8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION

13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 7, 2006

ADVANCED MAGNETICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or other jurisdiction

of incorporation)

Commission File No. 0-14732	04-2742539
	(IRS Employer
	Identification No.)

61 Mooney Street, Cambridge, Massachusetts	02138
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 497-2070

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

Amendment and Restatement of 2000 Stock Plan

On February 7, 2006, the stockholders of Advanced Magnetics, Inc. (the “Company”) approved the amendment and restatement of the Company’s 2000 Stock Plan to, among other things, increase the number of shares of common stock that may be issued under the plan by 1,000,000 to 2,000,000 shares. A copy of the plan is listed as Exhibit 10.1 and is incorporated herein by reference.

Option and RSU Grant

In connection with his election as President of the Company in November 2005, Dr. Brian J.G. Pereira and the Company entered into an employment agreement. Pursuant to the terms of such employment agreement, the Company agreed to grant Dr. Pereira an additional option to purchase 100,000 shares of common stock upon the approval of the amendment and restatement of the 2000 Stock Plan at the next annual meeting of stockholders, at an exercise price equal to the fair market value of the common stock on the date of grant. On February 7, 2006, the date of the annual meeting of stockholders, the amendment and restatement of the 2000 Stock Plan was approved by the Company’s stockholders and Dr. Pereira became entitled to receive, and was granted, options to purchase 100,000 shares of common stock under the Company’s Amended and Restated 2000 Stock Plan at an exercise price of $19.98, the fair market value of a share of common stock on the date of grant. These options become exercisable in three equal annual installments on November 16, 2006, 2007 and 2008. Effective February 7, 2006, Dr. Pereira was also granted Restricted Stock Units (“RSUs”) with respect to 20,000 shares of common stock. The RSUs will vest in equal annual installments over four years from the date of grant.

In the event the Company terminates Dr. Pereira’s employment without “cause” or Dr. Pereira terminates his employment for “good reason,” all of the foregoing options and RSUs will automatically become vested and/or exercisable in full. In addition, all of the foregoing options and RSUs will become immediately vested and/or exercisable in full upon the consummation of a “change of control,” as defined in Dr. Pereira’s stock option and RSU agreements.

A copy of the option agreement is attached hereto as Exhibit 10.2 and a copy of the RSU agreement is attached hereto as Exhibit 10.3. The foregoing exhibits are incorporated herein by reference.

Adoption of Change of Control Policy

On February 7, 2006, the Company’s Board of Directors adopted a policy that will provide each executive officer of the Company that has not entered into an alternative arrangement with the Company six months of severance pay (based on base salary) in the event such executive officer’s employment is terminated by the Company (or its successor) within the first year following a “change of control” of the Company. In addition, upon the occurrence of such change of control, 50% of any unvested options or other unvested equity incentives then held by such executive officer shall vest and the remaining 50% shall continue to vest in

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accordance with the existing vesting schedule, unless such executive officer’s employment is terminated by the Company (or its successor) within the first year following a change of control of the Company, in which case all remaining unvested options or equity incentives shall vest. A summary of the principal terms of this policy is attached hereto as Exhibit 10.5 and is incorporated herein by reference.

Employment Agreements

On February 7, 2006, the Company entered into a three-year employment agreement with Jerome Goldstein, the Chairman and Chief Executive Officer of the Company. Under the terms of the employment agreement, Mr. Goldstein will receive an initial annual salary of $345,560 and one year of severance pay in the event his employment is terminated for any reason within one year following a “change of control” as defined in the employment agreement. A copy of the employment agreement is attached hereto as Exhibit 10.6 and is incorporated herein by reference.

On February 7, 2006, the Company entered into a three-year employment agreement with Joseph L. Farmer, the General Counsel and Vice President of Legal Affairs of the Company. Under the terms of the employment agreement, Mr. Farmer will receive an initial annual salary of $178,000 and one year of severance pay in the event his employment is terminated for any reason within one year following a “change of control” as defined in the employment agreement. In addition, the agreement provides that Mr. Farmer will receive a one-time cash bonus of $100,000 upon the consummation of an acquisition if the definitive agreement relating to such change of control is entered into during calendar 2006. A copy of the employment agreement is attached hereto as Exhibit 10.7 and is incorporated herein by reference.

Director Compensation

On February 7, 2006, the Company’s Board of Directors voted to increase the cash and equity compensation paid to the Company’s non-employee directors. Effective February 7, 2006, each non-employee director will receive a quarterly retainer of $4,000. A non-employee Director must attend at least 3 of 4 regularly scheduled meetings during the prior fiscal year to earn the full $4,000 quarterly fee.  If a non-employee Director attends less than 3 of the 4 regularly scheduled meetings in the prior fiscal year, this fee will be reduced for the current fiscal year by $1,000 for each missed meeting after the first missed meeting.  In addition, members of the Company’s Compensation Committee and the Company’s Audit Committee will be paid an additional fee of $1,000 per meeting of such committees. The Chairperson of each of the Compensation Committee and the Audit Committee, currently Mark Skaletsky and Sheldon L. Bloch, respectively, will receive an additional annual retainer fee of $2,000. A summary of the principal terms of the Company’s Director compensation is attached hereto as Exhibit 10.8 and is incorporated herein by reference.

On February 7, 2006, the Compensation Committee of the Board of Directors also granted options to purchase 2,000 shares of common stock to each non-employee director under the Company’s Amended and Restated 2000 Stock Plan. These options were fully vested upon grant and had an exercise price of $19.98, the fair market value of a share of common stock on the date of grant. In addition, the option grant to be made to non-employee directors in

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November 2006 shall be increased from an immediately exercisable option to purchase 8,000 shares to an immediately exercisable option to purchase 10,000 shares.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Number Description

10.1 Advanced Magnetics, Inc. Amended and Restated 2000 Stock Plan (incorporated herein by reference to Appendix A to the Company’s definitive proxy statement for the fiscal year ended September 30, 2005, File No. 0-14732).

10.2 Stock Option Agreement, dated as of February 7, 2006, between Advanced Magnetics, Inc. and Brian J.G. Pereira.

10.3 Restricted Stock Unit Agreement, dated as of February 7, 2006, by and between Advanced Magnetics, Inc. and Brian J.G. Pereira.

10.4 Form of Restricted Stock Unit Agreement in connection with the Company’s Amended and Restated 2000 Stock Plan.

10.5 Summary of the Advanced Magnetics, Inc. Change of Control Policy applicable to executive officers.

10.6 Employment Agreement, dated as of February 7, 2006, between Advanced Magnetics, Inc. and Jerome Goldstein.

10.7 Employment Agreement, dated as of February 7, 2006, between Advanced Magnetics, Inc. and Joseph L. Farmer.

10.8 Summary of the Advanced Magnetics, Inc. Director Compensation.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ADVANCED MAGNETICS, INC.

By: /s/ Jerome Goldstein

Name: Jerome Goldstein

Title:   Chief Executive Officer

Date: February 13, 2006

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EXHIBIT INDEX

Number Description

10.1 Advanced Magnetics, Inc. Amended and Restated 2000 Stock Plan (incorporated herein by reference to Appendix A to the Company’s definitive proxy statement for the fiscal year ended September 30, 2005, File No. 0-14732).

10.2 Stock Option Agreement, dated as of February 7, 2006, between Advanced Magnetics, Inc. and Brian J.G. Pereira.

10.3 Restricted Stock Unit Agreement, dated as of February 7, 2006, by and between Advanced Magnetics, Inc. and Brian J.G. Pereira.

10.4 Form of Restricted Stock Unit Agreement in connection with the Company’s Amended and Restated 2000 Stock Plan.

10.5 Summary of the Advanced Magnetics, Inc. Change of Control Policy applicable to executive officers.

10.6 Employment Agreement, dated as of February 7, 2006, between Advanced Magnetics, Inc. and Jerome Goldstein.

10.7 Employment Agreement, dated as of February 7, 2006, between Advanced Magnetics, Inc. and Joseph L. Farmer.

10.8 Summary of the Advanced Magnetics, Inc. Director Compensation.

EX-10.2

Exhibit 10.2

Stock Option Grant

1. Grant of Option

Advanced Magnetics, Inc., a Delaware corporation (the “Company”), hereby grants to Brian J.G. Pereira (the “Employee”), an option to purchase 100,000 shares of Common Stock, $.01 par value per share, of the Company as hereinafter set forth (the “Option”), pursuant and subject to the terms and provisions of the Company’s Amended and Restated2000 Stock Plan (the “Plan”). The date of grant of this Option is February 7, 2006.

All terms which are defined in the Plan shall have the same meanings herein.

2. Vesting of Option

This Option shall be exercisable in cumulative installations on each of the following dates, as follows:

Date Exercisable	Number of Shares Exercisable
On date of grant		0
November 16, 2006		33,333
November 16, 2007		66,666
November 16, 2008		100,000

Subject to the other provisions of this Section 2 and Section 6 below, no additional shares shall vest and become exercisable between each of the vesting dates set forth above.

Notwithstanding the foregoing, this Option shall become immediately exercisable in full with respect to all 100,000 shares issuable hereunder upon the consummation of a Change of Control. A “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) 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 the Company; (b) any merger, consolidation or similar transaction involving the Company, other than a transaction in which the stockholders of the Company 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 the Company; or (d) any other acquisition by a third party of all or substantially all of the business or assets of the Company, as determined by the Board of Directors of the Company, in its sole discretion.

Stock Option Agreement Confidential Document 1

61 Mooney Street Cambridge, MA 02138 Tel: [617] 497-2070 Fax: [617] 547-2445

Advanced Magnetics, Inc.

3. Term of Option

This Option shall terminate in ten (10) years on February 7, 2016.

4. Exercise Price

The exercise price of this Option shall be nineteen dollars and ninety eight cents ($19.98) per share.

5. Exercise and Payment

(a) Method of Payment. This Option shall be exercisable by delivery to the Company of written notice of exercise, specifying the number of shares for which this Option is being exercised (subject to Section 2 hereof), together with payment to the Company for the total exercise price thereof in cash, by check or, subject to the Company’s approval, by Common Stock of the Company owned by the Employee for more than six (6) months, or by some combination thereof.

(b) Valuation of Shares Tendered in Payment of Purchase Price. For the purposes hereof, the fair market value of any share of the Company's Common Stock which may be delivered to the Company in exercise of this Option shall be determined in good faith by the Board of Directors of the Company, or, in the absence of such determination, shall be equal to the closing price of a share of the Company’s Common Stock as reported on the American Stock Exchange on the date of exercise of this Option.

(c) Delivery of Shares Tendered in Payment of Purchase Price. If the Company permits the Employee to exercise Options by delivery of shares of Common Stock of the Company, the certificate or certificates representing the shares of Common Stock of the Company to be delivered shall be duly executed in blank by the Employee or shall be accompanied by a stock power duly executed in blank suitable for purposes of transferring such shares to the Company. Fractional shares of Common Stock of the Company will not be accepted in payment of the purchase price of shares acquired upon exercise of this Option.

6. Effect of Termination of Employment or Death

This Option shall not be assignable or transferable either voluntarily or by operation of law, except as set forth in this Section 6.

In the event the Employee during his or her lifetime ceases to be an employee of the Company or of any subsidiary for any reason, other than death, disability, termination by the Company without “cause,” or termination by the Employee for “good reason” (each as defined in the Employment Agreement dated as of November 22, 2005 by and between the Company and the Employee (the “Employment Agreement”)), any unexercised portion of this Option which was otherwise

Stock Option Agreement Confidential Document 2

61 Mooney Street Cambridge, MA 02138 Tel: [617] 497-2070 Fax: [617] 547-2445

Advanced Magnetics, Inc.

exercisable on the date of termination of employment shall expire unless exercised within three months of that date, but in no event after the expiration of the term hereof.

In the event the Company terminates the Employee’s employment with the Company without “cause” or the Employee terminates his employment for “good reason” (each as defined in the Employment Agreement), this Option shall become exercisable in full with respect to all 100,000 shares covered hereby as of the effective date of such termination.

In the event of the death or disability of the Employee (i) while an employee of the Company or any subsidiary, or (ii) during the three-month period following termination of his or her employment for any reason other than death or disability, this Option shall be exercisable for the number of shares otherwise exercisable on the date of death, disability or termination, by the Employee or his or her personal representatives, heirs or legatees, as the case may be, at any time prior to the expiration of one (1) year from the date of the death or disability of the Employee, but in no event after the expiration of the term hereof.

Notwithstanding the foregoing, if the Employee, prior to the termination date of this Option, violates the confidentiality provisions of the Employment Agreement or any confidentiality or other agreement between the Employee and the Company, the right to exercise this Option shall terminate immediately upon written notice to the Employee from the Company describing such violation.

7. Employment

Nothing contained in this Option or in the Plan shall be construed as giving the Employee any right to be retained in the employ of the Company or any of its subsidiaries.

8. Withholding Taxes

The Employee acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Employee any federal, state or local taxes of any kind required by law to be withheld with respect to exercise of this Option.

9. Plan Provisions

Except as otherwise expressly provided herein, this Option and the rights of the Employee hereunder shall be subject to and governed by the terms and provisions of the Plan, including without limitation the provisions of Section 4 thereof.

10. Employee Representation; Stock Certificate Legend

The Employee hereby represents that he or she has received and read the Prospectus filed with the Securities and Exchange Commission as a part of the Registration Statement on Form S-8, which registered the shares under the Plan.

Stock Option Agreement Confidential Document 3

61 Mooney Street Cambridge, MA 02138 Tel: [617] 497-2070 Fax: [617] 547-2445

Advanced Magnetics, Inc.

If the Employee is an "affiliate" of the Company (as defined in Rule 144 promulgated under the Securities Act of 1933), all stock certificates representing shares of Common Stock issued to such Employee pursuant to this Option shall have affixed thereto legends substantially in the following form:

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act") and may not be sold, transferred or assigned unless such shares are registered under the Act or an opinion of counsel, satisfactory to the corporation, is obtained to the effect that such sale, transfer or assignment is exempt from the registration requirements of the Act."

11. Notice

Any notice required to be given under the terms of this Option shall be properly addressed as follows: to the Company at its principal executive offices, and to the Employee at his address set forth below, or at such other address as either of such parties may hereafter designate in writing to the other.

12. Non-Qualified Stock Option

It is understood that this Option is not intended to qualify as an "incentive stock option" as defined in Section 422 of the Internal Revenue Code.

13. Enforceability

This Option shall be binding upon the Employee, his estate, and his or her personal representatives and beneficiaries.

14. Effective Date

The effective date of this Option is February 7, 2006.

Stock Option Agreement Confidential Document 4

61 Mooney Street Cambridge, MA 02138 Tel: [617] 497-2070 Fax: [617] 547-2445

Advanced Magnetics, Inc.

IN WITNESS WHEREOF, this Option has been executed by a duly authorized officer of the Company as of the effective date.

	Advanced Magnetics, Inc.
	By: /s/ Michael N. Avallone
	Michael N. Avallone
	Chief Financial Officer
Employee’s Acceptance:
The undersigned hereby accepts this Option and agrees to the terms and provisions set forth in this Option and in the Plan (a copy of which has been delivered to him/her).
/s/ Brian J.G. Pereira
(Signature of Employee)
Brian J.G. Pereira
(Print Name of Employee)
Address:           54 Rowena Road
Newton, MA 02459
Date:          February 7, 2006

Stock Option Agreement Confidential Document 5

61 Mooney Street Cambridge, MA 02138 Tel: [617] 497-2070 Fax: [617] 547-2445

EX-10.3

Exhibit 10.3

ADVANCED MAGNETICS, INC.

Restricted Stock Unit Agreement

Advanced Magnetics, Inc. (the “Company”) hereby enters into this Restricted Stock Unit Agreement, dated as of the date set forth below, with the Recipient named herein (the “Agreement”) and grants to the Recipient the Restricted Stock Units (“RSUs”) specified herein pursuant to its Amended and Restated 2000 Stock Plan, as amended and in effect from time to time. The Terms and Conditions attached hereto are also a part hereof.

Name of recipient (the “Recipient”):	Brian J.G. Pereira
Date of this RSU grant:	February 7, 2006
Number of shares of the Company’s Common Stock (the “Underlying Shares”) underlying the equivalent number of restricted stock units (the “RSUs”) granted pursuant to this Agreement:	20,000
Vesting Start Date:	February 7, 2006
Number of RSUs that are vested on the Vesting Start Date:	0
Number of RSUs that are unvested on the Vesting Start Date:	20,000

Vesting Schedule:

One year from the Vesting Start Date:	5,000 units
Two years from the Vesting Start Date:	5,000 units
Three years from the Vesting Start Date:	5,000 units
Four years from the Vesting Start Date:	5,000 units

/s/ Brian J.G. Pereira Signature of Recipient Brian J.G. Pereira c/o Advanced Magnetics, Inc. 61 Mooney Street Cambridge, Massachusetts 02138 ADVANCED MAGNETICS, INC. By: /s/ Jerome Goldstein Jerome Goldstein Chief Executive Officer  

ADVANCED MAGNETICS, INC.

Restricted Stock Unit Agreement – Terms and Conditions

Advanced Magnetics, Inc. (the “Company”) agrees to award to the recipient specified on the cover page hereof (the “Recipient”), and the Recipient agrees to accept from the Company, the number of restricted stock units (the “RSUs”) specified on the cover page hereof representing an equivalent number of shares of the Company’s Common Stock (the “Underlying Shares”), on the following terms:

1.Grant Under Plan. This Restricted Stock Agreement (the “Agreement”) is made pursuant to and is governed by the Company’s Amended and Restated 2000 Stock Plan, as amended and in effect from time to time (the “Plan”), and, unless the context otherwise requires, capitalized terms used herein shall have the same meanings as in the Plan.

2. Vesting if Business Relationship Continues.

(a)Vesting Schedule. If the Recipient has maintained continuously a Business Relationship with the Company through each date specified on the cover page hereof, a portion of the RSUs shall vest on such date in such amounts as are set forth opposite each such date on the cover page hereof. Except as otherwise set forth herein, if the Recipient’s Business Relationship with the Company is terminated by the Company or by the Recipient for any reason, whether voluntarily or involuntarily, no additional RSUs shall become vested RSUs under any circumstances with respect to the Recipient. Any determination under this Agreement as to Business Relationship status or other matters referred to above shall be made in good faith by the Board, whose decision shall be final and binding on all parties.

“Business Relationship” means service to the Company or its successor in the capacity of an employee, officer, director, consultant, or advisor.

(b)Termination of Business Relationship. For purposes hereof, a Business Relationship shall not be considered as having terminated during anymilitary leave, sick leave, or other leave of absence if approved in writing by the Company and if such written approval, or applicable law, contractually obligates the Company to continue the Business Relationship of the Recipient after the approved period of absence (an “Approved Leave of Absence”). In the event of an Approved Leave of Absence, vesting of RSUs shall be suspended (and all subsequent vesting dates shall be postponed by the length of the period of the Approved Leave of Absence) unless otherwise provided in the Company’s written approval of the leave of absence that specifically refers to this Agreement. For purposes hereof, a Business Relationship shall include a consulting arrangement between the Recipient and the Company that immediately follows termination of employment, but only if so stated in a written consulting agreement executed by the Company that specifically refers to this Agreement.

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(c)Acceleration. These RSUs shall become immediately vested in full with respect to all 20,000 shares of Common Stock issuable hereunder upon the consummation of a Change of Control. A “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) 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 the Company; (b) any merger, consolidation or similar transaction involving the Company, other than a transaction in which the stockholders of the Company 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 the Company; or (d) any other acquisition by a third party of all or substantially all of the business or assets of the Company, as determined by the Board of Directors of the Company, in its sole discretion.

In the event the Company terminates the Recipient’s employment with the Company without “cause” or the Recipient terminates his employment for “good reason” (each as defined in the Employment Agreement dated as of November 22, 2005 by and between the Company and the Recipient (the “Employment Agreement”)), the RSUs evidenced herein shall become immediately vested in full with respect to all 20,000 shares of Common Stock issuable hereunder as of the effective date of such termination.

3.Issuance of Underlying Shares. With respect to any RSUs that become vested RSUs pursuant to Section 2, subject to Section 5, the Company shall issue to the Recipient, as soon as practicable following the applicable vesting date specified on the cover page hereof, the number of Underlying Shares equal to the number of RSUs vesting on such vesting date, provided that, if the vesting date of any portion of the RSUs shall occur during either a regularly scheduled or special “blackout period” of the Company wherein Recipient is precluded from selling shares of the Company’s Common Stock, the receipt of the corresponding Underlying Shares issuable with respect to such vesting date pursuant to this Agreement shall be deferred until after the expiration of such blackout period. The Underlying Shares the receipt of which was deferred as provided above shall be issued to Recipient as soon as practicable after the expiration of the blackout period.

4.Restrictions on Transfer. The Recipient shall not sell, assign, transfer, pledge, encumber or dispose of all or any of his or her RSUs.

5.Withholding Taxes. All grants made pursuant to this Agreement shall be subject to withholding of all applicable income and employment taxes resulting from the issuance or vesting of the RSUs or the delivery of the Underlying Shares (the “Tax Obligations”). The Company may, and the Recipient hereby agrees and authorizes the Company on his behalf to, withhold, sell, and/or arrange for the sale of such number of Underlying Shares otherwise issuable to the Recipient pursuant to this Agreement as deemed necessary by the Company, in its sole discretion, to ensure that the Tax Obligations can be satisfied, including the right to sell shares having a fair market value greater than the Tax Obligations; provided, however, that for

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this purpose the Tax Obligations shall be computed based on the minimum statutory withholding rates for federal, state, local, and foreign income and employment tax purposes; provided, further, however, that if the Company decides to satisfy the Tax Obligations by withholding shares otherwise issuable hereunder (rather than by selling or arranging for the sale of shares on behalf of the Recipient), the Company shall not withhold shares having a fair market value greater than the Tax Obligations. The Recipient further agrees that, if the Company elects not to withhold, sell, or arrange for the sale of the amount of Underlying Shares sufficient to satisfy the full amount of the Tax Obligations, the Company may withhold such shortfall in cash from wages or other remuneration or the Recipient will deliver to the Company, in cash, the amount of such shortfall. The Recipient further agrees that the Recipient shall not sell any of the Underlying Shares during the period of time that the Company is acting on the Recipient’s behalf to withhold, sell, and/or arrange for the sale of the number of Underlying Shares necessary to satisfy the Recipient’s Tax Obligations. Notwithstanding the preceding three sentences, the Recipient may, by written notice to the Company at least ten business days before the applicable vesting date specified on the cover page hereof, elect to pay in cash the applicable Tax Obligations, or make other appropriate provisions acceptable to the Company for the payment of the applicable Tax Obligations, including the withholding from any payroll or other amounts due to the Recipient.

Recipient further agrees to take any further actions and execute any additional documents as may be necessary to effectuate the provisions of this Section 5 and the Recipient hereby grants the Company a irrevocable power of attorney to sign such additional documents on the Recipient’s behalf if the Company is unable after reasonable efforts to obtain Recipient’s signature on such additional documents. This power of attorney is coupled with an interest and is irrevocable by the Recipient.

6.Provision of Documentation to Recipient. By signing the cover page of this Agreement, the Recipient acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.

7.Section 409A of the Internal Revenue Code. The RSUs granted hereunder are intended to avoid the potential adverse tax consequences to the Recipient of Section 409A of the Internal Revenue Code of 1986, as amended, and the Board may make such modifications to this Agreement as it deems necessary or advisable to avoid such adverse tax consequences.

8.Rights as Stockholder. The Recipient shall have no rights as a stockholder of the Company with respect to any RSUs covered by this Agreement until the issuance of the Underlying Shares.

9. Miscellaneous.

(a)Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, if to the Recipient, to the address set forth on the cover page hereof or at the address shown on the records of the Company, and if to the Company, to the Company’s principal executive offices, attention of the Corporate Secretary.

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(b)Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties relative to the subject matter hereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement. This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties signatories to this Agreement. In the event of a conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control.

(c) Fractional RSUs or Underlying Shares. All fractional RSUs or Underlying Shares resulting from the adjustment provisions contained in the Plan shall be rounded down to the nearest whole unit or share.

(d)Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision.

(e)Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, subject to the limitations set forth herein.

(f)Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of Delaware without giving effect to the principles of the conflicts of laws thereof.

(g)No Obligation to Continue Business Relationship. Neither the Plan, nor this Agreement, nor any provision hereof imposes any obligation on the Company to continue a Business Relationship with the Recipient.

(h) For purposes of Sections 2, 5 and 9(g), the “Company” shall mean the Company as defined in Section 8(a) of the Plan.

EX-10.4

Exhibit 10.4

ADVANCED MAGNETICS, INC.

Form of Restricted Stock Unit Agreement

Advanced Magnetics, Inc. (the “Company”) hereby enters into this Restricted Stock Unit Agreement, dated as of the date set forth below, with the Recipient named herein (the “Agreement”) and grants to the Recipient the Restricted Stock Units (“RSUs”) specified herein pursuant to its Amended and Restated 2000 Stock Plan, as amended and in effect from time to time. The Terms and Conditions attached hereto are also a part hereof.

Name of recipient (the “Recipient”):

Date of this RSU grant:

Number of shares of the Company’s Common Stock (the “Underlying Shares”) underlying the equivalent number of restricted stock units (the “RSUs”) granted pursuant to this Agreement:

Vesting Start Date:

Number of RSUs that are vested on the Vesting Start Date:

Number of RSUs that are unvested the Vesting Start Date:

Vesting Schedule:

One year from the Vesting Start Date:	____ units
Two years from the Vesting Start Date:	____ units
Three years from the Vesting Start Date:	____ units
Four years from the Vesting Start Date:	____ units

_____________________________ Signature of Recipient ADVANCED MAGNETICS, INC. By:  

ADVANCED MAGNETICS, INC.

Form of Restricted Stock Unit Agreement – Terms and Conditions

Advanced Magnetics, Inc. (the “Company”) agrees to award to the recipient specified on the cover page hereof (the “Recipient”), and the Recipient agrees to accept from the Company, the number of restricted stock units (the “RSUs”) specified on the cover page hereof representing an equivalent number of shares of the Company’s Common Stock (the “Underlying Shares”), on the following terms:

1.Grant Under Plan. This Restricted Stock Agreement (the “Agreement”) is made pursuant to and is governed by the Company’s Amended and Restated 2000 Stock Plan, as amended and in effect from time to time (the “Plan”), and, unless the context otherwise requires, capitalized terms used herein shall have the same meanings as in the Plan.

2. Vesting if Business Relationship Continues.

(a)Vesting Schedule. If the Recipient has maintained continuously a Business Relationship with the Company through each date specified on the cover page hereof, a portion of the RSUs shall vest on such date in such amounts as are set forth opposite each such date on the cover page hereof. If the Recipient’s Business Relationship with the Company is terminated by the Company or by the Recipient for any reason, whether voluntarily or involuntarily, no additional RSUs shall become vested RSUs under any circumstances with respect to the Recipient. Any determination under this Agreement as to Business Relationship status or other matters referred to above shall be made in good faith by the Board, whose decision shall be final and binding on all parties.

“Business Relationship” means service to the Company or its successor in the capacity of an employee.

(b)Termination of Business Relationship. For purposes hereof, a Business Relationship shall not be considered as having terminated during anymilitary leave, sick leave, or other leave of absence if approved in writing by the Company and if such written approval, or applicable law, contractually obligates the Company to continue the Business Relationship of the Recipient after the approved period of absence (an “Approved Leave of Absence”). In the event of an Approved Leave of Absence, vesting of RSUs shall be suspended (and all subsequent vesting dates shall be postponed by the length of the period of the Approved Leave of Absence) unless otherwise provided in the Company’s written approval of the leave of absence that specifically refers to this Agreement.

(c)Acceleration. The Board may at any time provide that the RSUs awarded pursuant to this Agreement shall become immediately exercisable in full or in part, shall be free of some or all restrictions, or otherwise realizable in full or in part, as the case

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may be, despite the fact that the foregoing actions may cause the application of Sections 280G and 4999 of the Code if a change in control of the Company occurs.

3.Issuance of Underlying Shares. With respect to any RSUs that become vested RSUs pursuant to Section 2, subject to Section 5, the Company shall issue to the Recipient, as soon as practicable following the applicable vesting date specified on the cover page hereof, the number of Underlying Shares equal to the number of RSUs vesting on such vesting date, provided that, if the vesting date of any portion of the RSUs shall occur during either a regularly scheduled or special “blackout period” of the Company wherein Recipient is precluded from selling shares of the Company’s Common Stock, the receipt of the corresponding Underlying Shares issuable with respect to such vesting date pursuant to this Agreement shall be deferred until after the expiration of such blackout period. The Underlying Shares the receipt of which was deferred as provided above shall be issued to Recipient as soon as practicable after the expiration of the blackout period.

4.Restrictions on Transfer. The Recipient shall not sell, assign, transfer, pledge, encumber or dispose of all or any of his or her RSUs.

5.Withholding Taxes. All grants made pursuant to this Agreement shall be subject to withholding of all applicable income and employment taxes resulting from the issuance or vesting of the RSUs or the delivery of the Underlying Shares (the “Tax Obligations”). The Company may, and the Recipient hereby agrees and authorizes the Company on his behalf to, withhold, sell, and/or arrange for the sale of such number of Underlying Shares otherwise issuable to the Recipient pursuant to this Agreement as deemed necessary by the Company, in its sole discretion, to ensure that the Tax Obligations can be satisfied, including the right to sell shares having a fair market value greater than the Tax Obligations; provided, however, that for this purpose the Tax Obligations shall be computed based on the minimum statutory withholding rates for federal, state, local, and foreign income and employment tax purposes; provided, further, however, that if the Company decides to satisfy the Tax Obligations by withholding shares otherwise issuable hereunder (rather than by selling or arranging for the sale of shares on behalf of the Recipient), the Company shall not withhold shares having a fair market value greater than the Tax Obligations. The Recipient further agrees that, if the Company elects not to withhold, sell, or arrange for the sale of the amount of Underlying Shares sufficient to satisfy the full amount of the Tax Obligations, the Company may withhold such shortfall in cash from wages or other remuneration or the Recipient will deliver to the Company, in cash, the amount of such shortfall. The Recipient further agrees that the Recipient shall not sell any of the Underlying Shares during the period of time that the Company is acting on the Recipient’s behalf to withhold, sell, and/or arrange for the sale of the number of Underlying Shares necessary to satisfy the Recipient’s Tax Obligations. Notwithstanding the preceding three sentences, the Recipient may, by written notice to the Company at least ten business days before the applicable vesting date specified on the cover page hereof, elect to pay in cash the applicable Tax Obligations, or make other appropriate provisions acceptable to the Company for the payment of the applicable Tax Obligations, including the withholding from any payroll or other amounts due to the Recipient.

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Recipient further agrees to take any further actions and execute any additional documents as may be necessary to effectuate the provisions of this Section 5 and the Recipient hereby grants the Company a irrevocable power of attorney to sign such additional documents on the Recipient’s behalf if the Company is unable after reasonable efforts to obtain Recipient’s signature on such additional documents. This power of attorney is coupled with an interest and is irrevocable by the Recipient.

6.Provision of Documentation to Recipient. By signing the cover page of this Agreement, the Recipient acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.

7.Section 409A of the Internal Revenue Code. The RSUs granted hereunder are intended to avoid the potential adverse tax consequences to the Recipient of Section 409A of the Internal Revenue Code of 1986, as amended, and the Board may make such modifications to this Agreement as it deems necessary or advisable to avoid such adverse tax consequences.

8.Rights as Stockholder. The Recipient shall have no rights as a stockholder of the Company with respect to any RSUs covered by this Agreement until the issuance of the Underlying Shares.

9. Miscellaneous.

(a)Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, if to the Recipient, to the address set forth on the cover page hereof or at the address shown on the records of the Company, and if to the Company, to the Company’s principal executive offices, attention of the Corporate Secretary.

(b)Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties relative to the subject matter hereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement. This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties signatories to this Agreement. In the event of a conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control.

(c) Fractional RSUs or Underlying Shares. All fractional RSUs or Underlying Shares resulting from the adjustment provisions contained in the Plan shall be rounded down to the nearest whole unit or share.

(d)Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision.

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(e)Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, subject to the limitations set forth herein.

(f)Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of Delaware without giving effect to the principles of the conflicts of laws thereof.

(g)No Obligation to Continue Business Relationship. Neither the Plan, nor this Agreement, nor any provision hereof imposes any obligation on the Company to continue a Business Relationship with the Recipient.

(h) For purposes of Sections 2, 5 and 9(g), the “Company” shall mean the Company as defined in Section 8(a) of the Plan.

EX-10.5

Exhibit 10.5

Summary of the Advanced Magnetics, Inc. (the “Company”)

Change of Control Policy Applicable to Executive Officers

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) 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 the Company; (b) any merger, consolidation or similar transaction involving the Company, other than a transaction in which the stockholders of the Company 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 the Company; or (d) any other acquisition by a third party of all or substantially all of the business or assets of the Company, as determined by the Board of Directors of the Company, in its sole discretion.

Severance: Executive officers of the Company that have not entered into alternative arrangements with the Company shall receive six months of severance pay (based on base salary) in the event such officers’ employment is terminated by the Company (or its successor) within the first year following a Change of Control of the Company.

Timing of Payments: Severance shall be paid in equal installments over the severance period in accordance with the Company’s usual payroll schedule. It is intended that no payment pursuant to this policy will give rise to any adverse tax consequences pursuant to Section 409A of the Internal Revenue Code, as amended. The policy shall be interpreted and applied to that end, and no effect shall be given to any provision herein in a manner that reasonably could be expected to give rise to adverse tax consequences under said Section 409A. Should there be a reasonable possibility that a provision of this policy could give rise to such adverse tax consequences, any payments or other benefits under this policy shall be paid as promptly as possible but without giving rise to any such adverse consequences.

Acceleration of

Vesting: Upon a Change of Control, fifty percent (50%) of each executive officer’s then unvested options or other equity incentives shall become immediately vested. In the event any executive officer is terminated by the Company (or its successor) within one year following a Change of Control, the remaining fifty percent (50%) of the unvested options or other equity incentives held by such executive officer on the date of closing of the Change of Control event shall become immediately vested.

EX-10.6

EXHIBIT 10.6

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into as of February 7, 2006 by and between Advanced Magnetics, Inc., a Delaware corporation with offices at 61 Mooney Street, Cambridge, MA 02138 (“AMI”) and Jerome Goldstein, of 282 Buckminster Road, Brookline, MA 02445 (“you”).

Whereas, AMI desires to continue to employ you, and you desire to continue your 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 Executive Officer and Treasurer of AMI.

b)Duties. You shall perform for AMI the duties customarily associated with the offices of Chief Executive Officer and Treasurer and such other duties as may be assigned to you from time to time by AMI’s Board of Directors (the “Board”) that are consistent with the duties normally performed by the most senior executives of similar entities. 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. 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.

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 at the annualized rate of $345,560.00, 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 or decreased annually by the Board or the Compensation Committee of the Board in their discretion.

b)Bonus. No bonus shall be payable to you unless the Board or the Compensation Committee otherwise approves such bonus (which approval shall be in the sole discretion of the Board or Compensation Committee).

c)Options. You shall be eligible to receive stock options or other equity compensation under AMI’s equity incentive plans as determined by the Board or the Compensation Committee from time to time.

d)Vacation. You will continue to accrue vacation days in accordance with the policies and procedures of AMI as in effect from time to time.

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 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 and failure to remedy such nonperformance within ten (10) business days following written notice from the Board identifying the nonperformance and the actions required to cure it; or (iv) you commit an act of gross negligence, engage in willful misconduct or otherwise act with willful disregard for AMI’s best interests, and you fail to remedy such conduct within ten (10) business days following written notice from the Board identifying the gross negligence, willful misconduct or willful disregard and the actions required to cure it (if such conduct can be cured).

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.

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e)By You For Any Reason. You may terminate your employment at any time for any reason upon thirty (30) days prior written notice to AMI.

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 Within One Year of a Change of Control. In addition to the payments provided for in Section 5(a), in the event that (i) within one year from the date a Change of Control (as defined below) of the Company is consummated either (a) AMI (for purposes of this section, such term to include its successor) terminates your employment other than for Cause pursuant to Section 4(c) or (b) you terminate your employment with AMI for any reason; (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 one (1) year 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. 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 the Company; (b) any merger, consolidation or similar transaction involving the Company, other than a transaction in which the stockholders of the Company 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 the Company; or (d) any other acquisition by a third party of all or substantially all of the business or assets of the Company, as determined by the Board of Directors of the Company, in its sole discretion the sale of AMI or its business, by merger, sale of substantially all of its assets or otherwise.

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

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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

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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)(x) 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.

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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: President

/s/ Jerome Goldstein

Jerome Goldstein

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EX-10.7

Exhibit 10.7

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into as of February 7, 2006 by and between Advanced Magnetics, Inc., a Delaware corporation with offices at 61 Mooney Street, Cambridge, MA 02138 (“AMI”) and Joseph L. Farmer, of 484 East Seventh Street, Boston, MA 02127 (“you”).

Whereas, AMI desires to continue to employ you, and you desire to continue your 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. Employment; Position; Duties.

a)Employment. AI and you agree that your employment with AMI commenced on February 28, 2005. The terms of this Agreement shall be effective as of February 7, 2006 (the “Effective Date”).

b)Position. You shall serve as General Counsel and Vice President of Legal Affairs of AMI.

c)Duties. You shall perform for AMI the duties customarily associated with the office of General Counsel and Vice President of Legal Affairs and such other duties as may be assigned to you from time to time by AMI’s Chief Executive Officer (“CEO”) or AMI’s Board of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of General Counsel and Vice President of Legal Affairs of similar entities. 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 another entity and in professional organizations and civic and charitable organizations. 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 Effective Date 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.

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 a Base Salary at the annualized rate of $178,000.00, 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 shall be increased annually by the CEO or Board in their discretion.

b) Transaction Bonus. In the event that a definitive agreement in connection with a Change of Control (as defined below) of the Company is executed prior to December 31, 2006 and such Change of Control is thereafter consummated, you will receive a bonus of $100,000 within 5 business days of the closing date of such Change of Control. 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 the Company; (b) any merger, consolidation or similar transaction involving the Company, other than a transaction in which the stockholders of the Company 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 the Company; or (d) any other acquisition by a third party of all or substantially all of the business or assets of the Company, as determined by the Board of Directors of the Company, in its sole discretion the sale of AMI or its business, by merger, sale of substantially all of its assets or otherwise.

c)Options. You shall be eligible to receive stock options or other equity compensation under AMI’s equity incentive plans as recommended by the Chief Executive Officer and approved by the Board of Directors from time to time.

d)Vacation. You will continue to accrue vacation days in accordance with the policies and procedures of AMI as in effect from time to time.

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 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 and failure to remedy such nonperformance within ten (10) business days following written notice from the CEO identifying the nonperformance and the actions required to cure it; or (iv) you commit an act of gross negligence, engage in willful misconduct or otherwise act with willful disregard for AMI’s best interests, and you fail to

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remedy such conduct within ten (10) business days following written notice from the CEO identifying the gross negligence, willful misconduct or willful disregard and the actions required to cure it (if such conduct can be cured).

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 Any Reason. You may terminate your employment at any time for any reason upon thirty (30) days prior written notice to AMI.

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 Within One Year of a Change of Control. In addition to the payments provided for in Section 5(a), in the event that (i) within one year from the date a Change of Control is consummated either (a) AMI (for purposes of this section, such term to include its successor) terminates your employment other than for Cause pursuant to Section 4(c) or (b) you terminate your employment with AMI for any reason; (ii) you comply fully with all of your obligations under the Nondisclosure and Developments Agreement dated February 28, 2005 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 one (1) year 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.

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

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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

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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 as 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)(x) 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.

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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/ Jerome Goldstein

Name: Jerome Goldstein

Title: Chief Executive Officer

/s/ Joseph L. Farmer

Joseph L. Farmer

EX-10.8

Exhibit 10.8

Summary of the Advanced Magnetics, Inc.

Director Compensation

Every non-employee Director will receive $4,000 per quarter for service on the Board of Directors. A non-employee Director must attend at least 3 of 4 regularly scheduled meetings during the prior fiscal year to earn the full $4,000 quarterly fee.  If a non-employee Director attends less than 3 of the 4 regularly scheduled meetings in the prior fiscal year, this fee will be reduced for the current fiscal year by $1,000 for each missed meeting after the first missed meeting.  Any new non-employee Director will receive the full quarterly retainer fee during his or her first full year as a member of the Board of Directors.

In addition, each non-employee Director that is a member of the Audit Committee and/or the Compensation Committee will receive $1,000 for attendance in person or by phone at a meeting of such committees. The Chairperson of each of the Audit Committee and the Compensation Committee shall each receive an additional annual retainer fee of $2,000.