ex10-1


     

    Exhibit
      10.1

     

    EMPLOYMENT
      AGREEMENT

    


    This
      Employment Agreement (the “Agreement”) is entered into as of April 5, 2007 by
      and between Advanced Magnetics, Inc., a Delaware corporation with offices at
      125
      CambridgePark Drive, Cambridge, MA 02140 (“AMI” or the “Company”) and David A.
      Arkowitz, 627 Chestnut Street, Waban, MA 02468 (“you”).

    


    Whereas,
      AMI desires to employ you, and you desire to accept employment with AMI on
      and
      subject to the terms and conditions set forth in this Agreement;

    


    Now
      therefore, AMI and you agree as follows:

    


    1. Position;
      Duties.

     

                   
      a) Position.
      You
      shall serve as Chief Financial Officer and Chief Business Officer, reporting
      to
      the Chief Executive Officer of the Company. 

    


    b) Duties.
      You
      shall perform for AMI the duties and have the authority customarily associated
      with the offices of Chief Financial Officer and Chief Business Officer,
      including but not limited to the accounting, financial reporting, financial
      planning and analysis, tax, treasury, investor relations, and corporate business
      development functions, and such other duties as may be assigned to you from
      time
      to time by AMI’s Chief Executive Officer. You shall devote substantially your
      full business time and best efforts to the performance of your duties hereunder
      and the business and affairs of AMI and will not undertake or engage in any
      other employment, occupation or business enterprise; provided, however, that
      you
      may participate as a member of the board of directors or advisory board of
      other
      entities and in professional organizations and civic and charitable
      organizations; provided further, that any such positions are disclosed to the
      Board of Directors (the “Board”) or the Audit Committee thereof and do not
      materially interfere with your duties and responsibilities at AMI. You shall
      be
      based in AMI’s principal offices, which currently are in Cambridge,
      Massachusetts. 

    


    2. Term.
      The
      term of this Agreement shall be for a three (3) year period commencing on the
      date hereof unless terminated earlier pursuant to Section 4 below (the “Term”).
      You may continue to be employed by AMI beyond the Term of this Agreement, but
      such employment shall be on such terms and conditions as you and AMI then may
      agree. The parties will enter into discussions regarding their respective
      intentions to renew this Agreement within ninety (90) days of expiration of
      the
      Term.

    


    3. Compensation
      and Benefits.
      AMI
      shall pay you the following compensation and benefits for all services rendered
      by you under this Agreement:

    


    a) Base
      Salary.
      AMI
      will pay you an initial base salary (the “Base Salary”) at the annualized rate
      of $300,000.00, minus withholdings as required by law and other deductions
      authorized by you, which amount shall be paid in equal installments at AMI’s
      regular payroll intervals, but not less often than monthly. Your base salary
      may
      be increased annually by the Board or the Compensation Committee of the Board
      in
      its discretion.

    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    b) Bonus.
      You
      will be eligible to receive an annual performance bonus of up to forty percent
      (40%) of your base salary for each fiscal year during the term of this Agreement
      beginning with the fiscal year which commenced October 1, 2006 based on the
      extent to which, in the discretion of the Board or the Compensation Committee
      in
      consultation with the Chief Executive Officer, you achieve specific and
      measurable individual and company performance objectives established by the
      Board or Compensation Committee in consultation with the Chief Executive Officer
      and communicated to you in advance. The exact amount of the bonus for any year
      during the term shall be determined by the Board or the Compensation Committee
      in its sole discretion and may be more than the target bonus in the event you
      achieve all of your personal and company performance objectives or less than
      the
      target bonus if you do not achieve all of your personal and company performance
      objectives. No bonus shall be deemed to have been earned by you for any year
      in
      which you are not actively employed for the entire fiscal year to which the
      bonus relates, with the exception of the fiscal year which began on October
      1,
      2006, provided that you are still employed by the Company through the date
      bonuses are approved for such fiscal year.

    


    c)
      Options/RSUs.
      

    


    (i) You
      will
      be granted options to purchase 50,000 shares of AMI’s common stock as of your
      first date of employment with the Company. The foregoing options shall have
      an
      exercise price equal to the fair market value of a share of AMI common stock
      on
      the date of grant (equal to the closing price as reported on the Nasdaq Global
      Market) and shall vest in four equal annual installments beginning on the first
      anniversary of your first date of employment with the Company. The foregoing
      options will be subject to the terms and conditions of AMI’s Amended and
      Restated 2000 Stock Plan and form stock option agreements. 

    


    (ii)
       You
      will
      be granted options to purchase an additional 10,000 shares of AMI’s common stock
      as of your first date of employment with the Company. The foregoing options
      shall have an exercise price equal to the fair market value of a share of AMI
      common stock on the date of grant (equal to the closing price as reported on
      the
      Nasdaq Global Market) and shall vest in full immediately upon the Company’s
      achievement of certain specific and measurable performance goals established
      by
      the Board or the Compensation Committee and communicated to you in advance.
      The
      foregoing options will be subject to the terms and conditions of AMI’s Amended
      and Restated 2000 Stock Plan and form stock option agreements

    


    (iii)
      You
      will be granted restricted stock units (“RSUs”) as of your first date of
      employment with the Company granting you the right to receive an additional
      3,000 shares of AMI’s common stock at no cost to you. The RSUs shall vest in
      four equal annual installments beginning on the first anniversary of your first
      date of employment with the Company. The RSUs will be subject to the terms
      and
      conditions of AMI’s Amended and Restated 2000 Stock Plan and form restricted
      stock unit agreement. 

    


    d)
      Vacation.
      You
      will receive four (4) weeks of paid vacation per calendar year, which shall
      accrue ratably on a monthly basis commencing on the Effective Date.

    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    e)
      Benefits.
      You
      will be eligible to participate in all group health, dental, 401(k), and other
      insurance and/or benefit plans that AMI may offer to similarly situated
      executives of AMI from time to time on the same terms as offered to such other
      executives.

    


    f)
      Business
      Expenses.
      AMI
      will reimburse you for all reasonable and usual business expenses incurred
      by
      you in the performance of your duties hereunder in accordance with AMI’s expense
      reimbursement policy.

    


    4. Termination.
      Your
      employment with AMI may be terminated prior to the expiration of the Term as
      follows:

    


    a) Death.
      This
      Agreement shall terminate automatically upon your death. 

    


    b) Disability.
      AMI may
      terminate your employment in accordance with applicable laws in the event that
      you shall be prevented, by illness, accident, disability or any other physical
      or mental condition (to be determined by means of a written opinion of a
      competent medical doctor chosen by mutual agreement of AMI and you or your
      personal representative(s)) from substantially performing your duties and
      responsibilities hereunder for one or more periods totaling one hundred and
      twenty (120) days in any twelve (12) month period. 

    c) By
      AMI
      for Cause.
      AMI may
      terminate your employment for “Cause” upon written notice to you. For purposes
      of this Agreement, “Cause” shall mean any of (i)
      fraud, embezzlement or theft against AMI or any of its affiliates; (ii) you
      are
      convicted of, or plead guilty or no contest to, a felony;
      (iii)
      willful nonperformance by you (other than by reason of illness) of your material
      duties hereunder; or (iv) you commit
      an
      act of gross negligence, engage in willful
      misconduct
      or
      otherwise act with willful disregard for AMI’s best interests.

    


    d) By
      AMI
      Other Than For Death, Disability or Cause.
      AMI may
      terminate your employment other than for Cause, disability or death upon thirty
      (30) days prior written notice to you. 

    


    e) By
      You
      For Good Reason or Any Reason.
      You may
      terminate your employment at any time with or without Good Reason upon thirty
      (30) days prior written notice to AMI. For purposes of this Agreement, “Good
      Reason” shall mean that any of the following occurs without your prior written
      consent: (i)
      a
      material adverse change in your position, duties or responsibilities;
      (ii)
      any relocation of your principal place of business to a location more than
      fifty
      (50) miles from the Company’s current executive offices in Cambridge, MA; or
      (iii) a material breach by AMI of any
      of
      the terms or provisions of this Agreement and failure to remedy such breach
      within thirty (30) days following written notice from you identifying the
      breach.
      

    


    5. Payment
      Upon Termination.
      In the
      event that your employment with AMI terminates, you will be paid the
      following:

    


    a) Termination
      for Any Reason.
      In the
      event that your employment terminates for any reason, AMI shall pay you for
      the
      following items that were earned and accrued but unpaid as of the date of your
      termination: (i) your Base Salary; (ii) a cash payment for all accrued, unused
      vacation calculated at your then Base Salary rate; (iii) reimbursement for
      


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    any
      unpaid business expenses; and (iv) such other benefits and payments to which
      you
      may be entitled by law or pursuant to the benefit plans of AMI then in effect.
      

    


    b)
       Termination
      Without Cause or for Good Reason.
      In
      addition to the payments provided for in Section 5(a), in the event that (i)
      AMI
      terminates your employment other than for death, disability or Cause pursuant
      to
      Section 4(d) or you terminate your employment for Good Reason pursuant to
      Section 4(e); (ii) you comply fully with all of your obligations under the
      Nondisclosure and Developments Agreement dated April 5, 2007 between AMI and
      you; and (iii) you execute, deliver to AMI and do not revoke a general release
      (in a form acceptable to AMI) releasing and waiving any and all claims that
      you
      have or may have against AMI and its directors, officers, employees, agents,
      successors and assigns with respect to your employment (other than any
      obligation of AMI set forth herein which specifically survives the termination
      of your employment), then AMI will provide you with twelve (12) months of
      severance pay (calculated at your last Base Salary rate). The foregoing
      severance shall be paid in equal installments over the severance period in
      accordance with AMI’s usual payroll schedule. This Section 5(b) shall not apply
      during the one year period following a Change of Control, in which case Section
      5(c) shall apply.

    


    c) Termination
      Within One Year of a Change of Control.
      In the
      event that (i) within one year from the date a Change of Control (as defined
      below) of AMI occurs, AMI (for purposes of this section, such term to include
      its successor) terminates your employment other than for Cause pursuant to
      Section 4(c), death or disability; (ii) you comply fully with all of your
      obligations under all agreements between AMI and you; and (iii) you execute,
      deliver to AMI and do not revoke a general release (in a form acceptable to
      AMI)
      releasing and waiving any and all claims that you have or may have against
      AMI
      and its directors, officers, employees, agents, successors and assigns with
      respect to your employment (other than any obligation of AMI set forth herein
      which specifically survives the termination of your employment), then AMI will
      pay you twelve (12) months of severance pay (calculated at your last Base Salary
      rate). The severance shall be paid in equal installments over the severance
      period in accordance with AMI’s usual payroll schedule. In addition, in
      accordance with AMI’s Change of Control Policy, upon a Change of Control, fifty
      percent (50%) of the unvested options to purchase common stock and other equity
      incentives then held by you shall become immediately vested. In the event you
      are terminated by AMI (or its successor) or you terminate your employment with
      AMI (or its successor) for Good Reason pursuant to Section 4(e) within one
      year
      following a Change of Control for any reason, the remaining fifty percent (50%)
      of the unvested options or other equity incentives held by you on the date
      of
      closing of the Change of Control shall become immediately vested. For purposes
      of this Agreement, “Change
      of Control”
shall
      mean the first to occur of any of the following: (a) any “person” or “group” (as
      defined in the Securities Exchange Act of 1934, as amended) becomes the
      beneficial owner of a majority of the combined voting power of the then
      outstanding voting securities with respect to the election of the Board of
      Directors of AMI; (b) any merger, consolidation or similar transaction involving
      AMI, other than a transaction in which the stockholders of AMI immediately
      prior
      to the transaction hold immediately thereafter in the same proportion as
      immediately prior to the transaction not less than 50% of the combined voting
      power of the then voting securities with respect to the election of the Board
      of
      Directors of the resulting entity; (c) any sale of all or substantially all
      of
      the assets of AMI; or (d) any other acquisition by a third party of all or
      substantially all of the business or assets of AMI, as determined by the Board
      of Directors, in its sole discretion. After the one year period following



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    a
      Change
      of Control, this Section 5(c) shall no longer apply, and Section 5(b) shall
      continue to apply.

    


    6. Nonsolicitation
      Covenant.
      In
      exchange for the consideration provided by this Agreement, you shall not, for
      a
      period of one year following the termination of your employment with AMI for
      any
      reason, directly or indirectly, whether through your own efforts, or in any
      way
      assisting or employing the assistance of any other person or entity (including,
      without limitation, any consultant or any person employed by or associated
      with
      any entity with which you are employed or associated), recruit, solicit or
      induce (or in any way assist another in recruiting, soliciting or inducing)
      any
      employee or consultant of AMI to terminate his or her employment or other
      relationship with AMI.

    


    7. Assignment.
      This
      Agreement and the rights and obligations of the parties hereto shall bind and
      inure to the benefit of any successor of AMI by reorganization, merger or
      consolidation and any assignee of all or substantially all of its business
      and
      properties. Neither this Agreement nor any rights or benefits hereunder may
      be
      assigned by you, except that, upon your death, your earned and unpaid economic
      benefits will be paid to your heirs or beneficiaries.

     

    8. Interpretation
      and Severability.
      It is
      the express intent of the parties that (a) in case any one or more of the
      provisions contained in this Agreement shall for any reason be held to be
      excessively broad as to duration, geographical scope, activity or subject,
      such
      provision shall be construed by limiting and reducing it as determined by a
      court of competent jurisdiction, so as to be enforceable to the fullest extent
      compatible with applicable law; and (b) in case any one or more of the
      provisions contained in this Agreement cannot be so limited and reduced and
      for
      any reason is held to be invalid, illegal or unenforceable, such invalidity,
      illegality or unenforceability shall not affect the other provisions of this
      Agreement, and this Agreement shall be construed as if such invalid, illegal
      or
      unenforceable provision had never been contained herein.

     

    9. Notices.
      Any
      notice that you or AMI are required to give the other under this Agreement
      shall
      be given by personal delivery, recognized overnight courier service, or
      registered or certified mail, return receipt requested, addressed in your case
      to you at your last address of record with AMI, or at such other place as you
      may from time to time designate in writing, and, in the case of AMI, to AMI
      at
      its principal office, or at such other office as AMI may from time to time
      designate in writing. The date of actual delivery of any notice under this
      Section 9 shall be deemed to be the date of receipt thereof.

     

    10. Waiver.
      No
      consent to or waiver of any breach or default in the performance of any
      obligation hereunder shall be deemed or construed to be a consent to or waiver
      of any other breach or default in the performance of any of the same or any
      other obligations hereunder. No waiver hereunder shall be effective unless
      it is
      in writing and signed by the waiving party.

     

    11. Complete
      Agreement; Modification.
      This
      Agreement sets forth the entire agreement of the parties with respect to the
      subject matter hereof, and supersedes any previous oral or written
      communications, negotiations, representations, understandings, or agreements
      between them. Any modification of this Agreement shall be effective only if
      set
      forth in a written document signed by you and a duly authorized officer of
      AMI.

     


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    12. Headings.
      The
      headings of the Sections hereof are inserted for convenience only and shall
      not
      be deemed to constitute a part, or affect the meaning, of this
      Agreement.

     

    13. Counterparts.
      This
      Agreement may be signed in two (2) counterparts, each of which shall be deemed
      an original and both of which shall together constitute one
      agreement.

     

    14. Choice
      of Law; Jurisdiction.
      This
      Agreement shall be deemed to have been made in the Commonwealth of
      Massachusetts, and the validity, interpretation and performance of this
      Agreement shall be governed by, and construed in accordance with, the laws
      of
      Massachusetts, without regard to conflict of law principles. You hereby consent
      and submit without limitation to the jurisdiction of courts in Massachusetts
      in
      connection with any action arising out of this Agreement, and waive any right
      to
      object to any such forum as inconvenient or to object to venue in Massachusetts.
      You agree that, in any action arising out of this Agreement, you will accept
      service of process by registered mail or the equivalent directed to your last
      known address or by such other means permitted by such court. 

     

    15. Advice
      of Counsel; No Representations.
      You
      acknowledge that you have been advised to review this Agreement with your own
      legal counsel, that prior to entering into this Agreement, you have had the
      opportunity to review this Agreement with your attorney, and that AMI has not
      made any representations, warranties, promises or inducements to you concerning
      the terms, enforceability or implications of this Agreement other than as are
      contained in this Agreement. 

     

    16. I.R.C.
      § 409A. All
      other
      provisions of this Agreement notwithstanding, this Agreement shall be construed
      to avoid any adverse tax consequences to you under Internal Revenue Code Section
      409A, and the parties agree to amend this Agreement from time to time as may
      be
      necessary to that end, in a manner that best preserves the economic benefits
      to
      you. Further, for so long AMI has a class of stock that is publicly traded
      on an
      established securities market or otherwise, then AMI shall from time to time
      compile a list of “Specified Employees” as defined in, and pursuant to, Prop.
      Treasury Reg. § 1.409A-1(i) or any successor regulation. If you are a Specified
      Employee on the date of the termination of your employment with AMI, then,
      notwithstanding any other provision herein, no payment shall be made to you
      pursuant to Section 5(b) or 5(c) above during the period lasting six (6) months
      from the date of such termination of employment unless AMI determines that
      there
      is no reasonable basis for believing that making such payment would cause you
      to
      suffer any adverse tax consequences pursuant to Section 409A. If any payment
      to
      you is delayed pursuant to the provisions of this paragraph, such delayed
      payment shall instead be made on the first business day following the expiration
      of the six (6) month period referred to herein. 

     


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF,
      AMI and
      you have executed this Agreement as of the day and year first set forth above.
      

    


    


    ADVANCED
      MAGNETICS, INC.

    


    


    By:
      /s/
      Brian J.G. Pereira________________

    Name:
      Brian J.G. Pereira 

    Title:
      Chief Executive Officer

    


    


    /s/
      David A. Arkowitz____________________

    David
      A.
      Arkowitz