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) April 24, 1997
ALTEON INC.
_________________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Delaware 0-19529 13-3304550
_________________________________________________________________
(State or Other Juris- (Commission (I.R.S. Employer
diction of Incorporation) File Number) Identification No.)
170 Williams Drive, Ramsey, New Jersey 07446
_________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 934-5000
______________
_________________________________________________________________
(Former Name or Former Address, If Changed Since Last Report)<PAGE>
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Item 5. Other Events
On April 24, 1997, Alteon Inc. (the "Company") completed the
private sale to six investors, certain of whom were advised by The
Palladin Group, L.P.of 5,000 shares of its 6% Cumulative
Convertible Preferred Stock (the "Preferred Stock") and warrants
to purchase 50,000 shares of its common stock (the "Common Stock")
at an exercise price of $4.025 (the "Warrants") for an aggregate
purchase price of $5,000,000.
The terms of the Preferred Stock and the Warrants and
certain obligations of the Company in connection with the
issuance of the Preferred Stock and the Warrants are set forth in
the Certificate of Designations of the Preferred Stock, the
Preferred Stock Investment Agreement, the Registration Rights
Agreement and the Form of Common Stock Purchase Warrant, copies
of which are attached hereto as Exhibits 3.1, 10.1, 4.1 and 4.2,
respectively.
In connection with the sale of the Preferred Stock, the
Company issued the following press release:
"ALTEON COMPLETES $5 MILLION PRIVATE PLACEMENT
OF CONVERTIBLE PREFERRED STOCK
"Ramsey, New Jersey, April 28, 1997 -- Alteon Inc. (Nasdaq:
ALTN) announced today a private placement of $5 million of 6%
Cumulative Convertible Preferred Stock. The private placement
was completed with investment funds advised by The Palladin
Group, LP, a New York-based money management firm and represented
by Amy Factor of AFO Capital.
"The conversion price of the stock will be set at a discount
to the average of the daily low prices of Alteon's Common Stock
during the 10 days immediately preceding the date of conversion.
As part of this transaction, the Company has issued to the
purchasers of the Preferred Stock warrants to purchase an
aggregate of 50,000 shares of Common Stock at $4.025 per share.
"Alteon also announced its intention to seek, at its Annual
Meeting of Stockholders on June 10, 1997, such stockholder
approval as may be required by NASD rules to engage in additional
similar transactions in connection with its plans to obtain
additional financing during 1997. "These funds strengthen our
financial position as we move toward evaluation of additional
Phase II data on our lead product, pimagedine, and as we enter
the final year of the Phase III ACTION I trial of this compound
for diabetic complications," said Kenneth I. Moch, Alteon's
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Senior Vice President, Finance and Business Development and CFO.
"Alteon is a leader in the discovery of pharmaceutical
products for the treatment of the complications of diabetes and
age-related diseases. The Company is actively developing its
lead first-in-class compound, pimagedine, to inhibit or block
abnormal glucose/protein complexes that lead to diabetic
complications such as kidney disease and dyslipidemia. Three
clinical trials evaluating pimagedine for complications of
diabetes are ongoing, including the two pivotal Phase III ACTION
Trials for diabetic kidney disease. These ACTION trials are
being conducted at more than 100 North American clinical sites
and involve over 1,200 patients. In addition, Alteon is pursuing
potential indications of pimagedine for the treatment of various
inflammatory conditions, and is continuing its research on A.G.E.
cross-link breakers and the glucose lowering agent (GLA) series
of compounds.
"Any statements contained in this press release that relate
to future plans, events or performance are forward-looking
statements that involve risk and uncertainties including, but not
limited to, those relating to technology and product development,
regulatory approval processes, intellectual property rights and
litigation, competitive products, ability to obtain financing and
other risks identified in the company's filings with the Securities
and Exchange Commission. Actual results, events or performances
may differ materially. The Company undertakes no obligation to
publicly release the result of any revisions to these
forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence
of unanticipated events."
# # #
In connection with the sale of the Preferred Stock and the
Warrants, the Company amended the Stockholders' Rights Agreement
dated July 27, 1995 between the Company and Registrar and
Transfer Company, as Rights Agent, to provide that under certain
circumstances the holders of the Preferred Stock and the Warrants
will not be deemed to be Beneficial Owners (as defined in such
Agreement) of the Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits.
3.1 Certificate of Designations of 6% Cumulative
Convertible Preferred Stock for Alteon Inc.
4.1 Registration Rights Agreement dated as of April
24, 1997 between Alteon Inc. and the investors named on the
signature page thereof
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4.2 Form of Common Stock Purchase Warrant
4.3 Form of Common Stock Purchase Delisting Warrant
4.4 Amendment to Stockholders' Rights Agreement
between Alteon Inc. and Registrar and Transfer Company, as Rights
Agent
10.1 Preferred Stock Investment Agreement dated as of
April 24, 1997 between Alteon Inc. and the investors named on the
signature page thereof (without exhibits)
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SIGNATURE
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.
Alteon Inc.
By: /s/ James J. Mauzey
_____________________
James J. Mauzey
Chairman and
Chief Executive Officer
Dated: May 8, 1997
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
3.1 Certificate of Designations of 6%
Cumulative Convertible Preferred Stock
for Alteon Inc.
4.1 Registration Rights Agreement dated as
of April 24, 1997 between Alteon Inc.
and the investors named on the signature
page thereof
4.2 Form of Common Stock Purchase Warrant
4.3 Form of Common Stock Purchase Delisting
Warrant
4.4 Amendment to Stockholders' Rights
Agreement between Alteon Inc. and
Registrar and Transfer Company, as
Rights Agent
10.1 Preferred Stock Investment Agreement
dated as of April 24, 1997 between
Alteon Inc. and the investors named on
the signature page thereof (without
exhibits)
CERTIFICATE OF DESIGNATIONS
of
6% CUMULATIVE CONVERTIBLE PREFERRED STOCK
for
ALTEON INC.
Alteon Inc., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, does hereby make this
Certificate of Designations and does hereby state and certify that
pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation
of the Corporation, the Board of Directors duly adopted the
following resolutions, which resolutions remain in full force and
effect as of the date hereof:
RESOLVED, that, pursuant to Article FIFTH of the
Certificate of Incorporation of the Corporation, the Board of
Directors hereby authorizes the issuance of, and fixes the
designation and preferences and relative, participating, optional
and other special rights, and qualifications, limitations and
restrictions, of a series of Preferred Stock consisting of 5,000
shares, par value $0.01, to be designated "6% Cumulative
Convertible Preferred Stock" (the "Preferred Shares").
RESOLVED, that each of the Preferred Shares shall rank
equally in all respects and shall be subject to the following terms
and provisions:
1. Dividends.
(a) Cumulative. The holders of the Preferred
Shares shall be entitled to receive out of any assets legally
available therefor cumulative dividends at the per share rate of
six percent (6%) of the Liquidation Preference of each Preferred
Share, per annum payable quarterly on March 31, June 30, September
30 and December 31 of each year, commencing June 30, 1997 (each a
"Dividend Payment Date"), when and as declared by the Board of
Directors, in preference and priority to any payment of any
dividend on the Common Stock (as defined below) or any other class
or series of stock of the Corporation. Such dividends shall accrue
on any given share from the most recent date on which a dividend
has been paid with respect to such share, or if no dividends have
been paid, from the date of the original issuance of such share,
and such dividends shall accrue from day to day whether or not
declared, based on the actual number of days elapsed. If at any
time dividends on the outstanding Preferred Shares at the rate set
forth above shall not have been paid or declared and set apart for
payment with respect to all preceding periods, the amount of the
deficiency shall be fully paid or declared and set apart for
payment, but without interest, before any distribution, whether by
way of dividend or otherwise, shall be declared or paid upon or set
apart for the shares of any other class or series of stock of the
Corporation ranking junior to the Preferred Shares. For so long
as any Preferred Shares are outstanding, the Corporation shall not
pay any dividends on any Shares of Common Stock or any shares of
any other capital stock with ranking junior to the Preferred
Shares, without having received consent of a majority in interest
of the holders of Preferred Shares.
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(b) Cash or PIK. Any dividend payable on the
outstanding Preferred Shares may be paid, at the option of the
Corporation, either (i) in cash or (ii) by adding the amount
thereof to the Liquidation Preference of such Preferred Shares;
provided, however, that if the Corporation shall fail to pay any
dividend on a Dividend Payment Date, the amount of such dividend
shall be added to the Liquidation Preference (as defined below) for
such Preferred Shares.
2. Liquidation Preference. In the event of any
liquidation, dissolution or winding up of the Corporation, either
voluntary or involuntary, the holders of the Preferred Shares shall
be entitled to receive, prior and in preference to any distribution
of any assets of the Corporation to the holders of any other class
or series of shares ranking junior to the Preferred Shares, the
amount of $1,000 per share plus (x) dividends added to the
Liquidation Preference in accordance with Section 1(b)(ii) above,
(y) default payments owing to such holder with respect to such
share pursuant to the Registration Rights Agreement (defined below)
and (z) any accrued but unpaid dividends (with dividends deemed
accrued on a per diem basis through the date of such event and
thereafter even if such event or any distribution is not on a
Dividend Payment Date) (the "Liquidation Preference").
3. Issuance of Preferred Shares. The Preferred Shares
shall be issued by the Corporation pursuant to a Preferred Stock
Investment Agreement ("Investment Agreement") to be entered into
between the Corporation and the initial subscribers for the
Preferred Shares, and holders of Preferred Shares shall enjoy the
benefits of the Registration Rights Agreement ("Registration Rights
Agreement") to be entered into between such parties in connection
with the Investment Agreement.
4. Conversion. Subject to the proviso at the end of
this sentence, each holder of the Preferred Shares shall have the
right at any time and from time to time, at the option of such
holder, to convert any or all Preferred Shares for such number of
fully paid, validly issued and nonassessable shares ("Common
Shares") of common stock, par value $0.01, of the Corporation
("Common Stock"), free and clear of any liens, claims or
encumbrances, as is determined by dividing (i) the Liquidation
Preference times the number of Preferred Shares being converted
(the "Conversion Amount"), by (ii) the Conversion Price determined
as hereinafter provided in effect on the Conversion Date, on the
following terms and conditions; provided that, if the average daily
dollar volume of Common Stock traded on the principal market during
the ten (10) consecutive trading days immediately preceding the
Conversion Date is greater than $500,000 per day, and (x) the
Conversion Price in effect on the Conversion Date is greater than
$4.00, then the Conversion Amount with respect to any Conversion
Notice (as hereinafter defined) must be at least $100,000; (y) the
Conversion Price in effect on the Conversion Date is greater than
$3.00 but less than $4.00, then the Conversion Amount with respect
to any Conversion Notice must be at least $50,000; (z) the
Conversion Price in effect on the Conversion Date is less than
$3.00, then the Conversion Amount with respect to any Conversion
Notice must be at least $10,000. For purposes of determining the
daily dollar volume for the proviso to the previous sentence,
individual trades of 15,000 or more shares of Common Stock shall
each be deemed to have been a trade of 15,000 shares.
(a) Mechanics of Conversion. To convert Preferred
Shares into Common Shares, the holder shall give written notice
("Conversion Notice") to the Corporation in the form of page 1 of
Exhibit A hereto (which Conversion Notice may be given by facsimile
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transmission) stating that such holder elects to convert the same
and shall state therein the number of shares to be converted and
the name or names in which such holder wishes the certificate or
certificates for Common Shares to be issued (the date of such
Conversion Notice shall be referred to herein as the "Conversion
Date"). Either simultaneously with the delivery of the Conversion
Notice, or within one (1) trading day thereafter, the holder shall
deliver (which also may be done by facsimile transmission) page 2
to Exhibit A hereto indicating the computation of the number of
Common Shares to be received. As soon as possible after delivery
of the Conversion Notice, such holder shall surrender the
certificate or certificates representing the shares being
converted, duly endorsed, at the office of the Corporation or of
any transfer agent for such shares, provided that the Corporation
shall at all times maintain an office or agency in New York City
(or within 60 miles thereof) for such purposes. The Corporation
shall, immediately upon receipt of such Conversion Notice, issue
and deliver to or upon the order of such holder, against delivery
of the certificates representing the shares which have been
converted, a certificate or certificates for the number of Common
Shares to which such holder shall be entitled (with the number of
and denomination of such certificates designated by such holder),
and the Corporation shall immediately issue and deliver to such
holder a certificate or certificates for the number of Preferred
Shares which such holder has not yet elected to convert hereunder
but which are evidenced in part by the certificate(s) delivered to
the Corporation in connection with such Conversion Notice; the
Corporation shall effect such issuance within three (3) trading
days (as defined in Section 4(b)(iv) below) of the Conversion Date
and shall transmit the certificates by messenger or overnight
delivery service to reach the address designated by such holder
within three (3) trading days after the receipt of such Conversion
Notice ("T+3"). In the alternative to physical delivery of
certificates for Common Shares, if delivery of the Common Shares
pursuant to any conversion hereunder may be effectuated by
electronic book-entry through Depository Trust Company ("DTC"),
then delivery of Common Shares pursuant to such conversion shall,
if requested by such holder, be closed and settled on T+3 by book-
entry transfer through DTC, and the Common Shares in connection
with such conversion shall be deemed delivered by such book-entry
transfer. The parties agree to coordinate with DTC to accomplish
this objective. The conversion pursuant to this Section 4 shall
be deemed to have been made immediately prior to the close of
business on the Conversion Date. The person or persons entitled
to receive the Common Shares issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such
Common Shares at the close of business on the Conversion Date.
(b) Determination of Conversion Price.
(i) The Conversion Price shall be equal to:
[100% - Applicable Percentage (as set forth below)] x Agreed
Value (as defined below).
The Agreed Value shall equal the average of the daily low
trading price of the Common Stock the ten (10) consecutive
trading days immediately preceding the Conversion Date.
(ii) The Applicable Percentage shall be as follows:
3.5% during calendar days 1 through 89 following the
Closing Date
7.5% during calendar days 90 through 179 following
the Closing Date
14.5% commencing with the 180th calendar day
following the Closing Date
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The Applicable Percentage shall be subject to adjustment as
provided in the Registration Rights Agreement.
(iii) The Closing Date shall be the date of
closing of the Investment Agreement.
(iv) The "low trading price" of the Common Stock on
any day shall be (A) the lowest reported sale price of the
Common Stock as reported in the consolidated transaction
reporting system ("consolidated tape") if transactions in the
Common Stock are included in the consolidated tape or (B) if
the Common Stock is not included in the consolidated tape, the
lowest reported sale price of the Common Stock on the
principal automated securities price quotation system on which
sale prices of the Common Stock are reported, or (C) if the
Common Stock is not included in the consolidated tape and sale
prices of the Common Stock are not reported on an automated
quotation system, the lowest bid price for the Common Stock
as reported by National Quotation Bureau Incorporated or
similar organization. If none of the foregoing provisions are
applicable, the "low trading price" of the Common Stock on a
day will be the fair market value of the Common Stock on that
day as determined by a member firm of the New York Stock
Exchange, Inc., selected in good faith by the Board of
Directors of the Corporation and reasonably acceptable to the
holders of Preferred Shares. The term "trading day" means (x)
if the Common Stock is listed on the New York Stock Exchange
or the American Stock Exchange, a day on which there is
trading on such stock exchange, (y) if the Common Stock is not
listed on either of such stock exchanges but sale prices of
the Common Stock are reported on an automated quotation
system, a day on which trading is reported on the principal
automated quotation system on which sales of the Common Stock
are reported, or (z) if the foregoing provisions are
inapplicable, a day on which quotations are reported by
National Quotation Bureau Incorporated. Notwithstanding the
foregoing, a day shall not be considered a trading day if (i)
trading of the Common Stock was suspended during the entire
day or (ii) no reported trades occur on such day.
(v) In the event that during any period of
consecutive trading days provided for above, the Corporation
shall pay any dividend on the Common Stock payable in Common
Stock or in rights to acquire Common Stock, or shall effect
a stock split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock, then
the Conversion Price shall be proportionately decreased or
increased, as appropriate, to give effect to such event.
(c) Distributions. In the event the Corporation shall
at any time or from time to time make or issue, or fix a record
date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of
the Corporation or any of its direct or indirect subsidiaries other
than additional Common Shares, then in each such event, in addition
to the number of shares of Common Stock receivable upon conversion,
provision shall be made so that the holders of Preferred Shares
shall receive, upon the conversion thereof, the securities of the
Corporation or such subsidiary which they would have received had
they been the owners on the date of such event of the number of
Common Shares issuable to them upon conversion. The Corporation
shall, upon the written request at any time of any holder of
Preferred Shares, furnish or cause to be furnished to such holder
a certificate prepared by the Corporation setting forth the number
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of other securities and the amount, if any, of other property which
at the time would be received upon the conversion of Preferred
Shares with respect to each share of Common Stock received upon
such conversion.
(d) Notice of Record Date. In the event of any taking
by the Corporation of a record date of the holders of any class of
securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, any
security or right convertible into or entitling the holder thereof
to receive additional Common Shares, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right,
the Corporation shall deliver to each holder of Preferred Shares
at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution, security or right and the
amount and character of such dividend, distribution, security or
right.
(e) Issue Taxes. The Corporation shall pay any and all
issue and other taxes, excluding any income, franchise or similar
taxes, that may be payable in respect of any issue or delivery of
Common Shares on conversion of Preferred Shares pursuant hereto.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued Common Shares, solely for the purpose
of effecting the conversion of the Preferred Shares, such number
of its Common Shares as shall from time to time be sufficient to
effect the conversion of all outstanding Preferred Shares, and if
at any time the number of authorized but unissued Common Shares
shall not be sufficient to effect the conversion of all the then
outstanding Preferred Shares, the Corporation will take such
corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued Common Shares to
such number of shares as shall be sufficient for such purpose,
including without limitation engaging in best efforts to obtain the
requisite shareholder approval. Without in any way limiting the
foregoing, so long as any Preferred Shares remain outstanding the
Corporation agrees to reserve and at all times keep available
solely for purposes of conversion of Preferred Shares such number
of authorized but unissued Common Shares that is set forth in the
Investment Agreement.
(g) Fractional Shares. No fractional shares shall be
issued upon the conversion of any Preferred Shares. All Common
Shares (including fractions thereof) issuable upon conversion of
more than one Preferred Share by a holder thereof shall be
aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation
shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the Conversion Date (as determined
in good faith by the Board of Directors of the Corporation).
(h) Reorganization or Merger; Going Private. In case
of any reorganization or any reclassification of the capital stock
of the Corporation or any consolidation or merger of the
Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation
to any other person, then, as part of such reorganization,
consolidation, merger or sale, if the holders of Common Shares
receive any publicly traded securities as part or all of the
consideration for such reorganization, consolidation, merger or
sale, then provision shall be made such that each Preferred Share
shall thereafter be convertible into such new securities at a
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conversion price which places the holders of Preferred Shares in
an economically equivalent position as they would have been if not
for such event. In addition to the foregoing, if the holders of
Common Shares receive any non-publicly traded securities or other
property or cash as part or all of the consideration for such
reorganization, consolidation, merger or sale, then such
distribution shall be treated as a distribution under Section 4(c)
above and such Section shall govern such distribution. So long as
any Preferred Shares are outstanding, the Corporation agrees that
there shall be no such reorganization, consolidation, merger or
sale unless an appropriate adjustment of the conversion price and
other provisions contained herein related to the conversion of such
Preferred Shares is agreed to in writing in advance by the Board
of Directors of the Corporation and a majority in interest of the
holders of outstanding Preferred Shares (which agreement will not
be unreasonably withheld). The Corporation further agrees that it
shall not agree or consent to or enter into any transaction or
series of transactions as a result of which the Common Shares would
cease to be publicly traded unless agreed to in writing in advance
by the Board of Directors of the Corporation and a majority in
interest of the holders of Preferred Shares.
(i) Change in Control. If at any time (x) there occurs
any consolidation or merger of the Corporation with or into any
other corporation or other entity or person (whether or not the
Corporation is the surviving corporation), or any other corporate
reorganization or transaction or series of related transactions in
which in excess of 50% of the Corporation's voting power is
transferred through a merger, consolidation, tender offer or
similar transaction, or there occurs any event which causes the
occurrence of a Distribution Date (as defined in Section 3(b) of
the Stockholders Rights Agreement, dated as of July 27, 1995,
between Alteon and Registrar and Transfer Company, as rights agent,
as amended) or a substantially similar occurrence under any
successor or similar plan, (y) in excess of 50% of the
Corporation's Board of Directors consists of directors not
nominated by the prior Board of Directors of the Corporation, or
(z) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), together
with its affiliates and associates (as such terms are defined in
Rule 405 under the Securities Act of 1933, as amended (the "Act")),
beneficially owns or is deemed to beneficially own (as described
in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Corporation's voting power
(the events in the foregoing clauses (x), (y) and (z) collectively
referred to as a "Change in Control Transaction"), then upon
announcement by the Corporation or any other person of the proposal
or commencement of any transaction or plan intended, or likely to,
result in a Change in Control Transaction, during the Pendency
Period (as hereinafter defined) notwithstanding anything to the
contrary contained herein, (i) the Applicable Percentage shall
immediately be deemed to be 17%, and (ii) the Agreed Value shall
equal the lowest of the daily low trading prices of the Common
Stock during the ten (10) consecutive trading days immediately
preceding the Conversion Date. The "Pendency Period" is the period
beginning with the announcement described above and ending ten (10)
trading days after (x) a subsequent contrary announcement of the
abandonment of the proposal, transaction or plan, or (y) the
consummation of the Change in Control Transaction. If the Change
in Control Transaction occurs in multiple stages, the Pendency
Period does not expire until all stages (e.g., including a merger
following a tender offer) are completed. The Corporation shall
provide all holders of Preferred Shares with the earlier of (i) 20
days' prior notice of any such Change in Control Transaction, to
the extent the Corporation has prior knowledge of a Change in
Control Transaction; or (ii) notice on the day immediately
following the Corporation's learning of any such transaction.
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(j) Forced Conversion or Redemption. (1) Subject to
subsection (j)(2) below, any Preferred Shares held on (i) the date
which is the fifth (5th) anniversary of the Closing Date, or (ii)
the first date following the third (3rd) anniversary of the Closing
Date on which the aggregate Liquidation Preference of the
outstanding Preferred Shares is less than $250,000 ("Forced
Conversion Date") shall be converted upon written notice to the
holders of the Preferred Shares at least 20 trading days prior to
the Forced Conversion Date, provided that such Forced Conversion
Date shall be deferred for such number of days as is equal to 1.5
times the number of days (A) there is not Effective Registration
(as defined in the Investment Agreement), but not including the
first 120 days after the Closing; (B) there is not a sufficient
amount of Common Shares available for conversion of all outstanding
Preferred Shares; (C) for any other reason the Corporation refuses
or announces its refusal to honor conversion of Preferred Shares;
or (D) there is a suspension, restriction or limitation in the
ability of holders of Preferred Shares to sell Common Shares
received upon conversion of Preferred Shares under the Registration
Statement and prospectus for any reason.
(2) Notwithstanding the preceding subsection
(j)(1), no holder of Preferred Shares shall be obligated to convert
any Preferred Shares held by such holder on the Forced Conversion
Date unless and until each of the following conditions has been
satisfied or exists, each of which shall be a condition precedent
to any such forced conversion:
(A) no material default or breach exists, and no
event shall have occurred which constitutes (or would
constitute with notice or the passage of time or both) a
material default or breach of the Investment Agreement, the
Registration Rights Agreement or this Certificate of
Designations;
(B) none of the events described in clauses (i)
through (iv) of Section 2(b) of the Registration Rights
Agreement shall have occurred and be continuing;
(C) Effective Registration (as defined in the
Investment Agreement) has occurred and is continuing and has
continuously existed for the prior 30 consecutive trading
days;
(D) the Corporation and its direct and indirect
subsidiaries on a consolidated basis has assets with a net
realizable fair market value exceeding its liabilities and is
able to pay all its debts as they become due in the ordinary
course of business, and the Corporation is not and has not
been subject to any liquidation, dissolution or winding up of
its affairs; and
(E) each holder of Preferred Shares shall have
received a certificate from an appropriate executive officer
of the Corporation certifying that each of the foregoing
conditions precedent exist or have been satisfied.
Such forced conversion shall be subject to and governed by all the
provisions relating to voluntary conversion of the Preferred Shares
contained herein.
(3) Upon written notice by the Corporation to the
holders of Preferred Shares at least 20 days prior to the Forced
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Conversion Date, any Preferred Shares held on the Forced Conversion
Date may be redeemed for cash at a price equal to the Liquidation
Preference of such Preferred Shares divided by [100%-Applicable
Percentage].
(4) Notwithstanding the previous subsections (j)(1)
and (j)(3), any Preferred Shares held on a date on which the
aggregate Liquidation Preference of the outstanding Preferred
Shares is less than $250,000, may be redeemed for cash at the
Corporation's option at a price equal to the Premium Redemption
Price (as defined in the Registration Rights Agreement).
(k) Limitations on Holder's Right to Convert.
(i) Notwithstanding anything to the contrary
contained herein, no Preferred Share may be converted by a
holder to the extent that, after giving effect to Common
Shares to be issued pursuant to a Conversion Notice, the total
number of Common Shares deemed beneficially owned by such
holder (other than by virtue of the ownership of Preferred
Shares or ownership of other securities that have limitations
on a holder's rights to convert or exercise similar to those
limitations set forth herein), together with all Common Shares
deemed beneficially owned by the holder's "affiliates" (as
defined in Rule 144 of the Act) that would be aggregated for
purposes of determining whether a group under Section 13(d)
of the Securities Exchange Act of 1934 exists, would exceed
4.9% of the total issued and outstanding shares of the
Corporation's Common Stock, provided that each holder shall
have the right to waive this restriction, in whole or in part,
immediately in the case of a pending Change in Control
Transaction described in clause (x) or (z) of Paragraph 4(i)
above and in any other case upon 61 days prior notice to the
Corporation. The delivery of a Conversion Notice by any
holder shall be deemed a representation by such holder that
it is in compliance with this paragraph. A transferee of the
Preferred Shares shall not be bound by this provision unless
it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Certificate of
Designations shall exclude shares that might otherwise be
deemed beneficially owned by reason of the convertibility of
the Preferred Shares.
(ii) The Preferred Shares in the aggregate may not
be converted into more than 3,141,965 shares of Common Stock, which
number of shares shall be appropriately adjusted for any stock
split, reverse split, stock dividend or reclassification of Common
Stock. The limitation set forth in the preceding sentence will
apply only if, and only to the extent, required, and only for so
long as imposed, by the rules of the NASDAQ (as defined in the
Investment Agreement) or such other principal market on which
shares of the Corporation's Common Stock are then traded; provided,
however, that if a holder has, or all holders in the aggregate
have, the right to convert to a number of shares exceeding the
limit described in the preceding sentence, the Corporation will use
its best efforts to obtain its shareholders' approval to waive such
limit.
(l) Certificate for Conversion Price Adjustment. The
Corporation shall, upon the written request at any time of any
holder of Preferred Shares, furnish or cause to be furnished to
such holder a certificate prepared by the Corporation setting forth
any adjustments or readjustments of the Conversion Price pursuant
to this Section 4.
(m) Specific Enforcement. The Corporation agrees that
irreparable damage would occur in the event that any of the
provisions of this Certificate of Designations were not performed
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<PAGE>
in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the holders of Preferred Shares shall
be entitled to specific performance, injunctive relief or other
equitable remedies to prevent or cure breaches of the provisions
of this Certificate of Designations and to enforce specifically the
terms and provisions hereof, this being in addition to any other
remedy to which any of them may be entitled under agreement, at law
or in equity.
(n) Other Securities Offerings. If at any time during
the period ending six (6) months after the Closing Date, the
Corporation sells or agrees to sell (including pursuant to a letter
of intent, term sheet, or similar means) Common Shares or
securities or options convertible into, exercisable for, or
exchangeable for, Common Shares (other than a private placement of
Common Stock to an affiliate of The Palladin Group, L.P. or a sale
pursuant to a bona fide registered public offering of Common Shares
by the Corporation and other than shares or options issued pursuant
to the Corporation's employee, director or consultant stock option
plans and other than sales of shares to underwriters), then, if the
effective or maximum sales price of the Common Shares with respect
to such transaction (including the effective or maximum conversion,
exercise or exchange price) ("Other Price") is less than the
effective conversion price of the Preferred Shares at such time,
the Corporation shall adjust the conversion price applicable to the
Preferred Shares not yet converted in form and substance reasonably
satisfactory to the holders of Preferred Shares so that the
conversion price applicable to the Preferred Shares shall, in no
event, be greater, after giving effect to all other adjustments
contained herein, than the Other Price. This Paragraph 4(n) shall
not apply to a financing transaction consisting of a private
placement of the Corporation's securities in connection with a
strategic alliance. For this purpose, a strategic alliance shall
mean a transaction in which the acquiror of the Corporation's
securities has a business relationship material to the Corporation
with the Corporation independent of such acquiror's acquisition of
the Corporation's securities.
5. Voting Rights. The affirmative vote of a majority
in interest of the Corporation's outstanding Preferred Shares shall
be necessary for (i) any amendment of this Certificate of
Designations, (ii) any amendment to the Certificate of
Incorporation or by-laws of the Corporation that may amend or
change or adversely affect any of the rights, preferences, or
privileges of the Preferred Shares, (iii) any waiver of a default
in payment of dividends on the Preferred Shares, and (iv) any
reorganization or reclassification of the capital stock of the
Corporation, any consolidation or merger of the Corporation with
or into any other corporation or corporations, or any sale of all
or substantially all of the assets of the Corporation, that would
have an adverse effect on any of the rights, preferences, or
privileges of the Preferred Shares, provided, however, that holders
of Preferred Shares who are affiliates of the Corporation (and the
Corporation itself) shall not participate in such vote and the
Preferred Shares of such holders shall be disregarded and deemed
not to be outstanding for purposes of such vote.
6. Notices. The Corporation shall distribute to the
holders of Preferred Shares copies of all notices, materials,
annual and quarterly reports, proxy statements, information
statements and any other documents distributed generally to the
holders of shares of Common Stock of the Corporation, at such times
and by such method as such documents are distributed to such
holders of such Common Stock.
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<PAGE>
7. Replacement Certificates. The certificate(s)
representing the Preferred Shares held by any holder of Preferred
Shares may be exchanged by such holder at any time and from time
to time for certificates with different denominations representing
an equal aggregate number of Preferred Shares, as reasonably
requested by such holder, upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
8. Attorneys' Fees. Any holder of Preferred Shares
shall be entitled to recover from the Corporation the reasonable
attorneys' fees and expenses incurred by such holder in connection
with enforcement by such holder of any obligation of the
Corporation hereunder.
9. No Reissuance. No Preferred Shares acquired by the
Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued.
Signed on April 23, 1997
ALTEON INC.
By: /s/Kenneth I. Moch
________________________
Name: Kenneth I. Moch
Title:Senior Vice President
Finance and Business
Development
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<PAGE>
EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Shares)
CONVERSION NOTICE
FOR
6% CUMULATIVE CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of 6% Cumulative
Convertible Preferred Stock ("Preferred Shares") of Alteon Inc.,
(the "Corporation"), hereby irrevocably elects to convert
_____________ Preferred Shares for shares ("Common Shares") of
common stock, par value $0.01 per share (the "Common Stock"), of
the Corporation according to the terms and conditions of the
Certificate of Designations for the Preferred Shares as of the date
written below. The undersigned hereby requests that share
certificates for the Common Stock to be issued to the undersigned
pursuant to this Conversion Notice be issued in the name of, and
delivered to, the undersigned or its designee as indicated below.
No fee will be charged to the holder of Preferred Shares for any
conversion. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Certificate
of Designations.
Conversion Date: __________________________
Conversion Information: NAME OF HOLDER: _________________
By:_______________________________
Print Name:
Print Title:
Print Address of Holder:
__________________________________
__________________________________
Issue Common Stock to:____________
at:_______________________________
__________________________________
If Common Stock is to be issued to a person other than Holder,
Holder's signature must be guaranteed below:
SIGNATURE GUARANTEED BY:
_______________________
THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET
FORTH ON PAGE 2 OF THE CONVERSION NOTICE.
Page 1 of Conversion Notice
<PAGE>
Page 2 to Conversion Notice dated____________ for:________________
(Conversion Date) (Name of Holder)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
Number of Preferred Shares converted:__________ shares
Number of Preferred Shares converted x
Liquidation Preference $__________
Total dollar amount converted $__________
Conversion Price $__________
Number of Common Shares = Total dollar amount converted $__________
Conversion Price $
Number of Common Shares = __________
If the conversion is not being settled by DTC, please issue and
deliver _____ certificate(s) for Common Shares in the following
amount(s):
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
If the Holder is receiving certificate(s) for Preferred Shares upon
the conversion, please issue and deliver _____ certificate(s) for
Preferred Shares in the following amounts:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is
entered into as of April 24, 1997 between Alteon Inc., a Delaware
corporation with offices at 170 Williams Drive, Ramsey, New
Jersey 07446 ("Alteon") and each of the entities listed under
"Investors" on the signature page hereto (each an "Investor" and
collectively the "Investors"), each with offices at the address
listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Preferred Stock
Investment Agreement by and between Alteon and the Investors (the
"Investment Agreement"), Alteon has agreed to sell and issue to the
Investors, and the Investors have agreed to purchase from Alteon,
an aggregate of 5,000 shares, par value $0.01, of Alteon's 6%
Cumulative Convertible Preferred Stock (the"Preferred Shares") on
the terms and conditions set forth therein;
WHEREAS, the Investment Agreement contemplates that the
Preferred Shares will be convertible into shares (together with
the Warrant Shares, the "Common Shares") of common stock, par value
$0.01, of Alteon ("Common Stock") pursuant to the terms and
conditions set forth in the Certificate of Designations (the
"Designation") for such Preferred Shares; and
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Investors' agreement to enter into the
Investment Agreement, Alteon has agreed to issue the Warrants and
to provide the Investors with certain registration rights with
respect to the Common Shares and Warrant Shares and certain other
rights and remedies with respect to the Preferred Shares as set
forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in
the Investment Agreement and this Agreement, Alteon and the
Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein
and not otherwise defined shall have the meaning ascribed thereto
in the Investment Agreement or the Designation. As used in this
Agreement, the following terms shall have the following respective
meanings:
"Closing" and "Closing Date" shall have the meanings
ascribed to such terms in the Investment Agreement.
"Commission" shall mean the
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
"Delisting Warrants" shall mean the
warrants in the form of Exhibit 2 to the Investment Agreement.
"Delisting Warrant Shares" shall mean shares of
Common Stock of Alteon issuable upon exercise of the Delisting
Warrants.
<PAGE>
"Liquidation Preference" shall have the meaning
ascribed to such term in the Designation. For clarification
purposes, "Liquidation Preference" hereunder shall include any
accrued and unpaid dividends on the Preferred Shares on a per diem
basis through the date of any event for which default payments are
payable pursuant to Section 2(b) below and thereafter.
"Registrable Securities" shall mean: (i) the Common
Shares issued to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares or exercise of the
Warrants or upon any stock split, stock dividend, recapitalization
or similar event with respect to such Common Shares; (ii) any
securities issued or issuable to each Holder upon the exchange or
conversion of any Preferred Shares, Warrants or Common Shares; and
(iii) any other security issued as (A) a dividend or other
distribution with respect to, or (B) in exchange for or in
replacement of, Registrable Securities.
The terms "register", "registered" and
"registration" shall refer to a registration effected by preparing
and filing a registration statement in compliance with the
Securities Act and applicable rules and regulations thereunder, and
the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to
be incurred by Alteon in connection with each Holder's registration
rights under this Agreement, including, without limitation, all
registration and filing fees, printing expenses, fees and
disbursements of counsel for Alteon, blue sky fees and expenses,
reasonable fees and disbursements of counsel to Holders (using a
single counsel selected by a majority in interest of the Holders)
for a "due diligence" examination of Alteon and review of the
Registration Statement and related documents, and the expense of
any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of Alteon,
which shall be paid in any event by Alteon).
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and all fees and disbursements of counsel
for Holders not included within "Registration Expenses".
"Holder" and "Holders" shall include an Investor or
the Investors, respectively, and any transferee of the Preferred
Shares, Warrants or Common Shares or Registrable Securities which
have not been sold to the public to whom the registration rights
conferred by this Agreement have been transferred in compliance
with this Agreement.
"Registration Statement" shall have the meaning set
forth in Section 2(a) herein.
"Regulation D" shall mean Regulation D as
promulgated pursuant to the Securities Act, and as subsequently
amended.
"Securities Act" or "Act" shall mean the Securities
Act of 1933, as amended.
"Warrants" shall mean the warrants in form and
substance of Exhibit 1 to the Investment Agreement.
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<PAGE>
"Warrant Shares" shall mean shares of Common Stock
of Alteon issuable upon exercise of the Warrants.
2. Registration Requirements.
Alteon shall use its best efforts to effect the
registration for resale of the Registrable Securities (including
without limitation the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale)
and in all states reasonably requested by the Holder. Such best
efforts by Alteon shall include the following:
(a) Alteon shall, as expeditiously as
reasonably possible after the Closing Date:
(i) Prepare and file a registration
statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the
event that Alteon is ineligible to use such form, such other form
as Alteon is eligible to use under the Securities Act) covering the
Registrable Securities ("Registration Statement"). Thereafter,
Alteon shall use its best efforts to cause such Registration
Statement and other filings to be declared effective prior to the
end of the period terminating 90 days following the Closing Date
(the "Registration Deadline"). Alteon shall provide Holders
reasonable opportunity to review any such Registration Statement
or amendment or supplement thereto prior to filing, and Holders
shall use their best efforts to complete such review in a timely
fashion.
(ii) Prepare and file with the SEC
such amendments and supplements to such Registration Statement and
the prospectus used in connection with such Registration Statement
as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement and notify the Holders of the filing and
effectiveness of such Registration Statement and any amendments or
supplements.
(iii) Furnish to each Holder such
numbers of copies of a current prospectus conforming with the
requirements of the Act, copies of the Registration Statement, any
amendment or supplement thereto and any documents incorporated by
reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(iv) Use its best efforts to register
and qualify the securities covered by such Registration Statement
under such other securities or "Blue Sky" laws of such
jurisdictions as shall be reasonably requested by each Holder;
provided that Alteon shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
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<PAGE>
(v) Notify each Holder immediately
of the happening of any event as a result of which the prospectus
(including any supplements thereto or thereof) included in such
Registration Statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing,
and use its best efforts to promptly update and/or correct such
prospectus.
(vi) Notify each Holder immediately
of the issuance by the Commission or any state securities
commission or agency of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings
for that purpose. Alteon shall use its best efforts to prevent the
issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(vii) Permit a single firm of counsel,
designated as Holders' counsel by a majority of the Registrable
Securities included in the Registration Statement, to review the
Registration Statement and all amendments and supplements thereto
within a reasonable period of time prior to each filing, and shall
not file any document in a form to which such counsel reasonably
objects.
(viii) Use its best efforts to list
the Registrable Securities covered by such Registration Statement
with all securities exchange(s) and/or markets on which the Common
Stock is then listed and prepare and file any required filings with
the National Association of Securities Dealers, Inc. or any
exchange or market where the Common Shares are traded.
(ix) Take all steps necessary to
enable Holders to avail themselves of the prospectus delivery
mechanism set forth in Rule 153 (or successor thereto) under the
Act.
(b) Set forth below in this Section 2(b) are
(I) events that may arise that the Investors consider will
interfere with the full enjoyment of their rights under this
Agreement (the "Interfering Events"), and (II) the remedies
applicable in each of these events.
Paragraphs (i) through (iv) of this
Section 2(b) describe the Interfering Events, provide a remedy to
the Investors if an Interfering Event occurs and provide that the
Investors may require that Alteon redeem outstanding Preferred
Shares at a specified price if certain Interfering Events are not
timely cured.
Paragraph (v) provides, inter alia, that
if cash payments required as the remedy in the case of certain of
the Interfering Events are not paid when due, Alteon may be
required by the Investors to repurchase outstanding Preferred
Shares at a specified price.
Paragraph (vi) provides, inter alia, that
the Investors may require that Alteon redeem outstanding Preferred
Shares at a specified price if certain of the Interfering Events
are not timely cured.
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<PAGE>
The preceding paragraphs in this Section
2(b) are meant to serve only as an introduction to this Section
2(b), are for convenience only, and are not to be considered in
applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of
Registration Statement. Alteon agrees that it shall file the
Registration Statement complying with the requirements of this
Agreement promptly following the Closing Date and shall use its
best efforts to cause such Registration Statement to become
effective not later than the Registration Deadline. In the event
that such Registration Statement has not been declared effective
by the Registration Deadline, then the Applicable Percentages
otherwise provided for in the Designation shall be increased by .5%
during and after the 30-day period ("Default Period") from and
after the Registration Deadline during any part of which such
Registration Statement is not effective, and such Applicable
Percentage shall be further increased by an additional 1.5% during
and after each Default Period thereafter. For example, if the
Registration Statement does not become effective until 70 days from
the Registration Deadline, the Applicable Percentage will be
increased by 3.5%.
No Listing. In the event that Alteon fails,
refuses or is unable to cause the Registrable Securities covered
by the Registration Statement to be listed with either the National
Association of Securities Dealers Automated Quotation system
National Market ("NASDAQ"), New York Stock Exchange or American
Stock Exchange and, in addition, such other principal securities
exchange(s) and markets on which the Common Stock is then traded
at all times during the period ("Listing Period") from the
Registration Deadline until the Forced Conversion Date (provided
that such Forced Conversion Date shall be deferred 1.5 days for
each day that there is no Effective Registration), then Alteon
shall immediately notify each Holder of such event, and:
(A) Alteon shall pay to each
Holder a default payment in an amount equal to three percent (3%)
of the Liquidation Preference for the Preferred Shares held by such
Holder for each 30-day period during the Listing Period from and
after such failure, refusal or inability to so list the Registrable
Securities until the Registrable Securities are so listed; and
(B) In the event Alteon fails,
refuses or is unable to cause the Registrable Securities covered
by the Registration Statement to be listed with NASDAQ in accord
with subparagraph (ii) above or shares of Common Stock are delisted
from NASDAQ, then the Delisting Warrant shall become exercisable
25 days following (i) the date of the notice required pursuant to
subparagraph (ii) above or (ii) the date of delisting, whichever
is earlier (the "Exercisability Date"). However, the Delisting
Warrant shall not become exercisable on the Exercisability Date,
if, prior thereto, Alteon has either (x) cured such failure to list
the applicable Common Stock, or (y) redeemed from the Holder
(pursuant to subparagraph (C) below) the Preferred Shares held by
such Holder. To the extent the Delisting Warrants are exercised,
the default payments under clause (A) of this subparagraph (ii)
shall be reduced pro rata to the percentage of Delisting Warrants
exercised; and
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<PAGE>
(C) In the event that shares
of Common Stock are delisted from NASDAQ at any time following the
Closing Date, Alteon may redeem the Preferred Shares held by such
Holder at a redemption price per share equal to the Premium
Redemption Price (as defined below) upon 20 days' prior notice to
a Holder stating the redemption date, such notice to be binding
upon Alteon. Holder may convert any of its Preferred Shares until
such redemption date. The closing for such redemption shall take
place at the office of the Investors' counsel in New York City on
the redemption date. At such closing, Alteon shall deliver to such
Investor the redemption price for the number of Preferred Shares
redeemed by Alteon hereunder by wire transfer in immediately
available funds to an account designated in writing by such
Investor and, to the extent all of the Preferred Shares are not
redeemed, a replacement Delisting Warrant for the remainder of
shares exercisable. Such Investor shall deliver to Alteon the
unexercised Delisting Warrant and the Preferred Shares being
redeemed. Default payments shall no longer accrue on Preferred
Shares after such shares have been redeemed by Alteon pursuant to
the foregoing provision.
(iii) Blackout Periods. In the
event any Holder's ability to sell Registrable Securities under the
Registration Statement is suspended for more than (i) fifteen (15)
days in any calendar year, including without limitation by reason
of any suspension or stop order with respect to the Registration
Statement or the fact that an event has occurred as a result of
which the prospectus (including any supplements thereto) included
in such Registration Statement then in effect includes an untrue
statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing,
but other than in connection with a Permitted Public Offering (as
hereinafter defined) or (ii) 90 days in the aggregate for so long
as Preferred Shares are outstanding, in connection with one or more
Permitted Public Offerings ("Suspension Grace Period") then Alteon
shall pay to each Holder a default payment in an amount equal to
three percent (3%) of the Liquidation Preference for the Preferred
Shares held by such Holder for each 30-day period from and after
the last day of the Suspension Grace Period. For this purpose, a
Permitted Public Offering shall mean a public offering of at least
$15 million using underwriters reasonably acceptable to the Holders
of Preferred Shares, provided each Holder has received not less
than 20 days notice of the commencement of the suspension period.
(iv) Conversion Deficiency; Premium
Price Redemption for Conversion Deficiency. In the event that
Alteon does not have a sufficient number of Common Shares available
to satisfy Alteon's obligations to any Holder upon receipt of a
Conversion Notice (as defined in the Designation) or is otherwise
unable to issue such Common Shares (including without limitation
by reason of the limit described in Section 11 below) in accordance
with the terms of the Designation for any reason after receipt of
a Conversion Notice, then:
(A) Alteon shall pay to each
Holder a default payment in an amount equal to three percent (3%)
of the Liquidation Preference for the Preferred Shares held by such
Holder for each 30-day period from and after the Conversion Date
-6-
<PAGE>
(as defined in the Designation) that Alteon fails or refuses to
issue Common Shares in accordance with the terms thereof; and
(B) at any time after the
commencement of the running of the 30-day period described above
in clause of this paragraph (iv), at the request of any Holder
pursuant to a redemption notice, Alteon promptly shall purchase
from such Holder, at a purchase price equal to the "Premium
Redemption Price", the number of Preferred Shares equal to such
Holder's pro rata share of the "Deficiency", as such terms are
defined below; provided, however, if within three (3) business days
of such redemption notice Alteon delivers to such Holder a notice
stating that Alteon will have a sufficient number of Common Shares
available for conversion of all outstanding Preferred Shares within
ten (10) business days, then Alteon shall not be required to redeem
such Preferred Shares pursuant to this paragraph (iv) unless Alteon
shall fail to have a sufficient number of Common Shares available
for conversion of all outstanding Preferred Shares after such ten
(10) business day period. Pursuant to the foregoing, in the event
any Holder delivers a Conversion Notice and Alteon is unable to
convert any Preferred Shares under the Designation due to an
insufficient number of Common Shares available for any reason,
Alteon promptly shall purchase from such Holder, at a purchase
price equal to the Premium Redemption Price, the number of
Preferred Shares requested to be converted in such Conversion
Notice which are not so converted. The "Premium Redemption Price"
per Share is equal to 1.3 (i.e., 130%) times the Liquidation
Preference of such Share. The "Deficiency" shall be equal to the
number of Preferred Shares that would not be able to be converted
for Common Shares, due to an insufficient number of Common Shares
available, if all the outstanding Preferred Shares were submitted
for conversion at the Conversion Price set forth in the Designation
as of the date such Deficiency is determined. Default payments
shall no longer accrue on Preferred Shares after such shares have
been redeemed by Alteon pursuant to the foregoing provision.
(v) Premium Price Redemption for
Cash Payment Defaults.
(A) Alteon acknowledges that
any failure, refusal or inability by Alteon described in the
foregoing clauses (ii) through (iv) will cause the Holders to
suffer damages in an amount that will be difficult to ascertain,
including without limitation damages resulting from the loss of
liquidity in the Registrable Securities and the additional
investment risk in holding the Registrable Securities, whether or
not such Holders ultimately achieve the return on investment
contemplated in the Designation. Accordingly, the parties agree
that it is appropriate to include in this Agreement the foregoing
provisions for default payments in order to compensate the Holders
for such damages. The parties acknowledge and agree that the
default payments set forth above represent the parties' good faith
effort to quantify such damages and, as such, agree that the form
and amount of such default payments are reasonable and will not
constitute a penalty. The default payments provided for above are
in addition to and not in lieu or limitation of any other rights
the Holders may have at law, in equity or under the terms of the
Designation, the Investment Agreement, the Warrants or this
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<PAGE>
Agreement, including without limitation the right to specific
performance.
(B) Each default payment
provided for in the foregoing clauses (ii) through (iv) shall be
in addition to each other default payment; provided, however,
that in no event shall Alteon be obligated to pay to any Holder
default payments in an aggregate amount greater than three
percent (3%) of the Liquidation Preference for the Preferred
Shares held by such Holder for any 30-day period. All default
payments required to be made in connection with the above
provisions shall be paid in cash by the tenth (10th) day of each
calendar month (which payments shall be pro rata on a per diem
basis for any period of less than 30 days). In the event that
Alteon fails or refuses to pay any default payment when due, at
any Holder's request and option Alteon shall purchase all or a
portion of the Preferred Shares held by such Holder (with default
payments accruing through the date of such purchase), within five
(5) days of such request, at a purchase price equal to the
Premium Redemption Price (as defined above), provided that such
Holder may revoke such request at any time prior to receipt of
such payment of such purchase price. Until such time as Alteon
purchases such Preferred Shares at the request of such Holder
pursuant to the preceding sentence, at any Holder's request and
option Alteon shall as to such Holder pay such amount by adding
and including the amount of such default payment to the
Conversion Amount and the Liquidation Preference instead of in
cash. Default payments shall no longer accrue on Preferred
Shares after such shares have been redeemed by Alteon pursuant to
the foregoing provision.
(vi) Premium Price Redemption for
Other Defaults. In the event of any of the circumstances
described in the foregoing clauses (i) through (iv) above, then
the Forced Conversion Date (as defined in the Designation) shall
be deferred by 1.5 days for each day that any of the
circumstances in clauses (i), (ii), (iii) (whether during the
Suspension Grace Period or otherwise), or (iv) exist. In
addition to and without in any way limiting the foregoing, Alteon
agrees that in the event that (A) any failure, refusal or
inability by Alteon described in clause (iii) (after the
expiration of the applicable Suspension Grace Period) of this
Section 2(b) is not cured within ten (10) days of such event
(whether or not Alteon is in compliance with its obligations
under clause (iii) to make the 3% default payments resulting from
such failure, refusal, inability or suspension), or (B) the
Registration Statement has not been declared effective by the
180th day following the Closing Date, then at the option of each
Holder and to the extent such Holder so elects, Alteon shall
redeem the Preferred Shares and/or Common Shares held by such
Holder, in whole or in part, as follows: (i) in the case of
Preferred Shares, such shares shall be redeemed at a redemption
price per share equal to the Premium Redemption Price (as defined
above); and (ii) in the case of Common Shares issued to such
Holder pursuant to conversion of Preferred Shares or exercise of
the Warrants, such shares shall be redeemed at a redemption price
per share equal to 1.3 times the dollar amount which is the
product of (x) the number of shares so to be redeemed pursuant to
this paragraph, and (y) the Agreed Value of the shares (as
defined in the Designation) at the time such shares were received
pursuant to conversion of Preferred Shares; provided, however,
that such Holder may revoke such request at any time prior to
receipt of such payment of such redemption price. Default
payments shall no longer accrue on Preferred Shares after such
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<PAGE>
shares have been redeemed by Alteon pursuant to the foregoing
provision.
(c) If the Holder(s) intend to distribute
the Registrable Securities by means of an underwriting, the
Holder(s) shall so advise Alteon. Any such underwriting may only
be administered by investment bankers reasonably satisfactory to
Alteon. Alteon shall only be obligated to permit one underwritten
offering, which offering shall be determined by a seventy-five
percent (75%) majority-in-interest of the Holders. In the event
that there is a cutback in connection with such an offering, such
cutback shall be pro rata among the Investors and any shareholders
with registration rights arising prior to the date of this
Agreement.
(d) Alteon shall enter into such
customary agreements for secondary offerings (including a customary
underwriting agreement with the underwriter or underwriters, if
any) and take all such other reasonable actions reasonably
requested by the Holders in connection therewith in order to
expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the Registrable
Securities are to be sold in an underwritten offering:
(i) make such representations and
warranties to the Holders and the underwriter or underwriters, if
any, in form, substance and scope as are customarily made by
issuers to underwriters in secondary offerings;
(ii) cause to be delivered to the
sellers of Registrable Securities and the underwriter or
underwriters, if any, opinions of independent counsel to Alteon,
on and dated as of the effective day (or in the case of an
underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and within ninety (90) days following the end of each
fiscal year thereafter, which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the Holders and
the underwriter(s), if any, and their counsel and covering, without
limitation, such matters as the due authorization and issuance of
the securities being registered and compliance with securities laws
by Alteon in connection with the authorization, issuance and
registration thereof and other matters that are customarily given
to underwriters in underwritten offerings, addressed to the Holders
and each underwriter, if any; such counsel shall have undertaken
in each such opinion delivered pursuant to the preceding sentence
to update the same during each such fiscal year so that such
updates received by the Holders during such year, if any, shall
have been reasonably satisfactory to such Holders. Alteon hereby
covenants and agrees to advise such counsel of any and all factual
matters which might pertain to any such update or as to which such
an update may be so required, and such counsel may rely upon such
advice in providing any such update. In the absence of such advice
from Alteon, any such update shall be provided to and upon such
counsel's best knowledge insofar as and to the extent such update
depends upon a factual matter.
(iii) in an underwritten offering
only, and then only if required by the underwriters, cause to be
delivered, immediately prior to the effectiveness of the
Registration Statement and at the time of delivery of any
Registrable Securities sold pursuant thereto, and at the beginning
of each fiscal year following a year during which
Alteon's independent certified public accountants shall have
reviewed any of Alteon's books or records, a "comfort" letter
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from Alteon's independent certified public accountants addressed
to the Holders and each underwriter, if any, stating that such
accountants are independent public accountants within the meaning
of the Securities Act and the applicable published rules and
regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary offerings; such accountants
shall have undertaken in each such letter to update the same during
each such fiscal year in which such books or records are being
reviewed so that each such letter shall remain current, correct and
complete throughout such fiscal year; and each such letter and
update thereof, if any, shall be reasonably satisfactory to the
Holders.
(iv) if an underwriting agreement is
entered into, the same shall include customary indemnification and
contribution provisions to and from the underwriters and procedures
for secondary underwritten offerings;
(v) deliver such documents and
certificates as may be reasonably requested by the Holders of the
Registrable Securities being sold or the managing underwriter or
underwriters, if any, to evidence compliance with clause (i) above
and with any customary conditions contained in the underwriting
agreement, if any; and
(vi) deliver to the Holders on
the effective day (or in the case of an underwritten offering,
dated the date of delivery of any Registrable Securities sold
pursuant thereto) of the Registration Statement, and at the
beginning of each fiscal quarter thereafter, a certificate in
form and substance as shall be reasonably satisfactory to the
Holders, executed by an executive officer of Alteon and to the
effect that all the representations and warranties of Alteon
contained in the Investment Agreement are still true and correct
except as disclosed in such certificate; Alteon shall, as to each
such certificate delivered at the beginning of each fiscal
quarter, update or cause to be updated each such certificate
during such quarter so that it shall remain current, complete and
correct throughout such quarter; and such updates received by the
Holders during such quarter, if any, shall have been reasonably
satisfactory to the Holders.
(e) Alteon shall make available
for inspection by the Holders, representative(s) of all the
Holders together, any underwriter participating in any
disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all
financial and other records customary for purposes of the
Holders' due diligence examination of Alteon and review of any
Registration Statement, all SEC Documents (as defined in the
Investment Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of Alteon, and cause Alteon's
officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration
Statement, provided that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above,
Alteon may suspend the use of any prospectus used in connection
with the Registration Statement only (i) in the event, and for
such period of time as, such a suspension is required by the
rules and regulations of the Commission, or (ii) in the event
such a suspension is required by the underwriter in a bona fide,
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underwritten Permitted Public Offering, provided that such
suspension or suspensions under the foregoing clause (i) shall
not exceed fifteen (15) days in any calendar year, and under the
foregoing clause (ii) shall not in the aggregate exceed ninety
(90) days. Alteon will use its best efforts to cause such
suspension to terminate at the earliest possible date.
(g) Alteon shall file a Registration
Statement with respect to any newly authorized and/or reserved
shares constituting Registrable Securities within five (5)
business days of any shareholders meeting authorizing same and
shall use its best efforts to cause such Registration Statement
to become effective within sixty (60) days of such shareholders
meeting. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable
Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration
Statement, subsequent to the date such Registration Statement is
declared effective, and Alteon is unable under the securities
laws to add such securities to the then effective Registration
Statement, Alteon shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement
with respect to such newly Registrable Securities. Alteon shall
use its best efforts to (i) cause any such additional
Registration Statement, when filed, to become effective under the
Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5
below. All of the registration rights and remedies under this
Agreement shall apply to the registration of such newly reserved
shares and such new Registrable Securities, including without
limitation the provisions providing for default payments
contained herein.
2. In the event Alteon is notified by the NASD that it
intends to delist or may seek the delisting of shares of Common
Stock (such date of notification shall hereinafter be referred to
as the "Notification Date"), Alteon shall use its best efforts to,
as expeditiously as reasonably possible after such notification,
prepare and file a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3 under the
Securities Act (or, if Alteon is ineligible to use such form, such
other form as Alteon is eligible to use under the Securities Act)
covering the Delisting Warrant Shares. Thereafter, Alteon shall
use its best efforts to cause such registration statement to be
declared effective as expeditiously as reasonably possible. The
provisions of Section 2(a) shall be effective with respect thereto,
except that references to the "Closing Date" shall be deemed to
refer to the "Notification Date".
3. Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or
compliance with registration pursuant to this Agreement shall be
borne by Alteon, and all Selling Expenses of a Holder shall be
borne by such Holder.
4. Registration on Form S-3. Alteon shall use its best
efforts to qualify for registration on Form S-3 or any comparable
or successor form or forms, or in the event that Alteon is
ineligible to use such form, such form as Alteon is eligible to use
under the Securities Act.
5. Registration Period. In the case of the
registration effected by Alteon pursuant to this Agreement, Alteon
will use its best efforts to keep such registration effective until
all the Holders have completed the sales or distribution described
in the Registration Statement relating thereto or, if earlier,
until such Registrable Securities may be sold under Rule 144(k)
(provided that Alteon's transfer agent has accepted an instruction
from Alteon to such effect).
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<PAGE>
6. Indemnification.
(a) Alteon Indemnity. Alteon will
indemnify each Holder, each of its officers, directors and
partners, and each person controlling each Holder, within the
meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who
controls, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document
(including any related registration statement, notification or
the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any
violation by Alteon of the Securities Act or any state securities
law or in either case, any rule or regulation thereunder
applicable to Alteon and relating to action or inaction required
of Alteon in connection with any such registration, qualification
or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling
such Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action,
provided that Alteon will not be liable in any such case to a
Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to Alteon by
such Holder or the underwriter (if any) therefor and stated to be
specifically for use therein. The indemnity agreement contained
in this Section 6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Alteon
(which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder
will, severally and not jointly, if Registrable Securities held
by it are included in the securities as to which such
registration, qualification or compliance is being effected,
indemnify Alteon, each of its directors, officers, partners, and
each underwriter, if any, of Alteon's securities covered by such
a registration statement, each person who controls Alteon or such
underwriter within the meaning of Section 15 of the Securities
Act and the rules and regulations thereunder, each other Holder
(if any), and each of their officers, directors and partners, and
each person controlling such other Holder(s) against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to
make the statement therein not misleading, and will reimburse
Alteon and such other Holder(s) and their directors, officers and
partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information
furnished to Alteon by such Holder and stated to be specifically
for use therein, and provided that the maximum amount for which
such Holder shall be liable under this indemnity shall not exceed
the net proceeds received by such Holder from the sale of the
Registrable Securities. The indemnity agreement contained in
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this Section 6(b) shall not apply to amounts paid in settlement
of any such claims, losses, damages or liabilities if such
settlement is effected without the consent of such Holder (which
consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to
indemnification under this Article (the "Indemnified Party") shall
give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of
any such claim in any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations
under this Article except to the extent that the Indemnifying Party
is materially and adversely affected by such failure to provide
notice. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and
litigation resulting therefrom.
7. Contribution. If the indemnification provided for
in Section 6 herein is unavailable to the Indemnified Parties in
respect of any losses, claims, damages or liabilities referred to
herein (other than by reason of the exceptions provided therein),
then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims,
damages or liabilities as between Alteon on the one hand and any
Holder on the other, in such proportion as is appropriate to
reflect the relative fault of Alteon and of such Holder in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of Alteon
on the one hand and of any Holder on the other shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by Alteon
or by such Holder.
In no event shall the obligation of any Indemnifying
Party to contribute under this Section 7 exceed the amount that
such Indemnifying Party would have been obligated to pay by way of
indemnification if the indemnification provided for under Section
6(a) or 6(b) hereof had been available under the circumstances.
Alteon and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Holders or the
underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as
a result of the losses, claims, damages and liabilities referred
to in the immediately preceding paragraphs shall be deemed to
include, subject to the limitations set forth above, any legal or
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other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this section, no Holder
or underwriter shall be required to contribute any amount in excess
of the amount by which (i) in the case of any Holder, the net
proceeds received by such Holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price
at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case,
the amount of any damages that such Holder or underwriter has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and
warranties of Alteon referred to in Section 2(d)(i) shall remain
operative and in full force and effect regardless of (i) any
termination of this Agreement or the Investment Agreement or
any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of Alteon, and
(iii) the consummation of the sale or successive resales of the
Registrable Securities.
9. Information by Holders. Each Holder shall furnish
to Alteon such information regarding such Holder and the
distribution and/or sale proposed by such Holder as Alteon may
reasonably request in writing and as shall be reasonably required
in connection with any registration, qualification or compliance
referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities
as so provided by such Investor shall be included without
alteration in the Registration Statement covering the Registrable
Securities and shall not be changed without written consent of
such Holder.
10. Intentionally left blank.
11. NASDAQ Limit on Stock Issuances. In the event that
Alteon is unable to issue (i) any Common Shares upon conversion of
Preferred Shares under the Designation or (ii) any Warrant Shares,
due to the rules or regulations of any market or exchange regulator
for the market or exchange on which the Common Shares or Warrant
Shares are then trading, Alteon shall, at the request of any Holder
promptly following such determination, purchase such Preferred
Shares of such Holder which cannot be converted, or Warrant Shares
which cannot be issued, at a purchase price equal to the Premium
Redemption Price.
12. Replacement Certificates. The certificate(s)
representing the Common Shares or Warrant Shares held by any
Investor (or then Holder) may be exchanged by such Investor (or
such Holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number
of Common Shares or Warrant Shares, as reasonably requested by such
Investor (or such Holder) upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
13. Transfer or Assignment. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted
assigns. The rights granted to the Investors by Alteon under this
Agreement to cause Alteon to register Registrable Securities may
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<PAGE>
be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares or Warrants, and all other rights
granted to the Investors by Alteon hereunder may be transferred or
assigned to any transferee or assignee of any Preferred Shares or
Warrants; provided in each case that Alteon must be given written
notice by the such Investor at the time of or within a reasonable
time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being
transferred or assigned; and provided further that the transferee
or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement.
14. Miscellaneous.
(a) Remedies. Alteon and the Investors
acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled
by law or equity.
(b) Jurisdiction. Alteon and each of
the Investors (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court, the New York
State courts and other courts of the United States sitting in New
York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit action
or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the
suit, action or proceeding is improper. Alteon and each of the
Investors consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other
manner permitted by law.
(c) Notices. Any notice or other
communication required or permitted to be given hereunder shall
be in writing and shall be effective upon actual receipt of such
mailing. The addresses for such communications shall be:
to Alteon: Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
Fax (201) 934-8880
Attn: James J. Mauzey
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<PAGE>
with copies to: Smith, Stratton, Wise,
Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Fax: (609) 987-6651
Attn: Marsha E. Novick, Esq.
to the Investors: To each Investor at the address
and/or fax number set forth on
Schedule I of this Agreement.
with copies to: Kleinberg, Kaplan, Wolff &
Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Fax: (212) 986-8866
Attn: Stephen M. Schultz, Esq.
Any party hereto may from time to time change its address for
notices by giving at least 10 days' written notice of such
changed address to the other parties hereto.
(d) Indemnity. Each party shall
indemnify each other party against any loss, cost or damages
(including reasonable attorney's fees) incurred as a result of
such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
(e) Waivers. No waiver by any party of
any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter. The representations and
warranties and the agreements and covenants of Alteon and each
Investor contained herein shall survive the Closing.
Notwithstanding anything contained herein, Alteon's obligation to
pay default payments hereunder may be waived from time to time in
whole or in part by the affirmative vote of a seventy-five percent
(75%) majority-in-interest of the holders of Preferred Shares,
provided, however, that holders of Preferred Shares who are
affiliates of Alteon (and Alteon itself) shall not participate in
such vote and the Preferred Shares of such holders shall be
disregarded and deemed not to be outstanding.
(f) Execution. This Agreement may be
executed in two or more counterparts, all of which shall be
considered one and the same agreement, it being understood that
all parties need not sign the same counterpart.
(g) Publicity. Alteon agrees that it
will not disclose, and will not include in any public announcement,
the name of any Investor without its consent, unless and until such
disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. Alteon agrees that it will
deliver a copy of any public announcement regarding the matters
covered by this Agreement or any agreement and document executed
in connection herewith to each Investor and any public announcement
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<PAGE>
including the name of an Investor to such Investor, prior to
publication of such announcements.
(h) Entire Agreement. This Agreement,
together with the Investment Agreement, the Designation and the
Warrants and the agreements and documents contemplated hereby and
thereby, contains the entire understanding and agreement of the
parties, and may not be modified or terminated except by a written
agreement signed by both parties.
(i) Governing Law. This Agreement and
the validity and performance of the terms hereof shall be governed
by and construed in accordance with the laws of the State of New
York, except to the extent that the law of Delaware regulates
Alteon's issuance of securities.
(j) Severability. The parties
acknowledge and agree that the Investors are not agents, affiliates
or partners of each other, that all representations, warranties,
covenants and agreements of the Investors hereunder are several and
not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or
omissions of any other Investor, and that any rights granted to
"Investors" hereunder shall be enforceable by each Investor
hereunder.
(k) Titles. The titles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
ALTEON:
ALTEON INC.
By: /s/Kenneth I. Moch
_______________________
Name: Kenneth I. Moch
Title: SVP and CEO
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.,
as attorney-in-fact
By: PALLADIN CAPITAL MANAGEMENT, L.L.C.
General Partner
By: /s/Robert L. Chender
_________________________
Name: Robert L. Chender
Title:Vice President
GALILEO CAPITAL, L.L.C.
By: /s/Robert L. Chender
__________________________
Name: Robert L. Chender
Title: Authorized Person
RGC INTERNATIONAL INVESTORS, LDC
By: ROSE GLEN CAPITAL MANAGEMENT, L.P.,
Investment Manager
By: RGC GENERAL PARTNER CORP.,
General Partner
By: /s/Wayne Bloch
________________________
Name:Wayne Bloch
Title:Managing Director
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HERACLES FUND
By: PROMETHEAN INVESTMENT, GROUP, L.L.C.
Its Investment Advisor
By: /s/James F. O'Brien
____________________________
Name: James F. O'Brien
Title: President
LEWIS FRASER
By: PROMETHEAN INVESTMENT GROUP, L.L.C.
Its Investment Advisor
By: /s/James F. O'Brien
____________________________
Name: James F. O'Brien
Title: President
JOSEPH A. UMBACH
By: PROMETHEAN INVESTMENT GROUP, L.L.C.
Its Investment Advisor
By: /s/James F. O'Brien
____________________________
Name: James F. O'Brien
Title: President
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<PAGE>
SCHEDULE I
Name of Purchaser
HALIFAX FUND, L.P.
c/o The Palladin Group, L.P.
Investment Manager
40 West 57th Street
New York, New York 10019
Attn: Andrew M. Kaplan
Name of Purchaser
RGC INTERNATIONAL INVESTORS, LDC
c/o Rose Glen Capital Management, L.P.,
Investment Manager
440 East Swedesford Road, Suite 2025
Wayne, Pennsylvania 19087
Attn: Wayne D. Bloch
Tel: (212) 698-0500
Fax: (212) 698-0599 Tel: (610) 902-0200
Fax: (610) 971-2212
Name of Purchaser
HERACLES FUND
c/o Promethean Investment Group, L.L.C.
Investment Advisor
40 West 57th Street
Suite 1520
New York, New York 10019
Attn: Jamie O'Brien
Tel:(212) 698-0588
Fax:(212) 698-0505
Name of Purchaser
LEWIS FRASER
c/o Promethean Investment Group, L.L.C.
Investment Advisor
40 West 57th Street
Suite 1520
New York, New York 10019
Attn: Jamie O'Brien
Tel:(212) 698-0588
Fax:(212) 698-0505
Name of Purchaser
JOSEPH A. UMBACH
c/o Promethean Investment Group, L.L.C.
Investment Advisor
40 West 57th Street
Suite 1520
New York, New York 10019
Attn: Jamie O'Brien
Tel: (212) 698-0588
Fax: (212) 698-0505
Name of Purchaser
GALILEO CAPITAL, L.L.C.
c/o The Palladin Group, L.P.
Investment Manager
40 West 57th Street
New York, New York 10019
Attn: Andrew M. Kaplan
Tel: (212) 698-0500
Fax: (212) 698-0599
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
________________________
April 24, 1997
ALTEON INC.
________________________
Common Stock Purchase Warrant
Alteon Inc., a Delaware corporation (the "Company"),
hereby certifies that for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, [Name
of Investor], having an address [Address] ("Purchaser") or any
other Warrant Holder is entitled, on the terms and conditions set
forth below, to purchase from the Company at any time beginning
on the date hereof and ending eighty-four (84) months after the
date hereof, [Number of Shares - Aggregate] ([Number of Shares]
shares for each share of Preferred Stock subscribed for) fully
paid and nonassessable shares of Common Stock, $.01 par value, of
the Company (the "Common Stock"), at a purchase price per share
of $4.025 (the "Purchase Price"), as the same may be adjusted
pursuant to Section 5 herein.
1. Definitions.
(a) the term "Warrant Holder" shall mean
the Purchaser or any assignee of all or any portion of this
Warrant.
(b) the term "Warrant Shares" shall mean
the Shares of Common Stock or other securities issuable upon
exercise of this Warrant.
(c) the term "Registration Rights
Agreement" shall mean the Registration Rights Agreement, dated on
or about the date hereof, between the Company and the Purchaser.
(d) the term "Agreement" shall mean the
Preferred Stock Investment Agreement, dated April 24, 1997,
between the Company and the Purchaser.
(e) the term "Preferred Stock" shall mean
the 6% Cumulative Convertible Preferred Stock of the Company.
<PAGE>
2. Exercise of Warrant.
This Warrant may be exercised by the Warrant Holder, in
whole or in part, at any time and from time to time by either of
the following methods:
(a) The Warrant Holder may surrender this
Warrant, together with the form of subscription at the end hereof
duly executed by Warrant Holder ("Subscription Notice"), at the
offices of the Company or any transfer agent for the Common Stock;
or
(b) The Warrant Holder may also exercise
this Warrant, in whole or in part, in a "cashless" or "net-issue"
exercise by delivering to the offices of the Company or any
transfer agent for the Common Stock this Warrant, together with a
Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("Deliverable Shares") and the
number of Warrant Shares with respect to which this Warrant is
being surrendered in payment of the aggregate Purchase Price for
the Deliverable Shares ("Surrendered Shares"); provided that the
Purchase Price multiplied by the number of Deliverable Shares shall
not exceed the value of the Surrendered Shares; and provided
further that the sum of the number of Deliverable Shares and the
number of Surrendered Shares so specified shall not exceed the
aggregate Warrant Shares represented by this Warrant. For the
purposes of this provision, each Warrant Share as to which this
Warrant is surrendered will be attributed a value equal to the fair
market value (as defined below) of the Warrant Share minus the
Purchase Price of the Warrant Share.
In the event that the Warrant is not exercised in full,
the number of Warrant Shares shall be reduced by the number of
such Warrant Shares for which this Warrant is exercised, and the
Company, at its expense, shall forthwith issue and deliver or
upon the order of Warrant Holder a new Warrant of like tenor in
the name of Warrant Holder or as Warrant Holder (upon payment by
Warrant Holder of any applicable transfer taxes) may request,
reflecting such adjusted Warrant Shares.
3. Delivery of Stock Certificates.
(a) Subject to the terms and conditions of
this Warrant, as soon as practicable after the exercise of this
Warrant in full or in part, and in any event within three (3)
"trading days" (as defined below) thereafter, the Company shall
transmit the certificates (together with any other stock or other
securities or property to which Warrant Holder is entitled upon
exercise) by messenger or overnight delivery service to reach the
address designated by such holder within three (3) trading days
after the receipt of the Subscription Notice ("T+3"). In the
alternative to physical delivery of certificates for shares, if
delivery of the Warrant Shares pursuant to any exercise hereunder
may be effectuated by electronic book-entry through Depository
Trust Company ("DTC") then delivery of Warrant Shares pursuant to
such exercise shall, if requested by such holder, be closed and
settled on T+3 by book-entry transfer through DTC, and the
Warrant Shares in connection with such exercise shall be deemed
delivered by such book-entry transfer.
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<PAGE>
Term "trading day" means a day on which there is trading on the
New York Stock Exchange or such other market or exchange on which
the Common Stock is then traded.
(b) This Warrant may not be exercised as to
fractional shares of Common Stock. In the event that the
exercise of this Warrant, in full or in part, would result in the
issuance of any fractional share of Common Stock, then in such
event the Warrant Holder shall be entitled to cash equal to the
fair market value of such fractional share. For purposes of this
Warrant, "fair market value" shall equal the closing trading
price of the Common Stock, on the Nasdaq Stock Market, the
American Stock Exchange or the New York Stock Exchange, whichever
is the principal trading exchange or market for the Common Stock
(the "Principal Market") on the date of determination or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange or quoted in the Nasdaq Stock Market, the
average of the closing bid and asked prices on the over-the-counter
market as furnished by any New York Stock Exchange member
firm reasonably selected from time to time by the Company for
that purpose and reasonably acceptable to the Warrant Holder, or,
if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq Stock Market
or traded over-the-counter and the average price cannot be
determined a contemplated above, the fair market value of the
Common Stock shall be as reasonably determined in good faith by
the Company's Board of Directors with the concurrence of the
Warrant Holder.
4. (A) Representations and Covenants of the
Company.
(a) The Company shall comply with its
obligations under the Registration Rights Agreement with respect
to the Warrant Shares, including, without limitation, the
Company's obligation to have filed and declared effective a
registration statement registering the Warrant Shares under the
Securities Act of 1933, as amended (the "Act").
(b) The Company shall take all necessary action
and proceedings as may be required and permitted by applicable
law, rule and regulation, including, without limitation, the
notification of the Principal Market, for the legal and valid
issuance of this Warrant and the Warrant Shares to the Warrant
Holder under this Warrant.
(c) From the date hereof through the last date
on which this Warrant is exercisable, the Company shall take all
steps reasonably necessary and within its control to insure that
the Common Stock remains listed on the Principal Market and shall
not amend its Certificate of Incorporation or Bylaws so as to
adversely affect any rights of the Warrant Holder under this
Warrant.
(d) The Company shall at all times reserve and
keep available, solely for issuance and delivery as Warrant
Shares hereunder, such shares of Common Stock as shall from time
to time be issuable.
(e) The Warrant Shares, when issued in
accordance with the terms hereof, will be duly authorized and,
when paid for or issued in accordance with the terms hereof,
shall be validly issued, fully paid and non-assessable. The
Company has authorized and reserved for issuance to Warrant
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<PAGE>
Holder the requisite number of shares of Common Stock to be
issued pursuant to this Warrant.
(f) With a view to making available to
Warrant Holder the benefits of Rule 144 promulgated under the Act
and any other rule or regulation of the Securities and Exchange
Commission ("SEC") that may at any time permit Warrant Holder to
sell securities of the Company to the public without
registration, the Company agrees to use its reasonable best
efforts to:
i) make and keep public
information available, as those terms are understood and defined
in Rule 144, at all times;
ii) file with the SEC in a timely
manner all reports and other documents required of the Company
under the Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); and
(iii) furnish to any Warrant Holder
forthwith upon request a written statement by the Company that it
has complied with the reporting requirements of Rule 144 and of
the Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested
to permit any such Warrant Holder to take advantage of any rule
or regulation of the SEC permitting the selling of any such
securities without registration.
(B) Representations and Covenants of the
Purchaser.
The Purchaser shall not resell Warrant
Shares, unless such resale is pursuant to an effective
registration statement under the Act or pursuant to an applicable
exemption from such registration requirements.
5. Adjustment of Purchase Price and Number of Shares.
The number of and kind of securities purchasable upon exercise of
this Warrant and the Purchase Price shall be subject to
adjustment from time to time as follows:
(a) Subdivisions, Combinations and
other Issuances. If the Company shall at any time after the
date hereof but prior to the expiration of this Warrant subdivide
its outstanding securities as to which purchase rights under this
Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this
Warrant exist, the number of Warrant Shares as to which this
Warrant is exercisable as of the date of such subdivision,
split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per
share, but the aggregate purchase price payable for the total
number of Warrant Shares purchasable under this Warrant as of such
date shall remain the same.
(b) Stock Dividend. If at any time after the
date hereof the Company declares a dividend or other distribution
on Common Stock payable in Common Stock or other securities or
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<PAGE>
rights convertible into Common Stock ("Common Stock Equivalents")
without payment of any consideration by holders of Common Stork
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of
shares of Common Stock for which this Warrant may be exercised
shall be increased as of the record date (or the date of such
dividend distribution if no record date is set) for determining
which holders of Common Stock shall be entitled to receive such
dividends, in proportion to the increase in the number of
outstanding shares (and shares of Common Stock issuable upon
conversion of all such securities convertible into Common Stock)
of Common Stock as a result of such dividend, and the Purchase
Price shall be adjusted so that the aggregate amount payable for
the purchase of all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such
distribution, if applicable), for such dividend shall equal the
aggregate amount so payable immediately before such record date
(or on the date of such distribution, if applicable).
(c) Other Distributions. If at any time after
the date hereof the Company distributes to holders of its Common
Stock, other than as part of its dissolution, liquidation or the
winding up of its affairs, any shares of its capital stock, any
evidence of indebtedness or any of its assets (other than cash,
Common Stock or securities convertible into Common Stock), then
the number of Warrant Shares for which this Warrant is
exercisable shall be adjusted to equal: (i) the number of Warrant
Shares for which this Warrant is exercisable immediately prior to
such event, (ii) multiplied by a fraction, (A) the numerator of
which shall be the fair market value per share of Common Stock on
the record date for the dividend or distribution, and (B) the
denominator of which shall be the fair market value price per
share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common
stock of the value (as jointly determined in good faith by the
Board of Directors of the Company and the Warrant Holder) of any
and all such evidences of indebtedness, shares of capital stock,
other securities or property, so distributed. The Purchase price
shall be adjusted to equal: (i) the Purchase Price in effect
immediately before the occurrence of any event (ii) multiplied by
a fraction, (A) the numerator of which is the number of Warrant
Shares for which this Warrant is exercisable immediately before
the adjustment, and (B) the denominator of which is the number of
Warrant Shares for which this Warrant is exercisable immediately
after the adjustment.
(d) Merger, etc. If at any time after the date
hereof there shall be a merger or consolidation of the Company
with or into or a transfer of all or substantially all of the
assets of the Company to another entity, then the Warrant Holder
shall be entitled-to receive upon such transfer, merger or
consolidation becoming effective, and upon payment of the
aggregate Purchase Price then in effect, the number of shares or
other securities or property of the Company or of the successor
corporation resulting from such merger or consolidation, which
would have been received by Warrant Holder for the shares of
stock subject to this Warrant had this Warrant been exercised
just prior to such transfer, merger or consolidation becoming
effective or to the applicable record date thereof, as the case
may be. The Company will not merge or consolidate with or into
any other corporation, or sell or otherwise transfer its
property, assets and business substantially as an entirety to
another corporation, unless the corporation resulting from such
merger or consolidation (if not the Company), or such transferee
corporation, as the case may be, shall expressly assume, by
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<PAGE>
supplemental agreement reasonably satisfactory in form and
substance to the Warrant Holder, the due and punctual performance
and observance of each and every covenant and condition of this
Warrant to be performed and observed by the Company.
(e) Reclassification, etc. If at any time
after the date hereof there shall be a reorganization or
reclassification of the securities as to which purchase rights
under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of
the Purchase Price then in effect, the number of shares or other
securities or property resulting from such reorganization or
reclassification, which would have been received by the Warrant
Holder for the shares of stock subject to this Warrant had this
Warrant at such time been exercised.
6. No Impairment. The Company will not, by amendment
of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the Warrant Holder against
impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any Warrant
Shares above the amount payable therefor on such exercise, and
(b) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares on the exercise
of this Warrant.
7. Notice of Adjustments- Notices. Whenever the Purchase
Price or number of Shares purchasable hereunder shall be adjusted
pursuant to Section 5 hereof, the Company shall execute and
deliver to the Warrant Holder a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount
of the adjustment, the method by which such adjustment was
calculated and the Purchase Price and number of shares
purchasable hereunder after giving effect to such adjustment, and
shall cause a copy of such certificate to be mailed (by first
class mail, postage prepaid) to the Warrant Holder.
8. Rights As Stockholder. Prior to exercise of this
Warrant, the Warrant Holder shall not be entitled to any rights
as a stockholder of the Company with respect to the Warrant
Shares, including (without limitation) the right to vote such
shares, receive dividends or other distributions thereon or be
notified of stockholder meetings. However, in the event of any
taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a cash dividend)
or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the
Company shall mail to each Warrant Holder, at least 10 days prior
to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
9. Limitation on Exercise. Notwithstanding anything to
the contrary contained herein, this Warrant may not be exercised
by the Warrant Holder to the extent that, after giving effect to
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Warrant Shares to be issued pursuant to a Subscription Notice,
the total number of shares of Common Stock deemed beneficially
owned by such holder (other than by virtue of ownership of this
Warrant, or ownership of other securities that have limitations
on the holder's rights to convert or exercise similar to the
limitations set forth herein), together with all shares of Common
Stock deemed beneficially owned by the holder's "affiliates" (as
defined in Rule 144 of the Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934 exists, would exceed 4.9% of
the total issued and outstanding shares of the Common Stock,
provided that the Warrant Holder shall have the right to waive
this restriction, in whole or in part, immediately in the case of
a pending "Change in Control Transaction" described in clause (x)
or (z) of Paragraph 4(i) of the Designations for the Preferred
Stock and in any other case upon 61 days prior notice to the
Company. The delivery of a Subscription Notice by the Warrant
Holder shall be deemed a representation by such holder that it is
in compliance with this paragraph.
A subsequent Warrant Holder shall not be bound by this
provision unless it expressly agrees to be so bound. The term
"deemed beneficially owned" as used in this Warrant shall exclude
shares that might otherwise be deemed beneficially owned by
reason of the exercise of this Warrant.
10. Replacement Of Warrant. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of the Warrant and, in the case of any
such loss, theft or destruction of the Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof a new Warrant
of like tenor.
11. Specific Enforcement; Consent to Jurisdiction;
Choice of Law
(a) The Company and the Warrant Holder
acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Warrant were not
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall he entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Warrant and to enforce
specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be
entitled by law or equity.
(b) Each of the Company and the Warrant
Holder (i) hereby irrevocably submits to the exclusive
jurisdiction of the state and federal court located in New York
County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Warrant and (ii)
hereby waives, and agrees not to assert in any such suit, action
or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the
suit, action or proceeding is improper. Each of the Company and
the Warrant Holder consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and
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<PAGE>
sufficient service of process and notice thereof. Nothing in
this paragraph shall affect or limit any right to serve process
in any other manner permitted by law.
(c) This Warrant shall be governed by and
construed and enforced in accordance with the internal laws of
the State of New York without regard to such state's principles
of conflict of laws.
12. Entire Agreement; Amendments. This Warrant, the
Exhibits hereto and the provisions contained in the Agreement or
the Registration Rights Agreement and incorporated into this
Warrant and the Warrant Shares contain the entire understanding
of the parties with respect to the matters covered hereby and
thereby and, except as specifically set forth herein and therein,
neither the Company nor the Warrant Holder makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is
sought.
13. Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or delivery by
telex (with correct answer back received), telecopy or facsimile
at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to
be received), or the first business day following such delivery
(if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to the Company:
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
Attn: James J. Mauzey
Fax: (201) 934-8880
with copies to:
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Attn: Marsha E. Novick, Esq.
Fax: (609) 987-6651
to The Warrant Holder:
[Name of Investor]
[Address]
Attn:[Name of Person]
Fax: [Number]
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Either party hereto may from time to time change its address for
notices under this Section 13 by giving at least 10 days prior
written notice of such changed address to the other party hereto.
14. Miscellaneous. This Warrant and any term hereof
may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in
accordance with and governed by laws of the State of New York.
The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other
provision.
15. Assignment. This Warrant may be transferred or
assigned, in whole or in part, at any time and from time to time
by the then Warrant Holder by submitting this Warrant to the
Company together with a duly executed Assignment in substantially
the form and substance of the Form of Assignment which
accompanies this Warrant and, upon the Company's receipt hereof,
and in any event, within three (3) business days thereafter, the
Company shall issue a Warrant to the Warrant Holder to evidence
that portion of this Warrant, if any as shall not have been so
transferred or assigned.
[The remainder of this page has intentionally been left blank.]
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Dated: April 24, 1997 ALTEON INC.
By:
_______________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:
_____________________
Its
By: _________________________
Name:
Title:
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(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(To be signed only on exercise of Warrant)
TO _________________________________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant
_____ (A) for, and to purchase thereunder, ______ shares of
Common Stock of Alteon Inc., a Delaware corporation (the
"Company"), and herewith makes payment of $_______ therefor; or
_____ (B) in a "cashless" or "net-issue exercise" for, and
to purchase thereunder , ______ shares of Common Stock, and
herewith makes payment therefor with ______ Surrendered Warrant
Shares.
The undersigned requests that the certificates for such
shares be issued in the name of, and delivered to ___________,
whose address is _____________________.
Dated:
__________________________________
(Signature must conform to name
of holder as specified on the
face of the Warrant)
__________________________________
(Address)
Tax Identification Number:
__________________________________
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________________________
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ______________ the right represented by the
within Warrant to purchase _____ shares of Common stock of Alteon
Inc., a Delaware corporation, to which the within Warrant
relates, and appoints __________ Attorney to transfer such right
on the books of Alteon Inc., a Delaware corporation, with full
power of substitution of premises.
Dated:
____________________________________
(Signature must conform to name
of holder as specified on the face
of the Warrant)
_____________________________________
(Address)
Signed in the presence of:
_______________________
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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
_________________
April ___, 1997
ALTEON INC.
__________________
Common Stock Purchase Delisting Warrant
Alteon Inc., a Delaware corporation (the "Company"),
hereby certifies that for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, [Name
of Investor], having an address [Address] ("Purchaser") or any
other Warrant Holder is entitled, on the terms and conditions set
forth below, to purchase from the Company at any time beginning
on the date which is 25 days following (i) the date of the notice
required pursuant to subparagraph 2(b)(ii) of the Registration
Rights Agreement in the event Alteon fails, refuses or is unable
to cause the Registrable Securities covered by the Registration
Statement to be listed with NASDAQ or (ii) the date of delisting,
as described in Section 2(b)(ii)(B) of the Registration Rights
Agreement, whichever is earlier (the "Exercisability Date"), and
ending on the date which the Warrant Holder has converted all
shares of Preferred Stock held by it, [Number of Shares -
Aggregate] ([Number of Shares] shares for each share of Preferred
Stock subscribed for) fully paid and nonassessable shares of
Common Stock, $.01 par value, of the Company (the "Common Stock),
at a purchase price per share of $.10 (the "Purchase Price"), as
the same may be adjusted pursuant to Section 5 herein.
Notwithstanding the foregoing, this Warrant shall not become
exercisable on the Exercisability Date, if, prior thereto, Alteon
has either cured or redeemed from the Warrant Holder (pursuant to
clause 2(b)(ii)(C) of the Registration Rights Agreement), the
Preferred Shares held by the Warrant Holder.
1. Definitions. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed to them in the
Investment Agreement, Designation or Registration Rights
Agreement.
(a) the term "Warrant Holder" shall mean the
Purchaser or any assignee of all or any portion of this Warrant.
(b) the term "Warrant Shares" shall mean the
Shares of Common Stock or other securities issuable upon exercise
of this Warrant.
(c) term "Registration Rights Agreement" shall
mean the Registration Rights Agreement, dated on or about the
date hereof, between the Company and the Purchaser.
<PAGE>
(d) the term "Agreement" shall mean the
Preferred Stock Investment Agreement, dated April 24, 1997,
between the Company and the Purchaser.
(e) the term "Preferred Stock" shall mean the
6% Cumulative Convertible Preferred Stock of the Company.
2. Exercise of Warrant.
(a) This Warrant may be exercised by the
Warrant Holder, in whole or in part, at any time and from time to
time by either of the following methods:
i) the Warrant
Holder may surrender this Warrant, together with the form of
subscription at the end hereof duly executed by Warrant Holder
("Subscription Notice"), at the offices of the Company or any
transfer agent for the Common Stock; or
ii) the Warrant
Holder may also exercise this Warrant, in whole or in part, in a
"cashless" or "net-issue" exercise by delivering to the offices
of the Company, or any transfer agent for the Common Stock this
Warrant, together with a Subscription Notice specifying the
number of Warrant Shares to be delivered to such Warrant Holder
("Deliverable Shares") and the number of Warrant Shares with
respect to which this Warrant is being surrendered in payment of
the aggregate Purchase Price for the Deliverable Shares
("Surrendered Shares"); provided that the Purchase Price
multiplied by the number of Deliverable Shares shall not exceed
the value of the Surrendered Shares; and provided further that
the sum of the number of Deliverable Shares and the number of
Surrendered Shares so specified shall not exceed the aggregate
Warrant Shares represented by this Warrant. For the purposes of
this provision, each Warrant Share as to which this Warrant is
surrendered will be attributed a value equal to the fair market
value (as defined below) of the Warrant Share minus the Purchase
Price of the Warrant Share.
In the event that the Warrant
is not exercised in full, the number of Warrant Shares shall be
reduced by the number of such Warrant Shares for which this
Warrant is exercised, and the Company, at its expense, shall
forthwith issue and deliver or upon the order of Warrant Holder a
new Warrant of like tenor in the name of Warrant Holder or as
Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant
Shares.
(b) If at the time this Delisting
Warrant becomes exercisable, the Warrant Shares are not
registered under an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), and listed on all
the exchanges or markets on which the shares of Common Stock are
then traded, then the Warrant Holder shall have the right to sell
the Preferred Shares then held by the Warrant Holder to the
Company at a price per share equal to the Premium Redemption
Price (as defined in the Registration Rights Agreement). The
closing for such redemption shall take place in accordance with
the mechanics set forth in clause 2(b)(ii)(C) of the Registration
Rights Agreement.
3. Delivery of Stock Certificates.
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(a) Subject to the terms and
conditions of this Warrant, as soon as practicable after the
exercise of this Warrant in full or in part, and in any event
within three (3) "trading days" (as defined below) thereafter,
the Company shall transmit the certificates (together with any
other stock or other securities or property to which Warrant
Holder is entitled upon exercise) by messenger or overnight
delivery service to reach the address designated by such holder
within three (3) trading days after the receipt of the
Subscription Notice ("T+3"). In the alternative to physical
delivery of certificates for shares, if delivery of the Warrant
Shares pursuant to any exercise hereunder may be effectuated by
electronic book-entry through Depository Trust Company ("DTC")
then delivery of Warrant Shares pursuant to such exercise shall,
if requested by such holder, be closed and settled on T+3 by
book-entry transfer through DTC, and the Warrant Shares in
connection with such exercise shall be deemed delivered by such
book-entry transfer.
The term "trading day" means a day on
which there is trading on the New York Stock Exchange or on such
other market or exchange on which the Common Stock is then
traded.
(b) This Warrant may not be
exercised as to fractional shares of Common Stock. In the event
that the exercise of this Warrant, in full or in part, would
result in the issuance of any fractional share of Common Stock,
then in such event the Warrant Holder shall be entitled to cash
equal to the fair market value of such fractional share. For
purposes of this Warrant, "fair market value" shall equal the
closing trading price of the Common Stock, on the Nasdaq Stock
Market, the American Stock Exchange or the New York Stock
Exchange, whichever is the principal trading exchange or market
for the Common Stock (the "Principal Market") on the date of
determination or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or quoted in the
Nasdaq Stock Market, the average of the closing bid and asked
prices on the over-the-counter market as furnished by any New
York Stock Exchange member firm reasonably selected from time to
time by the Company for that purpose, and reasonably acceptable
to the Warrant Holder, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted
on the Nasdaq Stock Market or traded over-the-counter and the
average price cannot be determined a contemplated above, the fair
market value of the Common Stock shall be as reasonably
determined in good faith by the Company's Board of Directors with
the concurrence of the Warrant Holder.
(A) Representations and Covenants
of the Company.
(a) The Company shall comply with
its obligations under the Registration Rights Agreement with
respect to the Warrant Shares, including, without limitation, the
Company's obligation to have filed and declared effective a
registration statement registering the Warrant Shares under the
Act.
(b) The Company shall take all
necessary action and proceedings as may be required and permitted
by applicable law, rule and regulation, including, without
limitation, the notification of the Principal Market, for the
legal and valid issuance of this Warrant and the Warrant Shares
to the Warrant Holder under this Warrant.
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<PAGE>
(c) From the date hereof through
the last date on which this Warrant is exercisable, the Company
shall take all steps reasonably necessary and within its control
to insure that the Common Stock remains listed on the Principal
Market and shall not amend its Certificate of Incorporation or
Bylaws so as to adversely affect any rights of the Warrant Holder
under this Warrant.
(d) The Company shall at all times
reserve and keep available, solely for issuance and delivery as
Warrant Shares hereunder, such shares of Common Stock as shall
from time to time be issuable.
(e) The Warrant Shares, when
issued in accordance with the terms hereof, will be duly
authorized and, when paid for or issued in accordance with the
terms hereof, shall be validly issued, fully paid and
non-assessable. The Company has authorized and reserved for
issuance to Warrant Holder the requisite number of shares of Common
Stock to be issued pursuant to this Warrant.
(f) With a view to making
available to Warrant Holder the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the Securities
and Exchange Commission ("SEC") that may at any time permit
Warrant Holder to sell securities of the Company to the public
without registration, the Company agrees to use its reasonable
best efforts to:
i) make and keep
public information available, as those terms are understood and
defined in Rule 144, at all times;
ii) file with the SEC
in a timely manner all reports and other documents required of
the Company under the Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and
iii) furnish to any
Warrant Holder forthwith upon request a written statement by the
Company that it has complied with the reporting requirements of
Rule 144 and of the Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents so filed by the Company as may be
reasonably requested to permit any such Warrant Holder to take
advantage of any rule or regulation of the SEC permitting the
selling of any such securities without registration.
(B) Representations and Covenants
of the Purchaser.
The Purchaser shall not
resell Warrant Shares, unless such resale is pursuant to an
effective registration statement under the Act or pursuant to an
applicable exemption from such registration requirements.
5. Adjustment of Purchase Price and Number of
Shares. The number of and kind of securities purchasable upon
exercise of this Warrant and the Purchase Price shall be subject
to adjustment from time to time as follows:
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<PAGE>
(a) Subdivisions, Combinations and
other Issuances. If the Company shall at any time after the date
hereof but prior to the expiration of this Warrant subdivide its
outstanding securities as to which purchase rights under this
Warrant exist, by split-up, spin-off, or otherwise, or combine
its outstanding securities as to which purchase rights under this
Warrant exist, the number of Warrant Shares as to which this
Warrant is exercisable as of the date of such subdivision,
split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per
share, but the aggregate purchase price payable for the total
number of Warrant Shares purchasable under this Warrant as of such
date shall remain the same.
(b) Stock Dividend. If at any time
after the date hereof the Company declares a dividend or other
distribution on Common Stock payable in Common Stock or other
securities or rights convertible into Common Stock ("Common Stock
Equivalents") without payment of any consideration by holders of
Common Stork for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of
Common Stock issuable upon exercise or conversion thereof), then
the number of shares of Common Stock for which this Warrant may
be exercised shall be increased as of the record date (or the
date of such dividend distribution if no record date is set) for
determining which holders of Common Stock shall be entitled to
receive such dividends, in proportion to the increase in the
number of outstanding shares (and shares of Common Stock issuable
upon conversion of all such securities convertible into Common
Stock) of Common Stock as a result of such dividend, and the
Purchase Price shall be adjusted so that the aggregate amount
payable for the purchase of all the Warrant Shares issuable
hereunder immediately after the record date (or on the date of
such distribution, if applicable), for such dividend shall equal
the aggregate amount so payable immediately before such record
date (or on the date of such distribution, if applicable).
(c) Other Distributions. If at
any time after the date hereof the Company distributes to holders
of its Common Stock, other than as part of its dissolution,
liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets
(other than cash, Common Stock or securities convertible into
Common Stock), then the number of Warrant Shares for which this
Warrant is exercisable shall be adjusted to equal: (i) the number
of Warrant Shares for which this Warrant is exercisable
immediately prior to such event, (ii) multiplied by a fraction,
(A) the numerator of which shall be the fair market value per
share of Common Stock on the record date for the dividend or
distribution, and (B) the denominator of which shall be the fair
market value price per share of Common Stock on the record date
for the dividend or distribution minus the amount allocable to
one share of Common stock of the value (as jointly determined in
good faith by the Board of Directors of the Company and the
Warrant Holder) of any and all such evidences of indebtedness,
shares of capital stock, other securities or property, so
distributed. The Purchase Price shall be adjusted to equal: (i)
the Purchase Price in effect immediately before the occurrence of
any event (ii) multiplied by a fraction, (A) the numerator of
which is the number of Warrant Shares for which this Warrant is
exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which
this Warrant is exercisable immediately after the adjustment.
(d) Merger, etc. If at any time
after the date hereof there shall be a merger or consolidation of
the Company with or into or a transfer of all or substantially
all of the assets of the Company to another entity, then the
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<PAGE>
Warrant Holder shall be entitled-to receive upon such transfer,
merger or consolidation becoming effective, and upon payment of
the aggregate Purchase Price then in effect, the number of shares
or other securities or property of the Company or of the
successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder
for the shares of stock subject to this Warrant had this Warrant
been exercised just prior to such transfer, merger or
consolidation becoming effective or to the applicable record date
thereof, as the case may be. The Company will not merge or
consolidate with or into any other corporation, or sell or
otherwise transfer its property, assets and business
substantially as an entirety to another corporation, unless the
corporation resulting from such merger or consolidation (if not
the Company), or such transferee corporation, as the case may be,
shall expressly assume, by supplemental agreement reasonably
satisfactory in form and substance to the Warrant Holder, the due
and punctual performance and observance of each and every
covenant and condition of this Warrant to be performed and
observed by the Company.
(e) Reclassification, etc. If at
any time after the date hereof there shall be a reorganization or
reclassification of the securities as to which purchase rights
under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of
the Purchase Price then in effect, the number of shares or other
securities or property resulting from such reorganization or
reclassification, which would have been received by the Warrant
Holder for the shares of stock subject to this Warrant had this
Warrant at such time been exercised.
(f) Conversion, etc. If any
time after the date hereof the Warrant Holder converts Preferred
Stock, then the number of Warrant Shares for which this Warrant
is exercisable shall be reduced to reflect a reduction of two
hundred (200) Warrant Shares, subject to adjustment in accordance
with this Section 5(a) or (b), for every share of Preferred Stock
converted.
6. No Impairment. The Company will not, by
amendment of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the Warrant Holder against
impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any Warrant
Shares above the amount payable therefor on such exercise, and
(b) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares on the exercise
of this Warrant.
7. Notice of Adjustments- Notices. Whenever
the Purchase Price or number of Shares purchasable hereunder
shall be adjusted pursuant to Section 5 hereof, the Company shall
execute and deliver to the Warrant Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment
was calculated and the Purchase Price and number of shares
-6-
<PAGE>
purchasable hereunder after giving effect to such adjustment, and
shall cause a copy of such certificate to be mailed (by first
class mail, postage prepaid) to the Warrant Holder.
8. Rights As Stockholder. Prior to exercise
of this Warrant, the Warrant Holder shall not be entitled to any
rights as a stockholder of the Company with respect to the
Warrant Shares, including (without limitation) the right to vote
such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of
any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right,
the Company shall mail to each Warrant Holder, at least 10 days
prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
9. Limitation on Exercise. Notwithstanding
anything to the contrary contained herein, this Warrant may not be
exercised by the Warrant Holder to the extent that, after giving
effect to Warrant Shares to be issued pursuant to a Subscription
Notice, the total number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of
ownership of this Warrant, or ownership of other securities that
have limitations on the holder's right to convert or exercise
similar to the limitations set forth herein), together with all
shares of Common Stock deemed beneficially owned by the holder's
"affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under
Section 13(d) of the Securities Exchange Act of 1934 exists, would
exceed 4.9% of the total issued and outstanding shares of the
Common Stock, provided that the Warrant Holder shall have the right
to waive this restriction, in whole or in part, immediately in the
case of a pending "Change in Control Transaction" described in
clause (x) or (z) of Paragraph 4(i) of the Designations for the
Preferred Stock and in any other case upon 61 days prior notice to
the Company. The delivery of a Subscription Notice by the Warrant
Holder shall be deemed a representation by such holder that it is
in compliance with this paragraph.
A subsequent Warrant Holder shall not be bound by this provision
unless it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Warrant shall exclude shares
that might otherwise be deemed beneficially owned by reason of
the exercise of this Warrant.
10. Replacement Of Warrant. On receipt of
evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of the Warrant and, in the case
of any such loss, theft or destruction of the Warrant, on
delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in
lieu thereof a new Warrant of like tenor.
11. Specific Enforcement; Consent to
Jurisdiction; Choice of Law
(a) The Company and the Warrant
Holder acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Warrant were not
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<PAGE>
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall he entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Warrant and to enforce
specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be
entitled by law or equity.
(b) Each of the Company and the
Warrant Holder (i) hereby irrevocably submits to the exclusive
jurisdiction of the state and federal court located in New York
County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Warrant and (ii)
hereby waives, and agrees not to assert in any such suit, action
or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the
suit, action or proceeding is improper. Each of the Company and
the Warrant Holder consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in
this paragraph shall affect or limit any right to serve process
in any other manner permitted by law.
(c) This Warrant shall be governed
by and construed and enforced in accordance with the internal
laws of the State of New York without regard to such state's
principles of conflict of laws.
12. Entire Agreement; Amendments. This
Warrant, the Exhibits hereto and the provisions contained in the
Agreement or the Registration Rights Agreement and incorporated
into this Warrant and the Warrant Shares contain the entire
understanding of the parties with respect to the matters covered
hereby and thereby and, except as specifically set forth herein
and therein, neither the Company nor the Warrant Holder makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is
sought.
13. Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or delivery by
telex (with correct answer back received), telecopy or facsimile
at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to
be received), or the first business day following such delivery
(if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
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<PAGE>
to the Company:
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
Attn: James J. Mauzey
Fax: (201) 934-8880
with copies to:
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Attn: Marsha E. Novick, Esq.
Fax: (609) 987-6651
to The Warrant Holder:
[Name of Investor]
[Address]
Attn: [Name of Person]
Fax: [Number]
Either party hereto may from time to time change its address for
notices under this Section 13 by giving at least 10 days prior
written notice of such changed address to the other party hereto.
14. Miscellaneous. This Warrant and any term
hereof may be changed, waived, discharged or terminated only by
an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in
accordance with and governed by laws of the State of New York.
The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other
provision.
15. Assignment. This Warrant may be
transferred or assigned, in whole or in part, only at any time
that the Warrant Holder transfers or assigns shares of Preferred
Stock, pro rata to such transfer or assignment, and only to such
transferee or assignee, by the then Warrant Holder by submitting
this Warrant to the Company together with a duly executed
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<PAGE>
Assignment in substantially the form and substance of the Form of
Assignment which accompanies this Warrant and, upon the Company's
receipt hereof, and in any event, within three (3) business days
thereafter, the Company shall issue a Warrant to the Warrant
Holder to evidence that portion of this Warrant, if any as shall
not have been so transferred or assigned.
[The remainder of this page has intentionally been left blank.]
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<PAGE>
Dated:
_________________________
ALTEON INC.
By: _________________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:_______________________________
Its [NAME OF INVESTOR]
By: ________________________________
Name:
Title:
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FORM OF WARRANT EXERCISE
(SUBSCRIPTION NOTICE)
(To be signed only on exercise of Warrant)
TO ____________________________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant:
_______ (A) for, and to purchase thereunder, _______
shares of Common Stock of Alteon Inc., a Delaware corporation (the
"Company"), and herewith makes payment of $ _____ therefor; or
_______ (B) in a "net issue exercise" for, and to purchase
thereunder, _________ shares of Common Stock, and herewith makes
payment therefor with _________ surrendered Warrant Shares.
The undersigned requests that the certificates for such shares
be issued in the name of, and delivered to ___________, whose
address is ______________.
Dated:
____________________________________
(Signature must conform to name of
holder as specified on the face of
the Warrant)
____________________________________
(Address)
Tax Identification Number: ________________
<PAGE>
____________________
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________ the right represented by the within
Warrant to purchase _____ shares of Common stock of Alteon Inc.,
a Delaware corporation, to which the within Warrant relates, and
appoints ___________ Attorney to transfer such right on the books
of Alteon Inc., a Delaware corporation, with full power of
substitution of premises.
Dated:
________________________________
(Signature must conform to name of
holder as specified on the fact of
the Warrant)
________________________________
(Address)
Signed in the presence of:
_____________________
<PAGE>
AMENDMENT TO
STOCKHOLDERS' RIGHTS AGREEMENT
BETWEEN
ALTEON INC.
AND
REGISTRAR AND TRANSFER COMPANY, AS RIGHTS AGENT
AMENDMENT TO STOCKHOLDERS' RIGHTS AGREEMENT dated as of
April 23, 1997 between Alteon Inc., a Delaware corporation, (the
"Company") and Registrar and Transfer Company, as Rights Agent
(the "Rights Agent").
PRELIMINARY STATEMENTS
1. The Company and the Rights Agent are parties to the
Stockholders' Rights Agreement dated as of July 27, 1995 (the
"Agreement").
2. Section 26 of the Agreement provides for the amendment
of the Agreement by the Company.
3. The Company wishes to amend the Agreement to provide for
certain exceptions to its terms.
NOW THEREFORE, for good and valuable consideration, the
Company and the Rights Agents agree as follows:
1. The Agreement is hereby amended by the addition of the
following Section 33:
SECTION 33. Certain Exceptions. For purposes of
this Agreement and subject to the following sentence,
none of Halifax Fund, L.P., Galileo Capital, L.L.C., RGC
International Investors, LDC, Heracles Fund, Lewis Fraser
or Joseph A. Umbach (each an "Investor," collectively,
the "Investors") or their Permitted Transferees (as
defined below) shall be deemed to be a Beneficial Owner
of Common Shares which are (i) issuable upon conversion
of the Corporation's 6% Cumulative Convertible Preferred
Stock ("Preferred Stock"), (ii) issuable upon exercise of
the warrants issued to the Investors concurrently with
the issuance of the Preferred Stock (the "Warrants"),
(iii) issued upon conversion of the Preferred Stock or
(iv) issued upon exercise of the Warrants (the Common
Shares referred to in phrases (i) through (iv) being
referred to as the "Exempt Shares"). The exemption from
Beneficial Ownership for the Exempt Shares of an Investor
or Permitted Transferee shall be effective only if, and
for so long as, the total number of Common Shares of
which such Investor or Permitted Transferee would be
deemed to be the Beneficial Owner (exclusive of the
Exempt Shares and Common Shares Beneficially Owned by an
Affiliate or an Associate of such Investor or Permitted
<PAGE>
Transferee which Common Shares are not Group Held Shares
(as hereinafter defined)), together with all Common
Shares (exclusive of the Exempt Shares) Beneficially
Owned by any person that is filing a Schedule 13D with
such Investor or Permitted Transferee, as the case may
be, as a "group" with regard to the Company ("Group Held
Shares"), does not exceed 4.9% of the Company's issued
and outstanding Common Shares, provided that any increase
in the percentage of Common Shares Beneficially Owned by
an Investor or a Permitted Transferee solely as the
result of a reduction in the Company's outstanding Common
Shares shall be disregarded for purposes of determining
such 4.9% Beneficial Ownership. For purposes of this
Section, "Permitted Transferee" shall mean an Investor,
an Affiliate of an Investor, any Person whose holdings of
Common Shares are under the investment management of The
Palladin Group, L.P. or its Affiliates, and any other
Person to whom an Investor or a Permitted Transferee has
transferred the Preferred Stock, the Warrants or the
Common Shares issued upon the conversion or exercise
thereof, as the case may be, with the prior written
consent of the Company, which consent shall not be
unreasonably withheld, provided that such Person shall be
a Permitted Transferee only with respect to the Exempt
Shares transferred with the consent of the Company and
not with respect to any Exempt Shares transferred without
the consent of the Company notwithstanding the fact that
such Person is a Permitted Transferee as the result of a
previous transfer of Exempt Shares with the consent of
the Company.
2. Except as specifically modified by this Amendment, all
terms of the Agreement shall remain in full force and effect and
shall be unaffected by this Amendment.
* * * * * * * * *
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the
date first written above.
ALTEON INC.
By: /s/ Kenneth I. Moch
____________________
Name: Kenneth I. Moch
Title: SVP, Finance and
Business Development
REGISTRAR AND TRANSFER COMPANY
By: /s/ William P. Tatler
_____________________
Name: William P. Tatler
Title: Vice President
PREFERRED STOCK INVESTMENT AGREEMENT
PREFERRED STOCK INVESTMENT AGREEMENT ("Agreement") dated
as of April 24, 1997 between Alteon Inc., a Delaware corporation
("Alteon"), and each person or entity listed as an investor on
Schedule I attached to this Agreement (each individually an
"Investor" and collectively the "Investors").
W I T N E S E T H:
WHEREAS, Alteon desires to sell and issue to the
Investors, and the Investors wish to purchase from Alteon, an
aggregate of 5,000 shares of Alteon's 6% Cumulative Convertible
Preferred Stock, par value $0.01, having the rights, designations
and preferences set forth in the Certificate of Designations of
Alteon (the "Designation") in the identical form and substance
of Exhibit 2.1(c) attached hereto (the "Preferred Shares"), on the
terms and conditions set forth herein;
and
WHEREAS, the Preferred Shares will be convertible into
shares ("Common Shares") of common stock, par value $0.01, of
Alteon ("Common Stock"), pursuant to the terms of the Designation,
and the Investors will have registration rights with respect to
such Common Shares issuable upon conversion, pursuant to the terms
of that certain Registration Rights Agreement to be entered into
between Alteon and the Investors substantially in the form of
Exhibit 4.2(f) hereto ("Registration Rights Agreement");
and
WHEREAS, to induce the Investors to purchase the
Preferred Shares, Alteon has agreed to issue to the Investors
warrants in the form attached as Exhibit 1 (the "Transaction
Warrants");
and
WHEREAS, Alteon has agreed to issue to the Investors
warrants in the form attached hereto as Exhibit 2 which will become
exercisable in the event, inter alia, that shares of Common
Stock of Alteon are delisted from NASDAQ (the "Delisting Warrants"
and together with the Transaction Warrants, the "Warrants");
NOW, THEREFORE, in consideration of the foregoing
premises and the covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Preferred Stock
Section 1.1 Purchase and Sale of Preferred Stock. Upon
the following terms and conditions, Alteon shall issue and sell to
each Investor severally, and each Investor severally shall purchase
from Alteon, the number of Preferred Shares indicated next to such
Investor's name on Schedule I attached hereto.
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Section 1.2 Purchase Price. The purchase price for
the Preferred Shares (the "Purchase Price") shall be $1,000 per
share.
Section 1.3 The Closing. (a) The closing of the
purchase and sale of the Preferred Shares (the "Closing"), shall
take place at the offices of the Investors' counsel, at 10:00 am.,
local time on the later of the following: (i) the date on which
the last to be fulfilled or waived of the conditions set forth in
Article IV hereof and applicable to the Closing shall be fulfilled
or waived in accordance herewith, or (ii) such other time and place
and/or on such other date as the Investors and Alteon may agree.
The date on which the Closing occurs is referred to herein as the
"Closing Date."
(b) On the Closing Date, Alteon shall deliver to each
Investor (i) certificates (with the number of and denomination of
such certificates reasonably requested by such Investor
representing the Preferred Shares purchased hereunder by such
Investor registered in the name of such Investor or its nominee or
deposit such Preferred Shares into accounts designated by such
Investor and (ii) Warrants to purchase ten (10) shares of Common
Stock for each Preferred Share purchased hereunder, registered in
the name of Investor or its nominee in such denominations as
reasonably requested by such Investor, and such Investor shall
deliver to Alteon the Purchase Price for the number of Preferred
Shares purchased by such Investor hereunder by wire transfer in
immediately available funds to an account designated in writing by
Alteon. The delivery of payment by each Investor of the Purchase
Price applicable to it as set forth in this paragraph shall
constitute a payment delivered to Alteon in satisfaction of such
Investor's obligation to pay the Purchase Price hereunder. In
addition, each party shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of Alteon.
Alteon hereby makes the following representations and warranties
to each of the Investors as of the date hereof and on the Closing
Date:
(a) Organization and Qualification; Material Adverse
Effect. Alteon is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware and has the
requisite corporate power to own its properties and to carry on its
business as now being conducted. Alteon does not have any direct
or indirect subsidiaries other than the subsidiaries listed on
Schedule 2.1(a) attached hereto. A "subsidiary" of Alteon is any
company of which more than 50% of the voting shares are owned by
Alteon. Alteon is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so
to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any adverse effect on the business,
operations, properties, prospects, or financial condition of
the entity with respect to which such term is used and which is
material to such entity and other entities controlling or
controlled by such entity taken as a whole, and any material
adverse effect on the transactions contemplated under this
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Agreement, the Registration Rights Agreement or any other agreement
or document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) Alteon has the
requisite corporate power and authority to enter into and perform
this Agreement, the Warrants and the Registration Rights Agreement
and to issue the Preferred Shares in accordance with the terms
hereof, (ii) the execution and delivery of this Agreement, the
Warrants and the Registration Rights Agreement by Alteon and the
consummation by it of the transactions contemplated hereby and
thereby, including the issuance of the Preferred Shares, and the
resolutions contained in the Designation, have been duly authorized
by all necessary corporate action, and no further consent or
authorization of Alteon or its Board of Directors or stockholders
is required, (iii) this Agreement and the Registration Rights
Agreement and the Warrants have been duly executed and delivered
by Alteon, and (iv) this Agreement and the Registration Rights
Agreement and the Warrants constitute valid and binding obligations
of Alteon enforceable against Alteon in accordance with their
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement
of creditors' rights and remedies or by other equitable principles
of general application.
(c) Capitalization. The authorized capital stock of
Alteon consists of 30,000,000 shares of common stock and 1,998,329
shares of preferred stock; there are 15,709,825 shares of
common stock issued and outstanding as of March 1, 1997 and no
shares of preferred stock issued and outstanding. All of the
outstanding shares of Alteon's common stock have been validly
issued and are fully paid and nonassessable. No Common Shares are
entitled to preemptive rights; as of March 7, 1997, 3,738,602
Common Shares have been reserved for issuance upon the exercise of
options granted or to be granted under stock option plans and there
are no outstanding warrants for Common Shares (excluding the
Warrants). There are no other scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities or rights exchangeable or convertible into, any shares
of capital stock of Alteon, or contracts, commitments,
understandings, or arrangements by which Alteon is or may become
bound to issue additional shares of capital stock of Alteon or
options, warrants, scrip, rights to subscribe to, or commitments
to purchase or acquire, any shares, or securities or rights
convertible into shares, of capital stock of Alteon (except as
contemplated by this Agreement or disclosed in the SEC Documents
(as defined below)). Other than as set forth in the Pre-Agreement
SEC Documents (as defined below), no holders of Alteon stock
(other than the Investors) are entitled to registration rights.
Attached hereto as Exhibit 2.1(c) are true and correct copies of
Alteon's Certificate of Incorporation (the "Charter") and the
Designation, each as in effect on the date hereof, and Alteon has
furnished or made available to the Investors true and correct
copies of Alteon's By-Laws, as in effect on the date hereof (the
"By-Laws"). The Designation has been duly filed in the State of
Delaware.
(d) Issuance of Common Shares. The Common Shares
issuable upon conversion of the Preferred Shares pursuant to the
Designation (the "Underlying Shares") or upon the exercise of the
Warrants (the "Warrant Shares") are duly authorized and reserved
for issuance and, upon such conversion in accordance with the
Designation and/or exercise in accordance with the Warrants such
Underlying Shares and Warrant Shares will be validly issued, fully
paid and non-assessable, free and clear of any and all liens,
claims and encumbrances, and such Underlying Shares and the Common
Shares issuable upon exercise of the Transaction Warrant
("Transaction Warrant Shares") will be entitled to be traded on the
National Association of Securities Dealers Automated Quotation
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system National Market ("NASDAQ"), and the holders of such
Underlying Shares and Warrant Shares shall be entitled to all
rights and preferences accorded to a holder of Common Shares. The
outstanding Common Shares are currently listed on the NASDAQ.
(e) No Conflicts. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement
and the Warrants by Alteon and the consummation by Alteon of the
transactions contemplated hereby and thereby and the filing of the
Designation do not and will not (i) result in a violation of
Alteon's Charter or By-Laws or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which
Alteon or any of its subsidiaries is a party, or result in a
violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to Alteon or any of its
subsidiaries or by which any property or asset of Alteon or any of
its subsidiaries is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have
a Material Adverse Effect); provided that, for purposes of such
representation as to Federal, state, local or foreign law, rule or
regulation, no representation is made herein with respect to any
of the same applicable solely to the Investors and not to Alteon.
The business of Alteon and its direct and indirect subsidiaries is
not being conducted in violation of any law, ordinance or
regulations of any governmental entity, except for violations which
either singly or in the aggregate do not and will not have a
Material Adverse Effect. Alteon is not required under Federal,
state, local or foreign law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for
it to execute, deliver or perform any of its obligations under this
Agreement and the Registration Rights Agreement and the Designation
and the Warrants or issue and sell the Preferred Shares in
accordance with the terms hereof and issue the Underlying Shares
upon conversion thereof and issue the Warrant Shares on exercise
of the Warrants, except for the registration provisions provided
in the Registration Rights Agreement, provided that, for purposes
of the representation made in this sentence, Alteon is assuming and
relying upon the accuracy of the relevant representations and
agreements of the Investors herein.
(f) SEC Documents; Financial Statements. The Common
Stock of Alteon is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and Alteon has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the Securities and
Exchange Commission ("SEC") pursuant to the reporting requirements
of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements
and amendments thereto heretofore filed by Alteon with the SEC (all
of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC Documents"). Alteon
has delivered or made available to the Investors true and complete
copies of all SEC Documents (including, without limitation, proxy
information and solicitation materials and registration statements)
filed with the SEC since December 31, 1995 and all annual SEC
Documents filed with the SEC since December 31, 1994. Alteon has
not provided to the Investor any material non-public information
or any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by Alteon but which
has not been so disclosed. As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws,
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rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The SEC Documents contain all material information
concerning Alteon, and no event or circumstance has occurred which
would require Alteon to disclose such event or circumstance in
order to make the statements in the SEC Documents not misleading
on the date hereof or on the Closing Date but which has not been
so disclosed. The financial statements of Alteon included in the
SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements,
to the extent they may not include footnotes or may be condensed
or summary statements) and fairly present in all material respects
the financial position of Alteon as of the dates thereof and the
results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(g) Principal Exchange/Market. The principal market on
which the Common Shares are currently traded is the NASDAQ.
(h) No Material Adverse Change. Since December 31,
1996, the date through which the most recent report of Alteon on
Form 10-K has been prepared and filed with the SEC, a copy of which
is included in the SEC Documents, no Material Adverse Effect has
occurred or exists with respect to Alteon or its subsidiaries,
except as otherwise disclosed or reflected in other SEC
Documents prepared through or as of a date subsequent to December
31, 1996.
(i) No Undisclosed Liabilities. Alteon and its direct
and indirect subsidiaries have no liabilities or obligations not
disclosed in the SEC Documents, other than those liabilities
incurred in the ordinary course of Alteon's or its subsidiaries'
respective businesses since December 31, 1996, which liabilities,
individually or in the aggregate, do not or would not have a
Material Adverse Effect on Alteon or its direct or indirect
subsidiaries.
(j) No Undisclosed Events or Circumstances. No event
or circumstance has occurred or exists with respect to Alteon or
its direct or indirect subsidiaries or their respective
businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by Alteon but which has
not been so publicly announced or disclosed.
(k) No General Solicitation. Neither Alteon, nor any
of its affiliates, or, to its knowledge, any person acting on its
or their behalf has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D under
the Securities Act of 1933, as amended (the "Act")) in connection
with the offer or sale of the Preferred Shares or Common Shares.
(l) No Integrated Offering. Neither Alteon, nor any of
its affiliates, nor to its knowledge any person acting on its or
their behalf has, directly or indirectly, made any offers or
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sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the
Preferred Shares under the Act.
(m) Form S-3. Alteon is eligible to file the
Registration Statement (as defined in the Registration Rights
Agreement) on Form S-3 under the Act and rules promulgated
thereunder, and Form S-3 is permitted to be used for the
transactions contemplated hereby under the Act and rules
promulgated thereunder.
(n) Intellectual Property. Alteon (and/or its
wholly-owned subsidiaries) owns or has licenses to use certain
patents, copyrights and trademarks ("intellectual property")
associated with its business. Alteon and its subsidiaries have all
intellectual property rights which are needed to conduct the
business of Alteon and its subsidiaries as it is now being
conducted or as proposed to be conducted as disclosed in the SEC
Documents. Alteon and its subsidiaries have no reason to
believe that the intellectual property rights which it owns are
invalid or unenforceable or that the use of such intellectual
property by Alteon or its subsidiaries infringes upon or conflicts
with any right of any third party, and neither Alteon nor any of
its subsidiaries has received notice of any such infringement or
conflict. Alteon and its subsidiaries have no knowledge of any
infringement of its intellectual property by any third party.
(o) No Litigation. Except as set forth in the SEC
Documents delivered to the Investors prior to the date of this
Agreement ("Pre-Agreement SEC Documents") no litigation or
claim (including those for unpaid taxes) against Alteon or any of
its subsidiaries is pending or, to Alteon's knowledge, threatened,
and no other event has occurred, which if determined adversely
would have a Material Adverse Effect on Alteon or would materially
adversely effect the transactions contemplated hereby. The legal
proceedings described in the SEC Documents will not have an effect
on the transactions contemplated hereby, and will not have a
Material Adverse Effect on Alteon.
(p) Brokers. Alteon has taken no action which would
give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments by any Investor relating to this
Agreement or the transactions contemplated hereby, except for
amounts owing to Forest Street Capital, L.L.C., which amounts shall
be paid by Alteon, pursuant to a separate agreement.
(q) Acknowledgement of Dilution. The number of Common
Shares constituting Underlying Shares may increase substantially
in certain circumstances, including the circumstance where the
trading price of the Common Shares declines. Alteon acknowledges
that its obligation to issue Underlying Shares upon conversion of
Preferred Shares and Warrant Shares upon conversion of the Warrants
is absolute and unconditional, regardless of the dilution that such
issuance may have on other shareholders of Alteon.
Section 2.2 Representations and Warranties of the
Investors. Each of the Investors, severally and not jointly,
hereby makes the following representations and warranties to
Alteon as of the date hereof and on the Closing Date:
(a) Authorization; Enforcement. (i) Such Investor has
the requisite power and authority to enter into and perform this
Agreement and the Registration Rights Agreement and to
purchase the Preferred Shares being sold hereunder and to acquire
the Warrant Shares, (ii) the execution and delivery of this
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Agreement and the Registration Rights Agreement by such Investor
and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate
or partnership action, and (iii) this Agreement and the
Registration Rights Agreement constitute valid and binding
obligations of such Investor enforceable against such Investor in
accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(b) No Conflicts. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement
and the Warrants and the consummation by such Investor of the
transactions contemplated hereby and thereby do not and will
not (i) result in a violation of such Investor's organizational
documents, or (ii) conflict with any agreement, indenture or
instrument to which such Investor is a party, or (iii) result in
a violation of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to such
Investor. Such Investor is not required to obtain any consent or
authorization of any governmental agency in order for it to perform
its obligations under this Agreement or the Registration Rights
Agreement or the Warrants.
(c) Investment Representation. Such Investor is
purchasing the Preferred Shares and acquiring the Warrants for its
own account and not with a view to distribution in violation of
any securities laws. Such Investor has no present intention to
sell the Preferred Shares, Warrants, Underlying Shares or Warrant
Shares and such Investor has no present arrangement (whether or not
legally binding) to sell the Preferred Shares, Warrants, Underlying
Shares or Warrant Shares to or through any person or entity;
provided, however, that by making the representations herein, such
Investor does not agree to hold the Preferred Shares, Warrants,
Underlying Shares or Warrant Shares for any minimum or other
specific term and reserves the right to dispose of the Preferred
Shares, Warrants, Underlying Shares or Warrant Shares at any time
in accordance with Federal and state securities laws applicable to
such disposition. Such Investor or Permitted Transferees (as
defined in the Stockholders Rights Agreement, dated as of July 27,
1995, between Alteon and Registrar and Transfer Company, as rights
agent, as amended (the "Rights Agreement")) is not the Beneficial
Owner (as defined in the Rights Agreement) of more than 4.9% of
Alteon's "common shares" (as defined in the Rights Agreement),
including all "common shares" which are aggregated with those
of such Investor or Permitted Transferee pursuant to a Schedule 13D
filed under Section 13(d) of the Securities Exchange Act of 1934,
but excluding all "common shares" that are Exempt Shares (as
defined in the Rights Agreement).
(d) Accredited Investor. Such Investor is an
"accredited investor" as defined in Rule 501 promulgated under the
Act. The Investor has such knowledge and experience in financial
and business matters in general and investments in particular, so
that such Investor is able to evaluate the merits and risks of an
investment in the Preferred Shares and to protect its own interests
in connection with such investment. In addition (but without
limiting the effect of Alteon's representations and warranties
contained herein), such Investor has received such information as
it considers necessary or appropriate for deciding whether to
purchase the Preferred Shares pursuant hereto.
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(e) Rule 144. Such Investor understands that there is
no public trading market for the Preferred Shares, that none is
expected to develop, and that the Preferred Shares and Underlying
Shares must be held indefinitely unless such Preferred Shares or
Underlying Shares are converted or registered under the Act or an
exemption from registration is available. Such Investor has been
advised or is aware of the provisions of Rule 144 promulgated under
the Act.
(f) Brokers. Such Investor has taken no action which
would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by Alteon relating
to this Agreement or the transactions contemplated hereby, except
for amounts owing to Forest Street Capital, L.L.C., which amounts
shall be paid by Alteon, pursuant to a separate agreement.
(g) Reliance by Alteon. Such Investor understands that
the Preferred Shares are being, and the Underlying Shares will be,
offered and sold and Warrants are being issued in reliance on a
transactional exemption from the registration requirements of
Federal and state securities laws and that Alteon is relying upon
the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Investor set
forth herein in order to determine the applicability of such
exemptions and the suitability of such Investor to acquire the
Preferred Shares, the Underlying Shares and Warrants.
ARTICLE III
Covenants
Section 3.1 Registration and Listing; Effective
Registration. Until such time as no Preferred Shares or Warrants
are outstanding, Alteon will cause the Common Shares to continue
to be registered under Section 12(g) of the Exchange Act, will
comply in all respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing
obligations. Until such time as no Preferred Shares or Warrants
are outstanding, Alteon shall continue the listing or trading of
the Common Shares on the NASDAQ market and comply in all respects
with Alteon's reporting, filing and other obligations under the
bylaws or rules of the NASDAQ and any exchange or market where the
Common Shares are then traded. Alteon shall cause the Underlying
Shares and the Transaction Warrant Shares to be listed on the
NASDAQ and in addition on such other markets (e.g., the New York
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Stock Exchange or the American Stock Exchange) on which the Common
Shares are then trading prior to the earlier of (i) the
registration of the Underlying Shares or the Warrant Shares under
the Act or (ii) 90 days after the Closing hereunder, and shall
continue such listing(s) in accordance with Alteon's obligations
under the Registration Rights Agreement. Upon the exercisability
of the Delisting Warrants, Alteon shall cause the Common Shares
issuable upon exercise of the Delisting Warrants to be listed on
such exchanges and markets on which the Common Shares are then
trading. As used herein and in the Registration Rights Agreement,
the Designation, and the Warrants, the term "Effective
Registration" shall mean that all registration obligations of
Alteon pursuant to the Registration Rights Agreement have been
satisfied, such registration is not subject to any suspension or
stop order, the prospectus for the Underlying Shares issuable upon
conversion of the Preferred Shares and the Warrant Shares issuable
upon exercise of the Warrants is current and such Common Shares are
listed for trading on the NASDAQ market, and in addition on such
other markets (e.g., the New York Stock Exchange or the American
Stock Exchange) on which the Common Shares are then trading, and
such trading has not been suspended for any reason, and none of
Alteon or any direct or indirect subsidiary of Alteon is subject
to any bankruptcy, insolvency or similar proceeding.
Section 3.2 Certificates on Conversion and Warrants
on Exercise. (a) Upon any conversion by an Investor (or then
holder of Preferred Shares) of the Preferred Shares pursuant to
the Designation, Alteon shall issue and deliver to such Investor
(or holder) within three (3) days of the Conversion Date (as
defined in the Designation) a new certificate or certificates for
the number of Preferred Shares which such Investor (or holder) has
not yet elected to convert but which are evidenced in part by the
certificate(s) submitted to Alteon in connection with such
conversion (with the number of and denomination of such new
certificate(s) designated by such Investor or holder).
(b) Upon any partial exercise by an Investor (or
then holder of the Warrants) of the Warrants, Alteon shall issue
and deliver to such Investor (or holder) within three (3) days of
the date on which such Warrants are exercised a new Warrant or
Warrants representing the number of adjusted Warrant Shares, in
accordance with the terms of Section 2 of the Warrants.
Section 3.3 Replacement Certificates and Warrants.
(a) The certificate(s) representing the Preferred Shares held by
any Investor (or then holder) may be exchanged by such Investor (or
such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number
of Preferred Shares, as reasonably requested by such Investor (or
such holder) upon surrendering the same. No service charge will
be made for such registration or transfer or exchange.
(b) The Warrants are exchangeable at the option of
the Investor (or then holder of the Warrants) at the office of
Alteon for other Warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of
Warrant Shares as are purchasable under such Warrants. No service
charge will be made for such transfer or exchange.
Section 3.4 Expenses. Alteon shall pay, at the
Closing and promptly upon receipt of any further invoices relating
to same, all reasonable due diligence fees and expenses and
reasonable attorneys' fees and expenses of Kleinberg, Kaplan, Wolff
& Cohen, P.C., up to a maximum amount of $20,000, incurred by
certain of the Investors in connection with the preparation,
negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Designation, the Warrants and
the related agreements and documents and the transactions
contemplated hereunder and thereunder. At Closing, Alteon shall
pay the amount due for such fees and expenses (which may include
fees and expenses estimated to be incurred for completion of the
transaction including post-closing matters). In the event such
amount is ultimately less than the actual fees and expenses, Alteon
shall promptly pay such deficiency upon receipt of an invoice
regarding same.
Section 3.5 Securities Compliance. Alteon shall notify
the SEC, the NASDAQ, in accordance with their requirements, of the
transactions contemplated by this Agreement, the Designation, the
Registration Rights Agreement and the Warrants, and shall take all
other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and
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valid issuance of the Preferred Shares hereunder, the Common Shares
issuable upon conversion thereof and the Warrant Shares.
Section 3.6 Intercompany Transactions; Restrictive
Covenant Termination Date. Until the Restrictive Covenant
Termination Date (as defined below), Alteon shall not, and shall
not permit any subsidiary to, transfer assets to any direct or
indirect subsidiary other than for value and for a proper business
purpose. The term "Restrictive Covenant Termination Date" shall
mean the date which is the earlier of (i) the date which is the
last day of the 12th fiscal month following the Effective
Registration ("Maximum Restrictive Covenant Termination Date"), or
(ii) such date on which 80% of the Preferred Shares have been
converted for Common Shares, provided that the Maximum Restrictive
Covenant Termination Date shall not occur until such time as Alteon
has performed all material obligations under this Agreement, the
Registration Rights Agreement, the Designation and the Warrants
which were required under the terms hereof or thereof to have been
so performed prior to such date, and provided further that the
Maximum Restrictive Covenant Termination Date shall be deferred one
and one-half (1/2) days for each day that there is no Effective
Registration after the Registration Deadline (as defined in the
Registration Rights Agreement).
Section 3.7 Dividends or Distributions. So long as
over 20% of the Preferred Shares remain outstanding, Alteon agrees
that it shall not (a) declare or pay any dividends or make any
distributions to any holder or holders of Common Shares, (b)
purchase or otherwise acquire for value, directly or indirectly,
any Common Stock or other equity security of Alteon either junior
to or on parity with the Preferred Shares as to priority in payment
of dividends and amounts payable in liquidation, or (c) authorize
or issue any other equity security senior to the Preferred Shares.
Section 3.8 No Senior Securities. Until the
Restrictive Covenant Termination Date, Alteon agrees that neither
Alteon nor any direct or indirect subsidiary of Alteon shall (i)
create, incur, assume, guarantee, secure or in any manner become
liable in respect of any indebtedness, or permit any liens, claims
or encumbrances to exist against Alteon or any direct or
indirect subsidiary of Alteon or any of their assets, except for
trade payables incurred in the ordinary course of business
consistent with past practices (including, without limitation,
license fees, royalties and pursuant to any lease) and except for
a working capital facility in form and substance and with a lender
reasonably satisfactory to the Investors, which working capital
facility shall not exceed $3,000,000, or (ii) issue any shares of
its preferred stock or any securities convertible into its
preferred stock without prior written approval of such preferred
stock (or convertible security) issuance by a majority in interest
of the holders of outstanding Preferred Shares, except for
preferred stock which is junior to or on parity with the Preferred
Shares as to priority in payment of dividends and amounts payable
in liquidation.
Section 3.9 Notices. Alteon agrees to provide all
holders of Preferred Shares with copies of all notices and
information, including without limitation notices and proxy
statements in connection with any meetings, that are provided to
the holders of shares of Common Shares, contemporaneously with the
delivery of such notices or information to such Common Share
holders.
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Section 3.10 Right of First Refusal.
Until the expiration of six (6) months from the
Closing Date, Alteon shall not (i) offer, sell, contract to sell
or otherwise issue or deliver or dispose of any debt or any Common
Shares or other equity securities or any securities which are
convertible into or exchangeable for its Common Shares or other
equity securities or any convertible security, or any warrants or
other rights to subscribe for or to purchase or any options for the
purchase of Common Shares or other equity securities (other than
in a private placement of Common Stock to an affiliate of The
Palladin Group, L.P., or in a bona-fide underwritten public
offering (other than a continuous offering pursuant to
Rule 415) and other than shares or options issued or which may be
issued pursuant to Alteon's employee, director or consultant stock
option plans or shares issued upon exercise of options,
warrants or rights outstanding on the Closing Date listed in the
SEC Documents), or (ii) obtain any financing from any third party
(excluding trade payables incurred in the ordinary course of
business consistent with past practices, including without
limitation, license fees, royalties and pursuant to any lease),
unless such offer, sale, issuance or financing ("Financing
Transaction") is first offered to the Investors pro rata. Alteon
shall make such offer by providing each Investor with written
notice of Alteon's intention to enter into the Financing
Transaction together with a term sheet containing the economic
terms and significant provisions of the Financing Transaction and
any other information reasonably requested by the Investors (the
"Offer"). Such Offer shall be given with respect to each Financing
Transaction contemplated by Alteon. The Investors shall have ten
(10) business days from receipt of the Offer to deliver a written
notice to Alteon that the Investors wish to accept the Offer in
whole or in part (subject to satisfactory due diligence and
reasonably acceptable definitive documentation) for the Financing
Transaction. To the extent any Investor declines to accept its pro
rata portion of such Offer in whole or in part, such Investor shall
give notice to the other Investors, who may accept such rejected
portion pro rata or in such other proportions as the Investors
shall agree among themselves. Should Alteon become aware that any
Investor wishes to decline its pro rata portion of such Offer in
whole or in part, Alteon shall immediately notify the other
Investors. If the Investors reject the Offer or fail to respond
within such ten (10) business day period, then Alteon shall be
permitted to complete such Financing Transaction without the
Investors on terms and conditions substantially the same as those
contained in the Offer. If any Financing Transaction is
contemplated on terms and conditions not substantially
the same as those contained in the Offer or with proposed
definitive documentation not substantially the same as that
proposed by Alteon with respect the Offer, then such Financing
Transaction shall be deemed a new Financing Transaction and the
Investors shall again be entitled to receive an Offer
for such Financing Transaction on such new terms and conditions
(and/or with such new definitive documentation if applicable). If
the Investors accept the Offer but fail to close the Financing
Transaction within twenty (20) business days of acceptance of the
Offer for any reason other than (i) any breach by Alteon of its
obligations hereunder or thereunder, (ii) any delay by Alteon or
reasonable delay in connection with execution of definitive
documentation, (iii) failure of the parties to reasonably agree on
definitive documentation or (iv) reasonable dissatisfaction by the
Investors with their due diligence examination, the Offer to the
Investors shall terminate and the Investors shall not be entitled
to receive any Offer in any future Financing Transaction, this
being in addition to any other rights or remedies Alteon may have
against the Investors for their failure to close such Financing
Transaction. As among the Investors, each Investor shall have the
right to participate in the Offer in whole or in part, up to the
full extent of the Offer, provided that if such Offer is
oversubscribed by the Investors, each Investor shall only be
entitled to participate in the Offer up to its pro rata share.
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This Section 3.10 shall not apply to a financing
transaction consisting of a private placement of Alteon's
securities in connection with a strategic alliance. For this
purpose, a strategic alliance shall mean a transaction in which the
acquiror of Alteon's securities has a business relationship
material to Alteon with Alteon independent of such acquiror's
acquisition of Alteon's securities.
Section 3.11 Reservation of Stock Issuable Upon
Conversion and Upon Exercise of the Warrants. Alteon shall at all
times reserve and keep available out of its authorized but
unissued Common Shares, solely for the purpose of effecting the
conversion of the Preferred Shares and the exercise of the
Warrants, such number of its Common Shares as shall from time to
time be sufficient to effect the conversion of all outstanding
Preferred Shares and the exercise of the Warrants, and if at any
time the number of authorized but unissued Common Shares shall not
be sufficient to effect the conversion of all the then outstanding
Preferred Shares and the exercise of the Warrants, Alteon will take
such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued Common Shares to
such number of shares as shall be sufficient for such purpose,
including without limitation engaging in best efforts to obtain the
requisite shareholder approval. Without in any way limiting the
foregoing, Alteon agrees to reserve and at all times keep available
solely for purposes of conversion of Preferred Shares and the
exercise of the Warrants 3,191,965 authorized but unissued Common
Shares, which number may be reduced by the number of Common Shares
actually delivered pursuant to conversion of Preferred Shares under
the Designation or exercise of the Warrants and shall be
appropriately adjusted for any stock split, reverse split, stock
dividend or reclassification of the Common Stock. If at any time
the number of authorized but unissued Common Shares is not
sufficient to effect the conversion of all the then outstanding
Preferred Shares or the exercise of the Warrants, the Investors
shall be entitled to the redemption rights provided in the
Registration Rights Agreement.
Section 3.12 Limitations on Offerings. Alteon shall
not offer or sell any equity securities, or any securities
convertible into or exchangeable or exercisable for equity
securities (other than a private placement of Common Stock to an
affiliate of The Palladin Group, L.P. or registered public offering
of common stock (other than a continuous offering pursuant to Rule
415) and other than shares or options issued or which may be issued
pursuant to Alteon's employee, director or consultant stock option
plans or shares issued upon exercise of options, warrants or rights
outstanding on the Closing Date listed in the SEC Documents),
during the three (3) month period commencing with the Closing Date.
Section 3.13 Stockholders Rights Agreement. Alteon
represents that neither the ownership of the Preferred Shares or
the Warrants, nor the acquisition of shares of common stock of
Alteon pursuant to the conversion of Preferred Shares or the
exercise of the Warrants in accordance with the terms thereof will
cause the occurrence of a Distribution Date (as defined in Section
3(b) of the Rights Agreement), or a substantially similar
occurrence under any successor or similar plan; provided, however,
that this Section 3.13 ceases to be applicable during any period
during which the total number of "common shares" (as defined in the
Rights Agreement) of which an Investor or Permitted Transferee (as
defined in the Rights Agreement) would be deemed to be the
Beneficial Owner (exclusive of the Exempt Shares (as defined in the
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Rights Agreement) and "common shares" held by an Affiliate or an
Associate (both as defined in the Rights Agreement) of such
Investor or Permitted Transferee which "common shares" are not
Group Held Shares (as hereinafter defined)), together with all
"common shares" (exclusive of the Exempt Shares) owned by such
Investor or Permitted Transferee, as the case may be, or any person
that is filing a Schedule 13D with such Investor or Permitted
Transferee, as the case may be, as a "group" with regard to
Alteon ("Group Held Shares"), exceeds 4.9% of Alteon's issued and
outstanding Common Shares; and provided, further, that any increase
in the percentage of Common Shares owned by an Investor or a
Permitted Transferee solely as a result of a reduction in Alteon's
outstanding Common Shares shall be disregarded for purposes of
determining such 4.9% ownership. The representation contained in
this Section 3.13 is assignable in connection with the sale,
transfer or assignment of Preferred Shares, Warrants or Common
Shares issued on the conversion or exercise thereof, in whole or
in part, to an Investor or to Permitted Transferees.
ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of
Alteon to Sell the Preferred Shares. The obligation hereunder of
Alteon to issue and/or sell the Preferred Shares and Warrants
to the Investors is subject to the satisfaction, at or before the
Closing, of each of the conditions set forth below. These
conditions are for Alteon's sole benefit and may be waived by
Alteon at any time in its sole discretion.
(a) Accuracy of the Investors' Representations and
Warranties. The representations and warranties of each Investor
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a
particular date).
(b) Performance by the Investors. Each Investor shall
have performed all agreements and satisfied all conditions required
to be performed or satisfied by such Investor at or prior to the
Closing.
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement or the Designation
or the Warrants.
Section 4.2 Conditions Precedent to the Obligation of
the Investors to Purchase the Preferred Shares. The obligation
hereunder of each Investor to acquire and pay for the Preferred
Shares and acquire the Warrants is subject to the satisfaction, at
or before the Closing, of each of the conditions set forth below.
These conditions are for the Investors' sole benefit and may be
waived by the Investors at any time in their sole discretion.
(a) Accuracy of Alteon's Representations and Warranties.
The representations and warranties of Alteon shall be true and
correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for
representations and warranties that speak as of a particular date).
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(b) Performance by Alteon. Alteon shall have performed
all agreements and satisfied all conditions required to be
performed or satisfied by Alteon at or prior to the Closing.
(c) NASDAQ. From the date hereof to the Closing Date,
trading in Alteon's Common Shares shall not have been suspended by
the SEC or the NASDAQ, and trading in securities generally as
reported by NASDAQ shall not have been suspended or limited, and
the Common Shares shall not have been delisted from any exchange
or market where they are currently listed, and the market value of
the outstanding Common Shares shall not have decreased below
$3.50 per share.
(d) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement or the Designation
or the Warrants.
(e) Opinion of Counsel. At the Closing the Investors
shall have received an opinion of counsel to Alteon in the form
attached hereto as Exhibit 4.2(e) and such other opinions,
certificates and documents as the Investors or their counsel shall
reasonably require incident to the Closing.
(f) Registration Rights Agreement. Alteon and the
Investors shall have executed and delivered the Registration Rights
Agreement in the form and substance of Exhibit 4.2(f) attached
hereto.
(g) Full Subscription. All Preferred Shares shall have
been purchased in the aggregate by the Investors pursuant to this
Agreement.
(h) Adverse Changes. Since December 31, 1996, no event
which had or is likely to have a Material Adverse Effect on Alteon
or any of its direct or indirect subsidiaries shall have occurred.
(i) Officer's Certificate. Alteon shall have delivered
to the Investors a certificate in form and substance reasonably
satisfactory to the Investors, executed by an officer of Alteon,
certifying as to satisfaction of closing conditions, incumbency of
signing officers, charter, by-laws, good standing and authorizing
resolutions of Alteon.
(j) Designation Filed. The Investors shall have
received copies of the filed Designation.
(k) Warrants. The Investors shall have received
Warrants executed by Alteon in the form and substance of Exhibit
1 hereto.
ARTICLE V
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Legend and Stock
Each certificate representing the Preferred Shares and
the Warrants shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR UPON DELIVERY
TO THIS CORPORATION OF AN OPINION OF LEGAL
COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION THAT AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
Alteon agrees to reissue certificates representing the
Preferred Shares and the Warrants without the legend set forth
above at such time as (i) the holder thereof is permitted to
dispose of such Preferred Shares and/or warrants pursuant to Rule
144(k) under the Act, (ii) such Preferred Shares and/or Warrants
are sold to a purchaser or purchasers who (in the opinion of
counsel to the seller or such purchaser(s), in form and substance
reasonably satisfactory to Alteon and its counsel) are able to
dispose of such shares publicly without registration under the Act,
or (iii) such Preferred Shares and/or Warrants are registered under
the Act.
Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, any Common
Shares issued pursuant to conversion of Preferred Shares or
exercise of the Warrants shall bear a legend in the same form as
the legend indicated above. Upon such Registration Statement
becoming effective, Alteon agrees to promptly, but no later than
three (3) business days thereafter, issue new certificates
representing such Common Shares without such legend. Any Common
Shares issued pursuant to conversion of Preferred Shares or
exercise of the Warrants after the Registration Statement has
become effective shall be free and clear of any legends, transfer
restrictions and stop orders.
ARTICLE VI
Termination
Section 6.1 Termination by Mutual Consent. This
Agreement may be terminated at any time prior to the Closing by the
mutual written consent of Alteon and the Investors.
Section 6.2 Other Termination. This Agreement may be
terminated by action of the Board of Directors of Alteon or by any
of the Investors at any time if the Closing shall not have been
consummated by the fifth business day following the date of this
Agreement.
ARTICLE VII
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Miscellaneous
Section 7.1 Stamp Taxes; Agent Fees. Alteon shall pay
all stamp and other taxes and duties levied in connection with the
issuance of the Preferred Shares pursuant hereto and the Common
Shares issued upon conversion thereof or upon exercise of the
Warrants.
Section 7.2 Specific Enforcement; Consent to
Jurisdiction.
(a) Alteon and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.
(b) Alteon and each of the Investors (i) hereby
irrevocably submits to the exclusive jurisdiction of the United
States District Court, the New York State courts and other courts
of the United States sitting in New York County, New York for the
purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not
to assert in any such suit action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum
or that the venue of the suit, action or proceeding is improper.
Alteon and each of the Investors consents to process being served
in any such suit, action or proceeding by mailing a copy thereof
to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this
paragraph shall affect or limit any right to serve process in any
other manner permitted by law.
Section 7.3 Entire Agreement; Amendment. This
Agreement, together with the Registration Rights Agreement, the
Warrants and the agreements and documents executed in connection
herewith and therewith, contains the entire understanding of the
parties with respect to the matters covered hereby and thereby and,
except as specifically set forth herein or therein, neither Alteon
nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 7.4 Notices. Any notice or other
communication required or permitted to be given hereunder shall be
in writing and shall be effective upon actual receipt of such
notice. The addresses for such communications shall be:
to Alteon: Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
Fax: (201) 934-8880
Attn: James J. Mauzey
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with copies to: Smith, Stratton, Wise,
Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Fax: (609) 987-6651
Attn: Marsha E. Novick, Esq.
to the Investors: To each Investor at
the address and/or fax
number set forth on
Schedule I of this
Agreement.
with copies to: Kleinberg, Kaplan,
Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Fax: (212) 986-8866
Att: Stephen M. Schultz, Esq.
Any party hereto may from time to time change its address for
notices by giving at least 10 days' written notice of such changed
address to the other parties hereto.
Section 7.5 Indemnity. Each party shall indemnify each
other party against any loss, cost or damages (including reasonable
attorney's fees but excluding consequential damages) incurred as
a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.
Section 7.6 Waivers. No waiver by any party of any
default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
Section 7.7 Headings. The headings herein are for
convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions
hereof.
Section 7.8 Successors and Assigns. Except as
otherwise provided herein, this Agreement shall be binding upon and
inure to the benefit of the parties and their successors and
permitted assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. Alteon may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of all Investors (which consent
may be withheld for any reason in their sole discretion), except
that Alteon may assign this Agreement in connection with the sale
of all or substantially all of its assets provided that Alteon is
not released from any of its obligations hereunder, such assignee
assumes all obligations of Alteon hereunder, and appropriate
adjustment of the provisions contained in this Agreement, the
Registration Rights Agreement, the Designation and the Warrants is
made, in form and substance satisfactory to the Investors, to place
the Investors in the same position as they would have been but for
such assignment, in accordance with the terms of the Designation
and the Warrants. Any Investor may assign this Agreement (in whole
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or in part) or any rights or obligations hereunder without the
consent of Alteon in connection with any sale or transfer all or
any portion of the Preferred Shares or Warrants held by such
Investor, provided that no Investor may assign this Agreement prior
to the Closing Date without Alteon's prior written consent except
to an affiliate or affiliates of such Investor.
Section 7.9 No Third Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any
other person.
Section 7.10 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
internal laws of the State of New York without regard to such
state's principles of conflict of laws.
Section 7.11 Survival. The representations and warranties
and the agreements and covenants of Alteon and each Investor
contained herein shall survive the Closing.
Section 7.12 Execution. This Agreement may be executed
in two or more counterparts, all of which shall be considered one
and the same agreement, it being understood that all parties need
not sign the same counterpart.
Section 7.13 Publicity. Alteon agrees that it will not
disclose, and will not include in any public announcement, the name
of any Investor without its consent, unless and until such
disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. Alteon agrees that it will
deliver a copy of any public announcement regarding the matters
covered by this Agreement or any agreement and document executed
herewith to each Investor and any public announcement including the
name of an Investor to such Investor, prior to publication of such
announcements.
Section 7.14 Severability. The parties acknowledge and
agree that the Investors are not agents, affiliates or partners of
each other, that all representations, warranties, covenants and
agreements of the Investors hereunder are several and not joint,
that no Investor shall have any responsibility or liability for the
representations, warrants, agreements, acts or omissions of any
other Investor, and that any rights granted to "Investors"
hereunder shall be enforceable by each Investor hereunder.
Section 7.15 Like Treatment of Holders. Neither Alteon
nor any of its affiliates shall, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest,
fee, payment for the redemptions or exchange of Preferred Shares,
or otherwise, to any holder of Preferred Shares, for or as an
inducement to, or in connection with the solicitation of, any
consent, waiver or amendment of any terms or provisions of the
Preferred Shares or this Agreement or the Registration Rights
Agreement or the Warrants, unless such consideration is required
to be paid to all holders of Preferred Shares bound by such
consent, waiver or amendment whether or not such holders so
consent, waive or agree to amend and whether or not such holders
tender their Preferred Shares for redemption or exchange. Alteon
shall not, directly or indirectly, redeem any Preferred Shares
unless such offer of redemption is made pro rata to all holders of
Preferred Shares on identical terms.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
ALTEON:
ALTEON INC.
By: /s/Kenneth I. Moch
______________________
Name: Kenneth I. Moch
Title: CFO
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-fact
By: PALLADIN CAPITAL MANAGEMENT,
L.L.C., General Partner
By: /s/Robert L. Chender
_______________________
Name: Robert L. Chender
Title: Vice President
GALILEO CAPITAL, L.L.C.
By:/s/Robert L. Chender
___________________________
Robert L. Chender
Authorized Person
RGC INTERNATIONAL INVESTORS, LDC
By: ROSE GLEN CAPITAL MANAGEMENT, L.P.,
Investment Manager
By: RGC GENERAL PARTNER CORP.,
General Partner
By:/s/Wayne Bloch
_______________________
Name: Wayne Bloch
Title: Managing Director
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HERACLES FUND
By: PROMETHEAN INVESTMENT GROUP, L.L.C.,
Its Investment Advisor
By:/s/James F. O'Brien, Jr.
________________________
Name: James F. O'Brien, Jr.
Title: President
LEWIS FRASER
By: PROMETHEAN INVESTMENT GROUP, L.L.C.,
Its Investment Advisor
By:/s/James F. O'Brien, Jr.
________________________
Name: James F. O'Brien, Jr.
Title: President
JOSEPH A. UMBACH
By: PROMETHEAN INVESTMENT GROUP, L.L.C.,
Its Investment Advisor
By:/s/James F. O'Brien, Jr.
________________________
Name: James F. O'Brien, Jr.
Title: President
EXHIBITS AND SCHEDULES
Schedule I List of Investors
Exhibit 1 Form of Transaction Warrant
Exhibit 2 Form of Delisting Warrant
Schedule 2.1(a) List of Subsidiaries
Exhibit 2.1(c)-1 Certificate of Incorporation of Alteon
Exhibit 2.1(c)-2 Certificate of Designations of Alteon
Exhibit 4.2(e) Opinion of Counsel
Exhibit 4.2(f) Registration Rights Agreement
<PAGE>
SCHEDULE
Name of Purchaser Purchase Price No. of Shares
HALIFAX FUND, L.P. $3,000,000 3,000
c/o The Palladin Group, L.P.
Investment Manager
40 West 57th Street
New York, New York 10019
Attn: Andrew M. Kaplan
Tel: (212) 698-0500
Fax: (212) 698-0599
GALILEO CAPITAL, L.L.C. $300,000 300
c/o The Palladin Group, L.P.
Investment Manager
40 West 57th Street
New York, New York 10019
Attn: Andrew M. Kaplan
Tel: (212) 698-0500
Fax: (212) 698-0599
RGC INTERNATIONAL INVESTORS, LDC $700,000 700
c/o Rose Glen Capital Management, L.P.,
Investment Manager
440 East Swedesford Road, Suite 2025
Wayne, Pennsylvania 19087
Attn: Wayne Bloch
Tel: (610) 902-0200
Fax: (610) 971-2212
HERACLES FUND $300,000 300
c/o Promethean Investment Group, L.L.C.
Investment Advisor
40 West 57th Street
Suite 1520
New York, New York 10019
Attn: Jamie O'Brien
Tel: (212) 698-0588
Fax: (212) 698-0505
LEWIS FRASER $250,000 250
c/o Promethean Investment Group, L.L.C.
Investment Advisor
40 West 57th Street
Suite 1520
New York, New York 10019
Attn: Jamie O'Brien
Tel: (212) 698-0588
Fax: (212) 698-0505
JOSEPH A. UMBACH $450,000 450
c/o Promethean Investment Group, L.L.C.
Investment Advisor
40 West 57th Street
Suite 1520
New York, New York 10019
Attn: Jamie O'Brien
Tel: (212) 698-0588
Fax: (212) 698-0505
__________ ______
TOTALS $5,000,000 $5,000
<PAGE>
SCHEDULE 2.1(a)
List of Subsidiaries
None.
