is made up of companies quoted on the Nasdaq National Market whose
Primary Industrial Classification Code is 283, Pharmaceutical Companies). The
graph assumes an investment of $100 made on December 31, 1996 in AVANT's common
stock and in the two indexes.
[GRAPHIC OMITTED]
12/31/96 12/31/97 12/31/98 12/31/99 12/29/00 12/31/01
---------- ---------- ---------- ---------- ---------- ---------
AVANT Immunotherapeutics, Inc. ............. $100 $150 $108 $152 $423 $247
Nasdaq Stock Market (U.S.) Index ........... $100 $122 $173 $321 $198 $153
Nasdaq Pharmaceutical Stock Index .......... $100 $103 $131 $247 $308 $262
18
OTHER MATTERS
Expenses of Solicitation
The expense of preparing, printing and mailing the notice of annual
meeting of stockholders and proxy material, and all other expenses of
soliciting proxies will be borne by AVANT. We have retained ADP Financial
Services, Inc. as agent for soliciting proxies. Officers or other employees of
AVANT may, without additional compensation therefor, solicit proxies in person,
by telephone, facsimile, mail or the Internet. We may also reimburse brokerage
firms, banks, trustees, nominees and other persons for their expenses in
forwarding proxy material to the beneficial owners of shares held by them of
record.
Stockholder Proposals for 2003 Annual Meeting
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8
for inclusion in AVANT's proxy statement and form of proxy for our 2003 annual
meeting must be received by AVANT on or before December 2, 2002 in order to be
considered for inclusion in our proxy statement and form of proxy. Such
proposal must also comply with the requirements as to form and substance
established by the SEC if such proposals are to be included in the proxy
statement and form of proxy. Any such proposal shall be mailed to: AVANT
Immunotherapeutics. Inc., 119 Fourth Avenue, Needham, MA 02494-2725, Attn.:
Secretary.
Shareholder proposals to be presented at AVANT's 2003 annual meeting,
other than stockholder proposals submitted pursuant to Exchange Act Rule 14a-8,
must be received in writing at the principal executive office of AVANT
Immunotherapeutics, Inc., 119 Fourth Avenue, Needham, MA 02494-2725 not earlier
than January 8, 2003 nor later than February 21, 2003 unless our 2003 annual
meeting of stockholders is scheduled to take place before April 7, 2003 or
after July 8, 2003. Our by-laws state that the stockholder must provide timely
written notice of such nomination or proposal and supporting documentation as
well as be present at such meeting, either in person or by a representative. A
stockholder's notice shall be timely received by AVANT at our principal
executive office not less than seventy-five (75) days nor more than one hundred
twenty (120) days prior to the anniversary date of the immediately preceding
annual meeting (the "Anniversary Date"); provided, however, that in the event
the annual meeting is scheduled to be held on a date more than thirty (30) days
before the Anniversary Date or more than sixty (60) days after the Anniversary
Date, a stockholder's notice shall be timely if received by AVANT at our
principal executive office not later than the close of business on the later of
(1) the seventy-fifth (75th) day prior to the scheduled date of such annual
meeting or (2) the fifteenth (15th) day following the day on which such public
announcement of the date of such annual meeting is first made by AVANT. Proxies
solicited by our Board of Directors will confer discretionary voting authority
with respect to these proposals, subject to SEC rules and regulations governing
the exercise of this authority. Any such proposal shall be mailed to: AVANT
Immunotherapeutics. Inc., 119 Fourth Avenue, Needham, MA 02494-2725, Attn.:
Secretary.
19
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================================================================================
AVANT IMMUNOTHERAPEUTICS, INC.
Proxy Solicited by the Board of Directors for the
Annual Meeting of Stockholders
on May 8, 2002
The undersigned hereby appoints J. Barrie Ward and Una S. Ryan, and each of
them, as the true and lawful attorneys, agents and proxies of the undersigned,
with full power of substitution, and hereby authorizes them to represent and to
vote, as designated on the reverse, all shares of Common Stock held of record by
the undersigned on March 15, 2002, at the Annual Meeting of Stockholders (the
Meeting) to be held at 2:00 p.m. on May 8, 2002 at the Company's offices located
at 119 Fourth Avenue, Needham, Massachusetts 02494, or at any adjournment or
postponement thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). If no direction is given, this proxy will be
voted FOR the election of the nominees for director and FOR the amendment to the
Company's 1999 Stock Option and Incentive Plan and, in their discretion, the
proxies are each authorized to vote upon such other business as may properly
come before the Meeting and any adjournments or postponements thereof. Any
stockholders wishing to vote in accordance with the Board of Directors
recommendations need only sign and date this proxy and return it in the
postage-paid envelope provided.
The undersigned hereby acknowledges(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's 2001 Annual Report to Stockholders, and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be revoked at
any time before it is executed.
ADDRESS CHANGE/COMMENTS:
-------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If you noted address changes/comments above, please mark the corresponding box
on the reverse side.)
PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
================================================================================
AVANT IMMUNOTHERAPEUTICS, INC.
119 FOURTH AVENUE
NEEDHAM, MASSACHUSETTS, 02494
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL -
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Avant Immunotherapeutics, Inc., c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: AVANT1 KEEP THIS PORTION FOR YOUR RECORDS
- ---------------------------------------------------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
===========================================================================================================================
AVANT IMMUNOTHERAPEUTICS, INC.
1. Election of Directors.
For Withhold For All
Nominees: (01) J. Barrie Ward, (02) Una S. Ryan, (03) Frederick W. Kyle, All All Except
(04) Thomas R. Ostermueller, (05) Harry H. Penner, Jr., (06) Peter A. Sears [ ] [ ] [ ]
and (07) Karen Shoos Lipton
(As noted as Proposal #2 on the proxy statement)
To withhold authority to vote, mark "For All Except" and write the nominee's number on the line below.
---------------------------------------------------------------------------------
VOTE ON PROPOSAL
For Against Abstain
2. Amendment to 1999 Stock Option and Incentive Plan.
A proposal to approve an amendment to the Company's 1999 Stock Option and Incentive Plan [ ] [ ] [ ]
(As noted as Proposal #1 on the proxy statement)
Mark box at right if an address change or comment
has been noted on the reverse side of this card. [ ]
Please sign exactly as your name(s) appear(s) on the books of the Company. Joint owners should each sign personally. Trustees
and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must
sign. If a corporation, this signature should be that of an authorized officer who should state his or her title.
Please be sure to sign and date this Proxy.
------------------------------------ ----------- ------------------------------------- ----------
------------------------------------ ----------- ------------------------------------- ----------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
===========================================================================================================================
