<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File No. 0-19529
ALTEON INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3304550
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
170 Williams Drive, Ramsey, New Jersey 07446
(Address of principal executive offices) (zip code)
(201) 934-5000
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
<PAGE> 2
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant: $101,690,814 at March 25, 1998 based on the
last sales price on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 25, 1998:
Class Number of Shares
Common Stock, $.01 par value 17,974,125
Documents incorporated by reference: None
<PAGE> 3
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
INFORMATION REGARDING DIRECTORS
The current Board of Directors is comprised of the following persons:
<TABLE>
<CAPTION>
SERVED AS A
NAME AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY
- ---- --- -------------- --------------------------
<S> <C> <C> <C>
James J. Mauzey 49 1994 Chairman of the Board and
Chief Executive Officer
Jere E. Goyan 67 1993 President, Chief Operating
Officer and Director
Marilyn G. Breslow 54 1988 Director
Robert N. Butler 71 1996 Director
Anthony Cerami 57 1993 Director
Alan J. Dalby 61 1994 Director
David McCurdy 48 1997 Director
Mark Novitch 66 1994 Director
</TABLE>
The principal occupations and business experience, for at least the
past five years, of each director are as follows:
James J. Mauzey, Chairman and Chief Executive Officer, joined the
Company in March 1994. From November 1992 until he joined the Company, Mr.
Mauzey was a Corporate Division President of Bristol-Myers Squibb Company. Mr.
Mauzey has over 20 years of experience in the pharmaceutical industry. He began
his career at American Cyanamid Company's Lederle Laboratories Division, where
he held numerous sales, marketing and executive positions during his 17 years
with the company, serving as both Vice President of the Lederle Laboratories
U.S. Pharmaceutical Division and Vice President of the Lederle International
Division. Mr. Mauzey joined The Squibb Corporation as President of its U.S.
Pharmaceutical Group in 1989. Following the merger of Bristol-Myers Company and
Squibb Corporation, Mr. Mauzey was named President of Bristol- Myers Squibb
Company's newly integrated U.S. Pharmaceutical Division, where he was
responsible for Squibb Pharmaceuticals, Bristol Laboratories and Mead Johnson
Pharmaceuticals.
Jere E. Goyan, Ph.D., has been the Company's President and Chief
Operating Officer since May 1993. He also served as the Company's Acting Chief
Executive Officer from June 1993 to February 1994 and as Senior Vice President,
Research and Development from January 1993 through May 1993. Dr. Goyan is
Professor Emeritus of Pharmacy and Pharmaceutical Chemistry and Dean Emeritus of
the School of Pharmacy, University of California, San Francisco ("UCSF"). He has
been on the faculty of the School of Pharmacy at UCSF since 1963. He took a
leave of absence from 1979 to 1981 to serve as Commissioner of Food and Drugs of
the U.S. Food and Drug Administration. Dr. Goyan is Past President of the
American Association of Pharmaceutical Scientists and the American Association
of Colleges of Pharmacy. He is a member of the Institute of Medicine of the
National Academy of Sciences and a Fellow of the American Association for the
Advancement of Science. Dr. Goyan is a director of ATRIX Laboratories, Inc.,
Emisphere Technologies, Inc., and SciClone Pharmaceuticals, Inc., each a
biopharmaceutical firm, and Boehringer Ingelheim Corporation, a pharmaceutical
company. He received his Ph.D. in pharmaceutical chemistry from the University
of California,
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<PAGE> 4
Berkeley.
Alan J. Dalby was elected as a director of the Company in December
1994. Mr. Dalby is Chairman of Reckitt & Colman, plc, a household products
company. Mr. Dalby is the former Chairman and Chief Executive Officer and a
founder of Cambridge NeuroScience, Inc., an emerging pharmaceutical company
focused on neurobiology. Prior to joining Cambridge NeuroScience, Inc., he was
Executive Vice President and a member of the Board of Directors of SmithKline
Beckman Corporation, retiring in 1987. Mr. Dalby is a director of Medeva plc.
Marilyn G. Breslow has been a director of the Company since June 1988.
She has been a Portfolio Manager/Analyst for W.P. Stewart & Co., Inc., an
investment advisory firm in New York City, since 1990, and is a Principal and
Director of that firm. She was a General Partner of Concord Partners and a Vice
President of Dillon, Read & Co. Inc. from 1984 to 1990.
Robert N. Butler, M.D. was elected as a director of the Company in June
1996. He is the Chief Executive Officer of the International Longevity Center
(ILC-USA), which he co-founded in 1990, and Professor of Geriatrics at the Henry
L. Schwartz Department of Geriatrics and Adult Development at the Mount Sinai
Medical Center. From 1975 to 1982, he was the first and founding director of the
National Institute of Aging of the National Institutes of Health. In 1976, Dr.
Butler won the Pulitzer Prize for his book "Why Survive? Being Old in America."
He held the Brookdale Professorship of Geriatrics from 1982 to 1995 at the Mount
Sinai Medical Center where he founded the department. Dr. Butler serves on the
board of Neurogen Corporation, a development-stage biotechnology company working
on anxiolytics, and serves on the Scientific Advisory Boards of Geron
Corporation, a development-stage biotechnology company working on aging, with
emphasis on the effect of telomeres, and Genesis Health Ventures, a leading
eldercare company. He also serves as an independent trustee of the AARP-Scudder
Fund.
Anthony Cerami, Ph.D., is a founder of the Company and has been
Chairman of the Scientific Advisory Board of the Company since December 1987 and
a member of the Company's Board of Directors since October 1993. In October
1996, he joined Cerami Consulting Corp., a biotechnology consulting corporation.
Dr. Cerami was the President of The Picower Institute for Medical Research,
which he helped establish in October 1991, prior to his retirement from such
entity in September 1996. Prior to joining The Picower Institute for Medical
Research, he was Dean of Graduate and Postgraduate Studies at The Rockefeller
University since 1986, a Professor at The Rockefeller University since 1978 and
the Head of the Laboratory of Medical Biochemistry at The Rockefeller University
since 1972. Dr. Cerami has been elected to membership in the National Academy of
Sciences and the Institute of Medicine. He received his Ph.D. from The
Rockefeller University.
David McCurdy, who became a director of the Company in June 1997, is
currently the Chairman and Managing Partner of the McCurdy Group LLC, a business
consulting and investment firm focused on high-growth companies in the fields of
healthcare, high technology and international business. Prior to forming the
McCurdy Group, he served for 14 years in the U.S. House of Representatives from
the fourth district of Oklahoma. In addition to serving as a consultant to over
a dozen healthcare and high technology companies, Mr. McCurdy is a partner in
the Switzer Group, an organization that invests in, owns and operates medical
and healthcare facilities in the U.S. and Asia.
Mark Novitch, M.D., was elected as a director of the Company in June
1994. Dr. Novitch is an Adjunct Professor of Health Care Sciences at The George
Washington University. He retired as Vice Chairman and Chief Compliance Officer
of the Upjohn Company in December 1993. Prior to joining Upjohn in 1985, he was
Deputy Commissioner of the U.S. Food and Drug Administration. Dr. Novitch is a
director of Guidant Corporation, a supplier of cardiology and minimally invasive
surgery products; Neurogen Corporation, a biopharmaceutical firm focused on
central nervous system disorders; Calypte Biomedical, a developer of urine-
based diagnostics; and Kos Pharmaceuticals, Inc., a developer of pharmaceutical
products for cardiovascular and respiratory conditions.
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<PAGE> 5
INFORMATION REGARDING OFFICERS
The following table identifies the current executive officers of the
Company:
<TABLE>
<CAPTION>
NAME AGE CAPACITIES IN WHICH SERVED IN CURRENT POSITIONS SINCE
---- --- -------------------------- --------------------------
<S> <C> <C> <C>
James J. Mauzey 49 Chairman of the Board and March 1994
Chief Executive Officer
Jere E. Goyan 67 President, Chief Operating May 1993
Officer and Director
Kenneth I. Moch 43 Senior Vice President, Finance February 1995
and Business Development
and Chief Financial Officer
Kenneth Cartwright 62 Senior Vice President, January 1994
Development and Regulatory
Affairs
Elizabeth A. O'Dell 38 Vice President, Finance and October 1993
Administration, Secretary and
Treasurer
</TABLE>
The principal occupations and business experience of each officer which
is not serving as a director of the Company are as follows:
Kenneth I. Moch, Senior Vice President, Finance and Business
Development and Chief Financial Officer, joined Alteon in February 1995. From
1990 to 1995 he was President and Chief Executive Officer of Biocyte
Corporation, a cord blood stem cell-based cellular therapy company. He was a
co-founder and Managing General Partner of Catalyst Ventures, a seed-stage
venture capital partnership, from 1988 through 1989. He was a founder and served
as Vice President of The Liposome Company, Inc. from 1982 to 1988, where he was
involved in all aspects of that company's growth from a start-up research
laboratory into a publicly-held biopharmaceutical firm. From 1980 until 1982,
Mr. Moch was a management consultant with McKinsey & Company, Inc.
Kenneth Cartwright, MB, ChB, MFCM, MRCPsych., has been Senior Vice
President, Development and Regulatory Affairs since January 1994. He joined
Alteon in May 1989 as Vice President, Clinical and Regulatory Affairs. Prior to
joining Alteon, Dr. Cartwright was Vice President, Clinical Research of American
Cyanamid Company, Lederle Laboratories from 1984 to 1989, where he was
responsible for worldwide development and implementation of strategical clinical
plans. From 1982 to 1984, he also served as Director of Clinical Research U.S.A.
From 1980 to 1982, Dr. Cartwright was Deputy Vice President and Marketing
Director, Pharmaceutical Division, Ciba-Geigy, Canada, Ltd., responsible for
product launch. From 1974 to 1980, he served as Medical Director where he was
responsible for clinical development and regulatory affairs. Dr. Cartwright
received his MB, ChB, from Liverpool University Medical School. He received his
Membership of the Faculty of Community Medicine (MFCM) and his Membership of the
Royal College of Psychiatrists (MRCPsych.) from Royal College of Physicians,
London.
Elizabeth A. O'Dell has been Vice President, Finance and
Administration, Secretary and Treasurer since October 1993. She served as the
Company's Director of Finance from February 1993 to September 1993 and as the
Controller of the Company from February 1992 to February 1993. From November
1991 to January 1992 she was the Controller of Radiodetection Corp. She was the
Director of Internal Operations of Kratos
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<PAGE> 6
Analytical, Inc. from May 1990 to November 1991 and Controller from March 1987
to April 1990. Prior to that she served for five years in public accounting in
various positions at Coopers & Lybrand and Deloitte & Touche.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission ("SEC") and NASDAQ. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1997 except Dr. Cerami's Form 4 for
December 1996 for four transactions was filed on April 21, 1997 and Ms. O'Dell's
Form 4 for January 1997 for one transaction was filed on February 12, 1997.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTORS' COMPENSATION
Directors of the Company not compensated as employees receive $1,500
per meeting for their service to the Board. Furthermore, directors of the
Company not compensated as employees receive, upon election to the Board, a
stock option for 33,600 shares of Common Stock (subject to adjustment if they
received stock options upon appointment to the Board between Annual Meetings of
Stockholders to fill a vacancy or newly-created directorship) at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
The stock options vest in three equal annual installments over the director's
term of service. All of the directors are reimbursed for their expenses for each
Board and committee meeting attended.
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<PAGE> 7
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for the fiscal years ended December 31, 1997,
1996, and 1995 of the Company's chief executive officer and the other four most
highly compensated executive officers of the Company who were serving as
executive officers at December 31, 1997 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION STOCK
OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (NUMBER OF SHARES) COMPENSATION
- --------------------------- ---- ------ ----- ------------------ ------------
<S> <C> <C> <C> <C> <C>
James J. Mauzey.......................... 1997 $300,000 $ 50,000 50,000 ---
Chairman of the Board and 1996 300,000 150,000 (1) 150,000 ---
Chief Executive Officer 1995 300,000 110,000 (2) 20,000 $45,823 (3)
Jere E. Goyan ........................... 1997 $262,500 $ 16,666 33,333 $54,000 (5)
President and 1996 262,500 50,000 (4) 33,004 54,000 (5)
Chief Operating Officer 1995 262,500 35,000 15,000 54,000 (5)
Kenneth Cartwright ...................... 1997 $200,280 $ 7,500 101,000 ---
Senior Vice President, 1996 194,922 --- 16,000 ---
Development and Regulatory 1995 191,100 --- --- ---
Affairs
Kenneth I. Moch ......................... 1997 $185,592 $ 12,500 (6) 25,000 ---
Senior Vice President, 1996 178,460 30,000 (7) 10,000 ---
Finance and Business Development 1995 141,964 55,000 (8) 170,000 ---
and Chief Financial Officer
Elizabeth A. O'Dell ..................... 1997 $120,841 $ 5,000 (9) 110,000 ---
Vice President, Finance and 1996 109,307 --- 9,000 ---
Administration, Secretary and 1995 112,815 --- 7,500 ---
Treasurer
</TABLE>
(1) Represents a deferred performance bonus for the year ending December
31, 1996
(2) Represents a deferred performance bonus for the year ending December
31, 1995.
(3) Represents reimbursement for certain moving expenses and relocation
expenses.
(4) Represents a deferred performance bonus for the year ending December
31, 1996.
(5) Represents a housing allowance.
(6) Represents a deferred performance bonus for the year ending December
31, 1997.
(7) Represents a deferred performance bonus for the year ending December
31, 1996.
(8) Includes a signing bonus of $25,000 and a deferred performance bonus of
$30,000 for the year ending December 31, 1995.
(9) Represents a deferred performance bonus for the year ending December
31, 1997.
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<PAGE> 8
The following table sets forth certain information concerning grants of
stock options during the fiscal year ended December 31, 1997, to the Named
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENTAGE ANNUAL RATES OF
OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------
NAME GRANTED FISCAL 1997 PER SHARE DATE 5% 10%
---- ------- ------------ ----------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
James J. Mauzey (2).......... 50,000 7.9% $6.563 12/03/07 $206,356 $522,947
Jere E. Goyan (3)............ 33,333 5.3% $6.563 12/03/07 137,569 348,628
Kenneth Cartwright (4)....... 36,000 5.7% $5.625 03/27/07 2,741 124,312
65,000 10.2% 6.563 12/03/07 268,263 679,831
Kenneth I. Moch (5) ......... 25,000 3.9% $6.563 12/03/07 103,178 261,473
Elizabeth A. O'Dell (6)...... 50,000 7.9% $5.625 01/31/07 176,877 448,240
50,000 7.9% 5.625 10/21/07 248,141 561,716
10,000 1.6% 6.563 12/03/07 41,271 104,589
</TABLE>
(1) The dollar amounts under these columns are the result of calculations
assuming that the price of Common Stock on the date of the grant of the
option increases at the hypothetical 5% and 10% rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Company's stock
price over the option term of ten years.
(2) Option became exercisable as to 25,000 shares on December 4, 1997 and
will become exercisable as to 25,000 shares on December 4, 1999.
(3) Option became exercisable as to 16,666 shares on December 4, 1997 and
will become exercisable as to 16,667 shares on December 4, 1999.
(4) Option for 36,000 shares became exercisable as to 1,000 shares each
month commencing April 27, 1997. The options for 65,000 shares became
exercisable as to 7,500 shares on December 4, 1997 and will become
exercisable as to 7,500 shares on December 4, 1999 and as to 50,000
shares on an accepted filing of a New Drug Application for pimagedine,
or on December 3, 2007, whichever occurs earlier.
(5) Option became exercisable as to 12,500 shares on December 4, 1997 and
will become exercisable as to 12,500 shares on December 4, 1999.
(6) First option for 50,000 shares became exercisable as to 28,000 shares
on January 31, 1997 and as to 2,000 shares each month commencing
February 28, 1997. Second option for 50,000 shares became exercisable
as to 1,388 shares each month commencing October 21, 1997. Option for
10,000 shares became exercisable as to 5,000 shares on December 4, 1997
and will become exercisable as to 5,000 shares on December 4, 1999.
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<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
exercises of options to purchase Common Stock during the fiscal year 1997 by the
Named Officers and unexercised options to purchase Common Stock held by the
Named Officers at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS HELD AT VALUE OF UNEXERCISED
SHARES VALUE DECEMBER 31, 1997 IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED ----------------- AT DECEMBER 31, 1997 (1)
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James J. Mauzey................... --- --- 425,000 310,000 $ 45,958 $ 309,463
Jere E. Goyan..................... --- --- 289,970 199,967 262,649 12,508
Kenneth Cartwright................ --- --- 203,601 92,000 1,116,447 103,265
Kenneth I. Moch................... --- --- 146,500 58,500 96,786 44,556
Elizabeth A. O'Dell............... --- --- 105,278 59,722 109,580 90,731
</TABLE>
(1) Based on the closing price on the Nasdaq National Market on December
31, 1997 ($7.313)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons who served as members of the Compensation Committee of the
Board of Directors during 1997 were Marilyn G. Breslow, Louis Fernandez, Ph.D.
(until his retirement on June 10, 1997), Mark Novitch, M.D., Robert N. Butler,
M.D., and David McCurdy. None of the members of the Compensation Committee was
an officer, former officer or employee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General Policies
The Compensation Committee (the "Committee") of the Board of Directors
is responsible for establishing and monitoring the general compensation policies
and compensation plans of the Company, as well as the specific compensation
levels for executive officers. It also makes recommendations to the Board of
Directors concerning the granting of options under the Company's Amended and
Restated 1987 Stock Option Plan and Amended 1995 Stock Option Plan. The
Committee currently consists of Mark Novitch, M.D., Marilyn G. Breslow, Robert
N. Butler, M.D. and David McCurdy, four non-employee directors of the Company.
Under the supervision of the Committee, the Company has developed and
implemented compensation policies, plans and programs which (1) provide a total
compensation package which is intended to be competitive within the industry so
as to enable the Company to attract and retain high-caliber executive personnel,
and (2) seek to align the financial interests of the Company's employees with
those of its stockholders by relying heavily on long-term incentive compensation
which is tied to performance.
The primary components of executive compensation include base salary
and long-term equity incentives in the form of stock options. As the Company has
not yet generated any revenue from the sale of pharmaceutical products, the
Company relies on long-term incentive compensation (i.e., stock options) to
motivate the executive officers and other employees. This allows the Company to
retain cash for research projects. In determining the size of such stock option
grants to individual executives, the Committee considers
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<PAGE> 10
a number of factors, including the following: the level of an executive's job
responsibilities; the executive's past performance; the size and frequency of
grants by comparable companies; the executive's salary level; performance of the
Company as measured by the accomplishment of key business development and
clinical milestones; the size of any prior grants; and the achievement of
designated milestones by the executive. The Committee assigns no specific weight
to any of the foregoing, other than achievement of designated milestones by the
executive in cases where the executive's employment agreement provides for a
grant of a specific size upon achievement of the milestone, when making
determinations as to the size of stock option grants.
Executive officers are also eligible to earn an annual cash incentive
award, the amount of which is based upon (1) the position level of the executive
officer, and (2) the attainment of specific individual non-financial performance
objectives. The Committee sets the performance objectives at the beginning of
the fiscal year.
The Chief Executive Officer and the Chief Operating Officer are
responsible for the development of the annual salary plan for executive officers
other than themselves. The plan is based on industry and peer group comparisons
and national surveys and on performance judgments as to the past and expected
future contributions of the individuals. To maintain a competitive level of
compensation, the Company targets base salary at the mid to upper percentiles of
a comparative group composed of other biotechnology companies. Base salary may
exceed this level as a result of individual performance. The Committee reviews
the annual plan and makes recommendations to the Board of Directors, with any
modifications it deems appropriate. The Committee believes it has established
executive compensation levels which are competitive with companies in the
industry taking into account individual experience, performance of both the
Company and the individual, company size, location and stage of development.
Compensation of the Chief Executive Officer
Mr. Mauzey's compensation was determined on the basis of his expertise
and experience which include approximately 25 years of experience in the
pharmaceutical industry. Compensation awarded to Mr. Mauzey in 1997 included
base salary, a performance bonus based on the achievement of milestones
(including, inter alia, securing a corporate partnership for pimagedine,
maintaining the Company's cash burn rate from operations at budget, filing a new
investigational drug application with the U.S. Food and Drug Administration, and
completion of a Phase II trial for pimagedine) and stock options.
Effective January 1, 1994, the Internal Revenue Code does not permit
corporations to deduct payment of certain compensation in excess of $1,000,000
to the chief executive officer and the four other most highly-paid executive
officers. All compensation paid to the Company's executive officers for 1997
will be fully deductible and the Committee anticipates that amounts paid as cash
compensation will continue to be fully deductible because the amounts are
expected to be less than the $1,000,000 threshold. Under certain circumstances,
the executive officers may realize compensation upon the exercise of stock
options granted under the Company's stock option plans which would not be
deductible by the Company. The Company expects to take such action as is
necessary to qualify its stock option plans as "performance-based compensation,"
which is not subject to the limitation, if and when the Committee determines
that the effect of the limitation on deductibility warrants such action.
Mark Novitch, M.D.
Marilyn G. Breslow
Robert N. Butler, M.D.
David McCurdy
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<PAGE> 11
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareowner return on the Company's Common Stock to the
cumulative total return of the NASDAQ CRSP Total Return Index for the NASDAQ
Stock Market (U.S. Companies) (the "NASDAQ-US") and the NASDAQ Pharmaceutical
Stocks Index (the "NASDAQ-Pharm") for the period commencing December 31, 1992
and ended December 31, 1997.
ALTEON INC. RELATIVE STOCK PERFORMANCE
[INSERT GRAPH]
<TABLE>
<CAPTION>
31-Dec-92 31-Dec-93 31-Dec-94 31-Dec-95 31-Dec-96 31-Dec-97
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alteon Inc. ....... 100.00 54.84 36.29 104.03 33.87 47.18
NASDAQ US ......... 100.00 114.79 112.21 158.68 195.19 239.63
NASDAQ Pharm ...... 100.00 89.13 67.08 122.73 122.86 127.19
</TABLE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
James J. Mauzey entered into a three year employment agreement with the
Company on February 28, 1994 which was amended on January 30, 1997 to extend the
term of employment through January 30, 2000. Under the terms of the agreement,
Mr. Mauzey serves as Chief Executive Officer and is currently entitled to an
annual salary of $300,000, which is subject to annual review by the Board of
Directors. Mr. Mauzey is also eligible, at the discretion of the Compensation
Committee, to receive a bonus of up to $50,000 and stock options for each year
during the term of the agreement.
Jere E. Goyan entered into an employment agreement with the Company on
July 13, 1993, which was amended on February 24, 1998 to extend the term of
employment through July 13, 1999. Under the agreement, he is currently entitled
to a salary of $262,500, which is subject to annual review by the Board of
Directors. Dr. Goyan is also eligible, at the discretion of the Board of
Directors, to receive a bonus of up to $50,000 in the form of cash and/or stock
options for the year ending December 31, 1998.
Kenneth I. Moch entered into a three year employment agreement with the
Company on February 27, 1995, which was amended on September 15, 1997 to extend
the term of employment through February 27, 2001. Under the terms of the
agreement, Mr. Moch is entitled to an annual salary of $195,000 during the first
year of the extended term of employment, $205,000 during the second year, and
$215,000 during the third year. Mr. Moch is eligible, at the discretion of the
Board of Directors, to receive a yearly bonus of up to $15,000 and stock options
for up to 30,000 shares of Common Stock.
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<PAGE> 12
Kenneth Cartwright entered into an employment agreement with the
Company on March 27, 1995, which was amended on March 27, 1997 to extend the
term of employment through March 27, 2000. Under the agreement, he is currently
entitled to an annual salary of $194,922, which is subject to annual review by
the Board of Directors. Dr. Cartwright is also eligible, at the discretion of
the Board of Directors, to receive a bonus in the form of cash and/or stock
options for 1998 and 1999.
Elizabeth A. O'Dell entered into an employment agreement with the
Company as of October 21, 1995, which was amended on October 21, 1997 to extend
the term through October 21, 2000. Under the agreement she is currently entitled
to an annual salary of $120,852, which is subject to annual review by the Board
of Directors. Ms. O'Dell is also eligible, at the discretion of the Board of
Directors, to receive a bonus in the form of cash and/or stock options for 1998
and 1999.
In addition to provisions in the above-described agreements requiring
each individual to maintain the confidentiality of Company information and
assign inventions to the Company, such executive officers have agreed that
during the terms of their agreements and for one year thereafter, they will not
compete with the Company by engaging in any capacity in any business which is
competitive with the business of the Company. Each of the above employment
agreements provides that either party may terminate the agreement upon 30 days'
prior written notice, subject to certain salary continuation obligations of the
Company if it terminates the agreements without cause (as to Mr. Mauzey 12
months and as to Dr. Goyan, Mr. Moch, Dr. Cartwright, and Ms. O'Dell 6 months).
All employment agreements between the Company and its Vice Presidents
provide that all unvested stock options held by such Vice Presidents will vest
and become exercisable immediately in the event of a change in control of the
Company.
CHANGE IN CONTROL SEVERANCE BENEFITS PLAN
In February 1996, the Company adopted the Alteon Inc. Change in Control
Severance Benefits Plan (the "Severance Plan"). The Severance Plan was adopted
to protect and retain qualified employees and to encourage their full attention,
free from distractions caused by personal uncertainties and risks in the event
of a pending or threatened change in control of the Company. The Severance Plan
provides for severance benefits to employees upon certain terminations of
employment after or in connection with a change in control of the Company as
defined in the Severance Plan. Following a qualifying termination which occurs
as a result of a change in control, officers of the Company will be entitled to
continuation of (i) their base salary for a period of twenty-four months, and
(ii) all benefit programs and plans providing for health and insurance benefits
for a period of up to eighteen months. In addition, upon a change in control of
the Company all outstanding unexercisable stock options held by employees will
become exercisable.
401(K) PLAN
In 1990, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit ($10,000 in 1998)
and have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan does not require additional matching contributions to the Plan by the
Company on behalf of participants in the Plan. Contributions by employees to the
Plan and income earned on such contributions are not taxable to employees until
withdrawn from the 401(k) Plan. The Trustees under the 401(k) Plan, at the
direction of each participant, invest the assets of the 401(k) Plan in any of
eight investment options.
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<PAGE> 13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were, as of March 2, 1998, approximately 333 holders of record of
the Company's Common Stock. The following table sets forth certain information
regarding the beneficial ownership of the Company's Common Stock as of March 2,
1998, except as otherwise set forth below, (i) by each person who is known to
the Company to own beneficially more than 5% of the Common Stock, and (ii) by
each current director and Named Officer, and by all current directors and
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (1) CLASS (2)
- ---------------------------- ------------------------ ----------
<S> <C> <C>
(i) Certain Beneficial Owners:
Amerindo Investment Advisors Inc.
388 Market Street, Suite 950
San Francisco, CA 94111............................... 1,358,000 (3) 7.6%
(ii) Current Directors and Named Officers:
James J. Mauzey ......................................... 450,000 (4) 2.4%
Jere E. Goyan ........................................... 304,175 (5) 1.7%
Marilyn G. Breslow....................................... 56,004 (6) *
Robert N. Butler ........................................ 11,200 (7) *
Kenneth Cartwright ...................................... 237,601 (8) 1.3%
Anthony Cerami .......................................... 631,110 (9) 3.4%
Alan J. Dalby ..... ..................................... 37,954 (10) *
David McCurdy ........................................... 0 (11) *
Kenneth I. Moch ........................................ 152,750 (12) *
Mark Novitch ............................................ 38,600 (13) *
Elizabeth A. O'Dell .................................... 113,459 (14) *
All current directors and officers as a group (11
persons) 2,032,853 (15) 10.3%
- -------------------
</TABLE>
* Less than one percent.
(1) Except as discussed below, none of these shares are subject to rights
to acquire beneficial ownership, as specified in Rule 13d-3(d)(1) under
the Securities Exchange Act of 1934, as amended, and the beneficial
owner has sole voting and investment power, subject to community
property law, where applicable.
(2) Applicable percentage of ownership is based on 17,964,765 shares of
Common Stock outstanding.
(3) Reflects beneficial ownership as of February 28, 1998.
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<PAGE> 14
(4) Includes 450,000 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
285,000 shares of Common Stock granted to Mr. Mauzey.
(5) Includes 303,275 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
186,662 shares of Common Stock granted to Dr. Goyan.
(6) Includes 56,004 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
11,196 shares of Common Stock granted to Ms. Breslow.
(7) Includes 11,200 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
33,600 shares of Common Stock granted to Dr. Butler.
(8) Includes 207,601 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
88,000 shares of Common Stock granted to Dr. Cartwright.
(9) Includes 257,666 shares of Common Stock and 373,444 shares of Common
Stock issuable to Dr. Cerami upon the exercise of options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
40,716 shares of Common Stock granted to Dr. Cerami.
(10) Includes 37,954 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable with
60 days after March 2, 1998. Does not include options to purchase 2,177
shares of Common Stock granted to Mr. Dalby.
(11) Does not include options to purchase 33,600 shares of Common Stock
granted to Mr. McCurdy.
(12) Includes 152,750 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
52,250 shares of Common Stock granted to Mr. Moch.
(13) Includes 33,600 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
33,600 shares of Common Stock granted to Dr. Novitch.
(14) Includes 111,459 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998 and 2,000 shares of Common Stock held by
Ms. O'Dell's husband. Does not include options to purchase 53,541
shares of Common Stock granted to Ms. O'Dell.
(15) Includes 1,737,287 shares of Common Stock subject to options which were
exercisable as of March 2, 1998 or which will become exercisable within
60 days after March 2, 1998. Does not include options to purchase
820,342 shares of Common Stock granted to the officers and directors.
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<PAGE> 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CONSULTING AGREEMENTS
The Company has entered into consulting arrangements with key
consultants and members of its Scientific Advisory Board who advise the Company
about present and long-term scientific planning, research and development. In
September 1991, the Company entered into a four-year consulting agreement with
Dr. Anthony Cerami, a director of the Company. Under this consulting agreement
and the consulting arrangement which has continued following the agreement's
expiration, Dr. Cerami is paid $100,000 per year to serve as Chairman of the
Scientific Advisory Board and perform general advisory and consulting services.
The Company is currently discussing the terms of an agreement with
Cerami Consulting Corporation ("Cerami Consulting"), a corporation of which Dr.
Anthony Cerami is the President and his daughter, Dr. Carla Cerami, is the sole
shareholder, pursuant to which Cerami Consulting will provide consulting
services to the Company. The Company is also discussing the terms of a
multi-year research agreement with Kenneth S. Warren Laboratories, Inc. ("Warren
Laboratories"), pursuant to which Warren Laboratories will conduct research and
development of such of the Company's technology as the parties may agree upon.
Warren Laboratories is a non-profit corporation of which Dr. Anthony Cerami is a
director and the President and Dr. Carla Cerami is a director and the Secretary
and Treasurer. Cerami Consulting and Dr. Anthony Cerami are currently providing
these consulting and research and development services to the Company in
anticipation of the agreements.
REGISTRATION RIGHTS
In December 1990, the Company, the holders of each of the common shares
underlying certain Preferred Stock and certain holders of the Common Stock,
including Dr. Anthony Cerami, entered into an Amended and Restated Registration
and Right of First Offer Agreement (the "Rights Agreement") pursuant to which
the Company granted certain registration rights and rights of first offer to
certain stockholders. The Rights Agreement terminated March 1, 1997.
INDEBTEDNESS OF MANAGEMENT
In July 1993 the Company lent $200,000 to Jere E. Goyan at an interest
rate equal to the prime rate as published in the Wall Street Journal, adjusted
quarterly, for the purpose of purchasing a home. Dr. Goyan is the President,
Chief Operating Officer and a director of the Company. The loan is secured by a
second mortgage on the premises purchased by Dr. Goyan. In February 1998 the
terms of the loan were amended so that interest will stop accruing as of July
1999 and the principal and interest shall be paid in equal installments in July,
1999, 2000 and 2001. In the event an installment is not paid when due, interest
shall accrue at a rate of one percent per month until payment is made. The
largest aggregate amount outstanding during fiscal year 1997 was $284,925 on
December 31, 1997. A $25,000 payment was made at December 31, 1997. As of March
2, 1998, $263,631, including accrued interest, remained outstanding.
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<PAGE> 16
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALTEON INC.
By: /s/ James J. Mauzey
----------------------------------
James J. Mauzey
Chairman of the Board and
Chief Executive Officer
Date: April 29, 1998
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