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As Filed with the Securities and Exchange Commission on January 16, 1998
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM S-3
REGISTRATION STATEMENT
AND
POST-EFFECTIVE AMENDMENT NO. 1
UNDER
THE SECURITIES ACT OF 1933
________________________
Alteon Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State of Incorporation)
13-3304550
(I.R.S. Employer Identification No.)
170 Williams Drive
Ramsey, New Jersey 07446
(201) 934-5000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
James J. Mauzey
Chief Executive Officer
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07647
(201) 934-5000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
________________________
Copy to:
Richard J. Pinto, Esq.
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
(609) 924-6000
________________________
Approximate date of commencement of proposed sale to the
public: From time to time after the effective date of this
Registration Statement.
If the only securities being registered on this form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. / /
If any of the securities being registered on this form are
to be offered on a delayed or continuous basis pursuant to Rule
415 of the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following box. /x/
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Shares Amount to be Offering Price Aggregate Registration
to be Registered Registered(1) per Share(2) Offering Price(2) Fee(3)
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value....... 2,043,492 $8.125 $16,603,372.50 $5,031.33
</TABLE>
(1) The shares of Common Stock offered hereby include such
presently indeterminate number of shares of Common Stock as shall
be issuable upon the conversion of all of the 939 shares of the
Company's Series G Preferred Stock, $.01 par value per share (the
"Series G Preferred Stock"). The number of shares of Common
Stock which a holder of Series G Preferred Stock shall be
entitled to receive upon conversion of a share of Series G
Preferred Stock shall be the quotient obtained by dividing
$10,000 by the average of the closing sales price of the Common
Stock (the "Fair Market Value") for the twenty (20) business days
immediately preceding the conversion date. The number of shares
of Common Stock issuable in connection therewith and offered for
resale hereby is an estimate based upon the average of the Fair
Market Value of the Common Stock for the twenty (20) business
days commencing December 20, 1997 and ended January 13, 1998, is
subject to adjustment and could be materially less or more than
such estimated amount depending upon factors which cannot be
predicted by the Registrant at this time, including, among other
factors, the date on which the Series G Preferred Stock is
converted and the future market price of the Common Stock.
Pursuant to Rule 416 under the Securities Act of 1933, this
Registration Statement also covers such additional shares of the
Registrant's Common Stock as may be issued as a result of stock
splits, stock dividends and anti-dilution adjustments with
respect to the shares registered hereby.
(2) Estimated solely for the purpose of calculating the
registration fee, based on the average of the high and low prices
for the Common Stock as reported on the Nasdaq National Market on
January 12, 1998 in accordance with Rule 457 under the Securities
Act of 1933.
(3) Calculation of the Registration Fee excludes 50,000 shares
of common stock which were registered pursuant to the
Registrant's Registration Statement on Form S-3 (Registration
Statement No. 333-28309) and which are included in the prospectus
contained in this Registration Statement pursuant to Rule 429
under the Securities Act of 1933.
________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
________________________
Pursuant to Rule 429 under the Securities Act of 1933, the
Prospectus included as a part of this Registration Statement
shall be deemed to be a combined prospectus which relates to the
Registration Statement on Form S-3, Registration No. 333-28309,
of the Registrant which is amended hereby (Post-Effective
Amendment No. 1).
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PROSPECTUS
SUBJECT TO COMPLETION, DATED JANUARY 16, 1998
Alteon Inc.
2,093,492 Shares*
Common Stock
(par value $.01 per share)
________________________
This Prospectus relates to the proposed sale from time to
time by certain stockholders (the "Selling Stockholders") of
shares (the "Shares") of common stock, $.01 par value per share
(the "Common Stock") of Alteon Inc. ("Alteon" or the "Company")
including Shares issuable upon (i) conversion of the Company's
Series G Preferred Stock, $.01 par value per share (the "Series G
Preferred Stock"), (ii) exercise of certain warrants issued by
the Company in April 1997 to purchase an aggregate of 50,000
shares of Common Stock (the "April 1997 Warrants"), and (iii)
exercise of certain warrants issued by the Company in January
1998 to purchase an aggregate of 10,000 shares of Common Stock
(the "January 1998 Warrants") (together with the April 1997
Warrants, the "Warrants"). All expenses of registration incurred
in connection herewith are being borne by the Company, but all
selling and other expenses incurred by the Selling Stockholders
will be borne by the Selling Stockholders. The Company has
agreed to indemnify the Selling Stockholders against certain
liabilities under the Securities Act of 1933 (the "Securities
Act"). See "Plan of Distribution."
The Company will not receive any proceeds from sales of the
Shares by the Selling Stockholders but will receive proceeds from
the exercise, if any, of the Warrants.
The Shares will be sold from time to time by the Selling
Stockholders or their successors in interest primarily in
transactions (which may include block transactions) on the Nasdaq
National Market or such other market on which the Common Stock
may, from time to time, be traded at the price then prevailing,
although sales may also be made in negotiated transactions or
otherwise. See "Plan of Distribution."
The Company's Common Stock is quoted on the Nasdaq National
Market under the symbol ALTN. On January 14, 1998 the last
reported sale price of the Common Stock was $9.25 per share.
________________________
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
*The shares of Common Stock offered hereby include 60,000
shares issuable upon exercise of the Warrants and such presently
indeterminate number of shares of Common Stock as shall be
issuable upon the conversion of all of the 939 shares of the
Company's Series G Preferred Stock, $.01 par value per share (the
"Series G Preferred Stock"). The number of shares of Common
Stock which a holder of Series G Preferred Stock shall be
entitled to receive upon conversion of a share of Series G
Preferred Stock shall be the quotient obtained by dividing
$10,000 by the average of the closing sales price of the Common
Stock (the "Fair Market Value") for the twenty (20) business days
immediately preceding the date of conversion. The number of
shares of Common Stock issuable in connection with the Series G
Preferred Stock and offered for resale hereby is an estimate
based upon the average of the Fair Market Value of the Common
Stock for the twenty (20) business days commencing December 20,
and ended January 13, 1998, is subject to adjustment and could be
materially less or more than such estimated amount depending upon
factors which cannot be predicted by the Registrant at this time,
including, among other factors, the date on which the Series G
Preferred Stock is converted and the future market price of the
Common Stock. Pursuant to Rule 416 under the Securities Act,
this Registration Statement also covers such additional shares of
the Common Stock as may be issued as a result of stock splits,
stock dividends and anti-dilution adjustments with respect to the
Shares. This presentation is not intended to constitute a
prediction as to the future market price of the Common Stock or
as to the number of shares of Common Stock that may be issued
upon conversion of the Series G Preferred Stock. See "Risk
Factors-Effect of the Conversion of the Series G Preferred Stock"
and "Description of Securities."
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ______________
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ADDITIONAL INFORMATION
This Prospectus, which constitutes a part of various
registration statements on Form S-3 (the "Registration
Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act, omits
certain of the information set forth in the Registration
Statement. Reference is hereby made to the Registration
Statement and to the exhibits thereto for further information
with respect to the Company and the securities offered hereby.
Copies of the Registration Statement and the exhibits thereto are
on file at the offices of the Commission and may be obtained upon
payment of the prescribed fee or may be examined without charge
at the public reference facilities of the Commission described
below.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and in accordance therewith files reports, proxy statements
and other information with the Commission. Reports, proxy
statements and other information filed by the Company can be
inspected without charge and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: 7 World Trade
Center, New York, New York 10048 and 500 West Madison Street,
14th Floor, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material is also available through the
Commission's Web Site (http://www.sec.gov). Alteon's Common
Stock is listed and traded on the Nasdaq National Market.
Reports, proxy statements and other information filed by the
Company may also be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20002.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 as amended by Form 10-K/A.
(b) The Company's Quarterly Report on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997.
(c) The Company's Current Reports on Form 8-K filed April
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25, 1997, May 9, 1997, June 24, 1997, August 8, 1997,
October 3, 1997 and December 10, 1997.
(d) The description of the Company's Common Stock, $.01 par
value, which is contained in the Company's Registration
Statement on Form 8-A filed November 1, 1991, including
any amendments or reports filed for the purpose of
updating such description.
(e) The description of the Company's Rights to Purchase
Series F Preferred Stock which is contained in the
Company's Registration Statement on Form 8-A, filed
August 4, 1995, including any amendments or reports
filed for the purpose of updating such description.
All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to termination of the offering shall be
deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such documents. Any
statement contained herein or in a document incorporated by
reference or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this
Prospectus to the extent that the statement is modified or
superseded by any other subsequently filed document which is
incorporated or is deemed to be incorporated by reference herein.
Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
This Prospectus incorporates documents by reference which are
not presented herein or delivered herewith. Alteon hereby
undertakes to provide without charge to each person, including
any beneficial owner, to whom this Prospectus is delivered, on
the written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be
incorporated into this Prospectus and deemed to be a part hereof,
other than exhibits to such documents unless such exhibits are
specifically incorporated by reference in such documents. These
documents are available upon request from Elizabeth A. O'Dell,
Vice President, Finance and Administration, Alteon Inc., 170
Williams Drive, Ramsey, New Jersey 07446, (201) 934-5000.
THE COMPANY
Alteon is engaged in the discovery and development of
pharmaceutical products for the treatment of the complications of
diabetes and age-related diseases. The Company's efforts have
focused primarily on developing its lead first-in-class compound,
pimagedine, as an agent to inhibit or block abnormal
glucose/protein complexes, known as Advanced Glycosylation
End-products ("A.G.E.s"), that lead to diabetic complications
such as
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kidney disease and retinopathy. A.G.E.s accumulate throughout
the body at a rate dependent on glucose levels. This
accumulation and the subsequent cross-linking of A.G.E.s to other
proteins results in a progressive loss of function of certain
organs, blood vessels and nerves. High levels of A.G.E.s are
found in persons with diabetes, a disease characterized by
elevated glucose levels. The Company is also utilizing its
technical expertise in the field of diabetes to develop compounds
focused on glucose regulation and control.
The Company is currently conducting three pivotal clinical
trials evaluating pimagedine as a treatment for diabetic kidney
disease: two Phase III clinical trials for overt nephropathy and
one Phase III trial for end-stage renal disease. In addition,
the Company recently expanded the potential indications and
dosage forms of pimagedine beyond the complications of diabetes
to take advantage of its other mechanisms of action. The Company
has filed two investigational new drug applications ("INDs") with
the U.S. Food and Drug Administration ("FDA") for inflammatory
skin diseases and stroke.
Alteon has strategic alliances with Yamanouchi
Pharmaceutical Co., Ltd. ("Yamanouchi"), Corange International
Ltd., acting through Boehringer Mannheim Diagnostics ("Boehringer
Mannheim"), Gamida for Life, formerly Eryphile BV ("Gamida"),
IDEXX Laboratories, Inc. ("IDEXX") and Genentech, Inc.
("Genentech") to develop and market pimagedine and A.G.E.
diagnostics for human or veterinary uses in specific territories
throughout the world. In order to expand its internal research
and development capacities, Alteon has licensed technology and/or
patent rights from The Rockefeller University ("Rockefeller
University"), The Picower Institute for Medical Research ("The
Picower Institute") and Washington University in St. Louis,
Missouri ("Washington University").
The Company was incorporated in Delaware in 1986. The
Company's principal executive offices are located at 170 Williams
Drive, Ramsey, New Jersey 07446 and its telephone number is (201)
934-5000.
FORWARD LOOKING STATEMENTS
This Prospectus includes certain forward-looking statements
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The words "believes,"
"anticipates," "expects" and similar expressions are intended to
identify such forward-looking statements. Such statements are
subject to certain risks and uncertainties that could cause
actual results to differ materially from those anticipated by the
statements made by the Company. Factors described in this
Prospectus, including without limitation those identified in
"Risk Factors" and in the documents incorporated herein by
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reference, could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements
made by the Company.
RISK FACTORS
The following risk factors should be considered carefully in
evaluating an investment in the Shares offered by this
Prospectus:
UNCERTAINTIES RELATED TO CLINICAL TRIALS
Before obtaining regulatory approvals for the commercial
sale of any of its products under development, the Company must
demonstrate through pre-clinical studies and clinical trials that
the product is safe and effective for use in each target
indication. The results from pre-clinical studies and early
clinical trials may not be predictive of results that will be
obtained in large-scale testing, and there can be no assurance
that the Company's clinical trials will demonstrate sufficient
safety and efficacy to obtain the requisite regulatory approvals
or will result in marketable products. In addition, clinical
trials are often conducted with patients having the most advanced
stages of disease. During the course of treatment, these
patients may die or suffer other adverse medical events for
reasons that may not be related to the pharmaceutical agent being
tested but which can nevertheless adversely affect clinical trial
results. A number of companies in the pharmaceutical industry
have suffered significant setbacks in advanced clinical trials,
even after promising results in earlier trials. If the Company's
lead compound, pimagedine, is not shown to be safe and effective
in clinical trials, the resulting delays in developing other
compounds and conducting related pre-clinical and clinical
development, as well as the need for additional financing, would
have a material adverse effect on the Company's business,
financial condition and results of operations.
The rate of completion of the Company's clinical trials may
be delayed by many factors. For example, as a result of
independent academic research which implied that pimagedine had
potential tumorigenic activity, and the Company's pre-clinical
animal studies which demonstrated evidence of gastric and other
toxicities, additional studies, data analysis and modification of
protocols were needed before pivotal human clinical trials could
begin. This caused a delay in the initiation of Phase II/III
clinical trials of pimagedine in patients with diabetic
nephropathy. In addition, delays may occur in enrolling patients
as a result of the lack of availability of patients who satisfy
the protocol for a particular trial, variations in the
performance of the principal investigators in the trials, the
response of potential patients to recruitment efforts and the
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performance of the Company's collaborative partners who may
manage portions of the clinical trials. Delays in completion of
the trials may also occur as a result of difficulties in
retaining patients in the trials, preliminary safety data
analysis which requires changes in the protocols, such as those
made following dose-related adverse events in certain patients in
the ACTION II Trial with pimagedine, and delays in approval of
the trials by institutional review boards at the trial sites.
Accordingly, no assurance can be given that enrollment in any of
the Company's clinical trials can be achieved on a timely basis,
if at all, or that clinical trials can be successfully completed
within any particular time frame or at all. In addition,
clinical trials may be terminated at any time for safety reasons
or if little or no efficacy is demonstrated on an interim basis.
Any delays in, or termination of, the Company's clinical trial
efforts would have a material adverse effect on the Company's
business, financial condition and results of operations.
The use of the Company's potential products in clinical
trials may expose the Company to product liability claims. See
"-- Potential Product Liability; Uncertainties Related to
Insurance."
There can be no assurance that the outcome measures used by
the Company in clinical trials will be acceptable to the FDA or
other regulatory authorities as the basis for marketing approvals
or that additional Phase III clinical trials will not be required
by regulatory authorities. There can be no assurance that Alteon
will be permitted by regulatory authorities to undertake
additional clinical trials for pimagedine or, if such trials are
conducted, that any of the Company's product candidates will
prove to be safe and efficacious or will receive regulatory
approvals.
Additionally, the Company has engaged third parties to
assist in conducting its clinical trials. Failure of Alteon or
any of these third parties to perform to the standards necessary
for ultimate regulatory approval of a compound would have a
material adverse effect on the Company's business, financial
condition and results of operations.
NEED FOR FUTURE FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
Alteon will require substantial funding in order to continue
the research, product development, pre-clinical testing and
clinical trials of its product candidates. The Company will also
require additional funding for operating expenses, the pursuit of
regulatory approvals for its product candidates and the
establishment of marketing and sales capabilities. The Company's
future capital requirements will depend on many factors,
including continued scientific progress in its research and
development programs, the size and complexity of these programs,
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progress with pre-clinical testing and clinical trials, the time
and costs involved in obtaining regulatory approvals, the costs
involved in filing, prosecuting and enforcing patent claims,
competing technological and market developments, the
establishment of additional collaborative arrangements, the cost
of manufacturing arrangements, commercialization activities, and
the cost of product in-licensing and strategic acquisitions, if
any. There can be no assurance that the Company's cash reserves
and other liquid assets, including funding that may be received
from the Company's corporate partners and equity sales and
interest income earned thereon, will be adequate to satisfy its
capital and operating requirements.
Alteon intends to seek funding through arrangements with
corporate collaborators and through public or private sales of
the Company's securities, including equity securities. In
addition, the Company has obtained capital leases and may pursue
opportunities to obtain debt financing in the future. There can
be no assurance, however, that additional funding will be
available on reasonable terms, if at all. Any additional equity
financing would be dilutive to the Company's stockholders. If
adequate funds are not available, Alteon may be required to
curtail significantly or eliminate one or more of its research
and development programs and/or obtain funds through arrangements
with collaborative partners or others that may require Alteon to
relinquish rights to certain of its technologies or product
candidates.
UNCERTAINTIES RELATED TO THE EARLY STAGE OF DEVELOPMENT;
TECHNOLOGICAL UNCERTAINTIES
All of the Company's product candidates are in the research
or development stage, and all revenues to date have been
generated from collaborative research agreements and financing
activities, or interest income earned on these funds. No revenues
have been generated from product sales. There can be no
assurance that product revenues can be realized on a timely
basis, if at all.
Alteon has not yet requested or received regulatory approval
for any product from the FDA or any other regulatory body. There
can be no assurance that Alteon will succeed in the development
and marketing of any therapeutic or diagnostic product. To
achieve profitable operations, the Company must, alone or with
others, successfully identify, develop, introduce and market
proprietary products. Such products will require significant
additional investment, development and pre-clinical and clinical
testing prior to potential regulatory approval and
commercialization.
The development of new pharmaceutical products is highly
uncertain and subject to a number of significant risks.
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Potential products that appear to be promising at early stages of
development may not reach the market for a number of reasons.
Potential products may be found ineffective or cause harmful side
effects during pre-clinical testing or clinical trials, fail to
receive necessary regulatory approvals, be difficult to
manufacture on a large scale, be uneconomical, fail to achieve
market acceptance or be precluded from commercialization by
proprietary rights of third parties. The Company's lead
compound, pimagedine, has not yet been proven safe and effective
in humans and utilizes a mechanism of action as yet unproven in
humans. There can be no assurance that the Company's product
development efforts will be successfully completed, that required
regulatory approvals can be obtained or that any products, if
introduced, will be successfully marketed or achieve customer
acceptance. Commercial availability of any Alteon products,
including pimagedine, is not expected for a number of years, if
at all.
UNCERTAINTY OF FUTURE PROFITABILITY
At September 30, 1997, the Company had a cumulative net loss
of $73,412,020. The Company anticipates that it will incur
substantial, potentially greater losses in the future. There can
be no assurance that the Company's products under development
will be successfully developed or that its products, if
successfully developed, will generate revenues sufficient to
enable the Company to earn a profit. Alteon expects to incur
substantial additional operating expenses over the next several
years as its research, development and clinical trial activities
increase. Alteon does not expect to generate revenues from the
sale of products, if any, for a number of years. The Company's
ability to achieve profitability depends in part on its ability
to enter into agreements for product development, obtain
regulatory approval for its products and develop the capacity, or
enter into agreements, for the manufacture, marketing and sale of
any products. There can be no assurance that Alteon will obtain
required regulatory approvals, or successfully develop,
manufacture, commercialize and market product candidates or that
the Company will ever achieve product revenues or profitability.
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company's strategy for development and commercialization
of certain of its products is dependent upon entering into
various arrangements with research collaborators, corporate
partners and others and upon the subsequent success of these
third-parties in performing their obligations.
Alteon has established collaborative arrangements with
Yamanouchi, Gamida, Boehringer Mannheim, IDEXX and Genentech with
respect to the development of drug therapies and diagnostics
utilizing the Company's scientific platforms. The Company will,
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in some cases, be dependent upon these outside partners to
conduct pre-clinical testing and clinical trials and to provide
adequate funding for the Company's development programs. Under
certain of these arrangements, the Company's corporate partners
may have all or a significant portion of the development and
regulatory approval responsibilities. Failure of the corporate
partners to develop marketable products or to gain the
appropriate regulatory approvals on a timely basis, if at all,
would have a material adverse effect on the Company's business,
financial condition and results of operations.
In most cases, the Company cannot control the amount and
timing of resources which its corporate partners devote to the
Company's programs or potential products. If any of the
Company's corporate partners breach or terminate their agreements
with the Company or otherwise fail to conduct their collaborative
activities in a timely manner, the pre-clinical or clinical
development or commercialization of product candidates or
research programs will be delayed, and the Company will be
required to devote additional resources to product development
and commercialization or terminate certain development programs.
The termination of collaborative arrangements would have a
material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance
that disputes will not arise in the future with respect to the
ownership of rights to any technology developed with
third-parties. These and other possible disagreements between
collaborators and the Company could lead to delays in the
collaborative research, development or commercialization of
certain product candidates or could require or result in
litigation or arbitration, which would be time-consuming and
expensive and would have a material adverse effect on the
Company's business, financial condition and results of
operations.
Alteon's corporate partners may develop, either alone or
with others, products that compete with the development and
marketing of the Company's products. Competing products, either
developed by the corporate partners or to which the corporate
partners have rights, may result in their withdrawal of support
with respect to all or a portion of the Company's technology,
which would have a material adverse effect on the Company's
business, financial condition and results of operations.
UNCERTAINTIES RELATED TO PATENTS AND PROPRIETARY TECHNOLOGY
The Company's success will depend on its ability to obtain
patent protection for its products, preserve its trade secrets,
prevent third-parties from infringing upon its proprietary rights
and operate without infringing upon the proprietary rights of
others, both in the United States and abroad.
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The degree of patent protection afforded to pharmaceutical
inventions is uncertain and the Company's potential products are
subject to this uncertainty. Pimagedine is not a novel compound
and is not covered by a composition-of-matter patent. The
patents covering pimagedine are use patents containing claims
covering therapeutic indications and the use of specific
compounds and classes of compounds to inhibit A.G.E. formation.
Competitors may develop and commercialize pimagedine or
pimagedine-like products for indications outside of the
protection provided by the claims of the Company's use patents.
Physicians, pharmacies and wholesalers could then substitute for
the Company's pimagedine products. Substitution for the
Company's pimagedine products would have a material adverse
effect on the Company's business, financial condition and results
of operations. Use patents may afford a lesser degree of
protection in certain foreign countries due to their patent laws.
In addition, although the Company has several patent applications
pending to protect proprietary technology and potential products,
there can be no assurance that these patents will be issued, that
the claims of any patents which do issue will provide any
significant protection of the Company's technology or products,
or that the Company will enjoy any patent protection beyond the
expiration dates of its currently issued patents.
There can be no assurance that competitors will not develop
competitive products outside the protection that may be afforded
by the claims of the Company's patents. The Company is aware
that other parties have been issued patents and have filed patent
applications in the United States and foreign countries with
respect to other agents which impact A.G.E. or A.G.E. cross-link
formation.
Because of the substantial length of time and expense
associated with bringing new products through development and
regulatory approval to the marketplace, the pharmaceutical
industry places considerable importance on obtaining patent and
trade secret protection for new technologies, products and
processes. There can be no assurance as to the success or
timeliness in obtaining any such patents, that the breadth of the
claims obtained will provide any significant protection of the
Company's technology and products, or that the degree of
protection afforded by patents for licensed technologies or for
future discoveries will be adequate to protect the Company's
technology or potential products.
The Company also relies upon unpatented trade secrets and
improvements, unpatented know-how and continuing technological
innovation to maintain, develop and expand its competitive
position, which it seeks to protect, in part, by confidentiality
agreements with its corporate partners, collaborators, employees
and consultants. The Company also has invention or patent
assignment agreements with its employees and certain, but not
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<PAGE>
all, corporate partners and consultants. There can be no
assurance that relevant inventions will not be developed by a
person not bound by an invention assignment agreement. There can
be no assurance that binding agreements will not be breached,
that the Company would have adequate remedies for such breach, or
that the Company's trade secrets will not otherwise become known
to or be independently discovered by competitors.
UNCERTAINTIES RELATED TO GOVERNMENT REGULATION; NO ASSURANCE OF
REGULATORY APPROVAL
Alteon's research, pre-clinical testing and clinical trials
of its product candidates are, and the manufacturing and
marketing of its products will be, subject to extensive and
rigorous regulation by numerous governmental authorities in the
United States and in other countries where the Company intends to
test and market its product candidates.
Prior to marketing, any product developed by the Company
must undergo an extensive regulatory approval process. This
regulatory process, which includes pre-clinical testing and
clinical trials, and may include post-marketing surveillance, of
each compound to establish its safety and efficacy, can take many
years and can require the expenditure of substantial resources.
Data obtained from pre-clinical and clinical activities are
susceptible to varying interpretations which could delay, limit
or prevent regulatory approval. In addition, delays or
rejections may be encountered based upon changes in FDA policy
for drug approval during the period of product development and
FDA regulatory review of each submitted new drug application
("NDA"). Similar delays may also be encountered in foreign
countries. There can be no assurance that regulatory approval
will be obtained for any drugs developed by the Company.
Moreover, regulatory approval may entail limitations on the
indicated uses of the drug. Further, even if regulatory approval
is obtained, a marketed drug and its manufacturer are subject to
continuing review and discovery of previously unknown problems
with a product or manufacturer which may have adverse effects on
the Company's business, financial condition and results of
operations, including withdrawal of the product from the market.
Violations of regulatory requirements at any stage, including
pre-clinical testing and clinical trials, the approval process or
post-approval, may result in various adverse consequences
including the FDA's delay in approving, or its refusal to
approve, a product withdrawal of an approved product from the
market and the imposition of criminal penalties against the
manufacturer and NDA holder. Except for pimagedine, which has
been allowed to proceed into human clinical trials for diabetic
patients with nephropathy, end-stage renal disease, dyslipidemia
and dermatological conditions and an IND for treatment of stroke
(intravenous), the Company has not submitted any other IND
application for any product candidate and none has been approved
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<PAGE>
for commercialization in the United States or elsewhere. No
assurance can be given that the Company will be able to obtain
FDA approval for any products. Failure to obtain requisite
governmental approvals or failure to obtain approvals of the
scope requested will delay or preclude the Company or its
licensees or marketing partners from marketing the Company's
products or limit the commercial use of such products and will
have a material adverse effect on the Company's business,
financial condition and results of operations.
INTENSE COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE;
ALTERNATE CURES OR THERAPIES FOR DIABETES
The Company is engaged in pharmaceutical fields
characterized by extensive research efforts and rapid
technological progress. Many established pharmaceutical and
biotechnology companies with resources greater than those of the
Company are attempting to develop products that would be
competitive with the Company's products. Other companies may
succeed in developing products that are safer, more efficacious
or less costly than any that may be developed by Alteon and may
also be more successful than Alteon in production and marketing.
Rapid technological development by others may result in the
Company's products becoming obsolete before the Company recovers
a significant portion of the research, development or
commercialization expenses incurred with respect to those
products.
Certain technologies under development by other
pharmaceutical companies could result in a cure for diabetes or
the reduction of the incidence of diabetes and its complications.
For example, a number of companies are investigating islet cell
transplantation as a possible cure for Type I diabetes. Results
of a study conducted by the National Institutes of Health, known
as the Diabetes Control and Complications Trial ("DCCT"),
published in 1993, showed that tight glucose control reduced the
incidence of diabetic complications. Numerous companies are
pursuing methods to control glucose levels. In addition, several
large companies have initiated or expanded research, development
and licensing efforts to build a diabetic pharmaceutical
franchise focusing on diabetic nephropathy, neuropathy,
retinopathy and related conditions. An example of this is
research seeking anti-angiogenesis drugs for the potential
treatment of diabetic retinopathy. Furthermore, the Company is
aware of several pharmaceutical companies which are developing
thiazolidinedione derivatives ("glitazones") for the treatment of
Type II diabetes. In January 1997, Warner-Lambert Company was
given approval and clearance by the FDA for the marketing of
Rezulin(TM) (troglitazone), an anti-diabetic drug designed to
target insulin resistance in Type II diabetes. It is possible
that one or more of these initiatives may reduce or eliminate the
market for the Company's products.
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<PAGE>
In addition, captopril, a product marketed by Bristol-Myers
Squibb Company, has been approved for Type I diabetics with overt
nephropathy. The patent covering captopril expired in February
1996. Other pharmaceutical companies have chosen to market and
sell this drug, resulting in a substantial decrease in price.
This decline in price for captopril may significantly reduce or
eliminate the market for any product developed by the Company for
this indication.
UNCERTAINTIES RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT
The Company's business, financial condition and results of
operations may be materially adversely affected by the continuing
efforts of government and third-party payors to contain or reduce
the costs of health care through various means. For example, in
certain foreign markets, pricing and/or profitability of
prescription pharmaceuticals are subject to government control.
In the United States, the Company expects that there will
continue to be federal and state initiatives to control and/or
reduce pharmaceutical expenditures. In addition, increasing
emphasis on managed care in the United States will continue to
put pressure on pharmaceutical pricing. Cost control initiatives
could decrease the price that the Company receives for any
products it may develop and sell in the future and have a
material adverse effect on the Company's business, financial
condition and results of operations. Further, to the extent that
cost control initiatives have a material adverse effect on the
Company's corporate partners, the Company's ability to
commercialize its products may be adversely affected.
The Company's ability to commercialize pharmaceutical
products may depend in part on the extent to which reimbursement
for the products will be available from government health
administration authorities, private health insurers and other
third-party payors. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, and
third-party payors, including Medicare, are increasingly
challenging the prices charged for medical products and services.
There can be no assurance that any third-party insurance coverage
will be available to patients for any products developed by the
Company. Government and other third-party payors are
increasingly attempting to contain health care costs by limiting
both coverage and the level of reimbursement for new therapeutic
products and by refusing in some cases to provide coverage for
uses of approved products for disease indications for which the
FDA has not granted labeling approval. If adequate coverage and
reimbursement levels are not provided by government and other
third-party payors for the Company's products, the market
acceptance of these products would be adversely affected.
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<PAGE>
UNCERTAINTIES RELATED TO MARKETING AND SALES
For certain of its products, the Company has licensed
exclusive marketing rights to its corporate partners or formed
collaborative marketing arrangements within specified territories
in return for royalties to be received on sales, a share of
profits or beneficial transfer pricing. These agreements are
terminable at the discretion of the Company's partners upon as
little as 90 days' prior written notice. If the licensee or
marketing partner terminates an agreement or fails to market a
product successfully, the Company's business, financial condition
and results of operations may be adversely affected.
Alteon currently has no experience in marketing or selling
pharmaceutical products. In order to achieve commercial success
for any approved product, Alteon must either develop a marketing
and sales force or, where appropriate or permissible, enter into
arrangements (such as its arrangement with Genentech regarding
the marketing of pimagedine in a specific territory) with third
parties to market and sell its products. There can be no
assurance that Alteon will develop successfully marketing and
sales experience or that it will be able to enter into marketing
and sales agreements with others on acceptable terms, if at all,
or that any such arrangements, if entered into, will not be
terminated. If the Company develops its own marketing and sales
capability, it will compete with other companies that currently
have experienced, well funded and larger marketing and sales
operations. To the extent that the Company enters into
co-promotion or other sales and marketing arrangements with other
companies, any revenues to be received by Alteon will be
dependent on the efforts of others, and there can be no assurance
that their efforts will be successful.
NO MANUFACTURING EXPERIENCE; RELIANCE ON THIRD-PARTY
MANUFACTURING
The Company has no experience in manufacturing products for
commercial purposes and does not have manufacturing facilities.
Consequently, the Company is dependent on contract manufacturers
for the production of products for development and commercial
purposes. The manufacture of the Company's products for clinical
trials and commercial purposes is subject to current Good
Manufacturing Practice ("cGMP") regulations promulgated by the
FDA.
The Company has contracted or will be contracting with third
parties for the manufacture and distribution of pimagedine.
However, in the event that the Company is unable to obtain or
retain third-party manufacturing for its products, it will not be
able to commercialize such products as planned. There can be no
assurance that the Company will be able to enter into agreements
for the manufacture of future products with manufacturers whose
facilities and procedures comply with cGMP and other regulatory
requirements. The Company's current dependence upon others for
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<PAGE>
the manufacture of its products may adversely affect its profit
margin, if any, on the sale of future products and the Company's
ability to develop and deliver such products on a timely and
competitive basis.
POTENTIAL PRODUCT LIABILITY; UNCERTAINTIES RELATED TO INSURANCE
The use of any of the Company's potential products in
clinical trials and the sale of any approved products, including
the testing and commercialization of pimagedine, may expose the
Company to liability claims resulting from the use of products or
product candidates. These claims might be made directly by
consumers, pharmaceutical companies or others. The Company
maintains product liability insurance coverage for claims arising
from the use of its products in clinical trials. However,
coverage is becoming increasingly expensive, and no assurance can
be given that the Company will be able to maintain insurance or,
if maintained, that insurance can be acquired at a reasonable
cost or in sufficient amounts to protect the Company against
losses due to liability that could have a material adverse effect
on the Company's business, financial conditions and results of
operations. There can be no assurance that the Company will be
able to obtain commercially reasonable product liability
insurance for any product approved for marketing in the future or
that insurance coverage and the resources of the Company would be
sufficient to satisfy any liability resulting from product
liability claims. A successful product liability claim or series
of claims brought against the Company could have a material
adverse effect on its business, financial condition and results
of operations.
ATTRACTION AND RETENTION OF KEY EMPLOYEES AND CONSULTANTS
The Company is highly dependent on the principal members of
its management and scientific staff. The loss of services of any
of these personnel could impede the achievement of the Company's
development objectives. Furthermore, recruiting and retaining
qualified scientific personnel to perform research and
development work in the future will also be critical to the
Company's success. There can be no assurance that the Company
will be able to attract and retain personnel on acceptable terms
given the competition between pharmaceutical and health care
companies, universities and non-profit research institutions for
experienced scientists. In addition, the Company relies on
consultants and members of its Scientific Advisory Board to
assist the Company in formulating its research and development
strategy. All of Alteon's consultants and the members of the
Scientific Advisory Board are employed outside the Company and
may have commitments to or consulting or advisory contracts with
other entities that may limit their availability to the Company.
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<PAGE>
HAZARDOUS MATERIALS
The Company's research and development activities involve
the controlled use of hazardous materials, chemicals and various
radioactive compounds. Although the Company believes that its
safety procedures for handling and disposing of hazardous
materials comply with the standards prescribed by state and
federal regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In
the event of an accident, the Company could be held liable for
any damages or fines that result. Such liability could have a
material adverse effect on the Company's business, financial
condition and results of operations.
EFFECT OF THE CONVERSION OF THE SERIES G PREFERRED STOCK
The exact number of shares of Common Stock issuable upon
conversion of all of the Series G Preferred Stock will vary
inversely with the market price of the Common Stock. The holders
of Common Stock may be materially diluted by conversion of the
Series G Preferred Stock depending on the future market price of
the Common Stock. On January 14, 1998 the average of the Fair
Market Value of the Common Stock on the Nasdaq National Market
for the twenty (20) business days immediately preceding such date
was $7.85 per share. If such price were used to determine the
number of shares of Common Stock issuable upon conversion of the
Series G Preferred Stock, the Company would issue a total of
approximately 1,196,178 shares of Common Stock if all shares of
the Series G Preferred Stock were converted on such date. To the
extent the average of the Fair Market Value of the Common Stock
during the 20 business days immediately preceding any date on
which shares of the Series G Preferred Stock are converted is
higher or lower than $7.85, the Company would issue more or fewer
shares of Common Stock than reflected in such estimate, and such
difference could be material. In addition, the number of shares
of Common Stock to be issued upon conversion of the Series G
Preferred Stock will depend on the number of shares of Series G
Preferred Stock issued as dividends on the Series G Preferred
Stock. See "Description of Securities -- Series G Preferred
Stock."
EFFECT OF CONVERSION OF THE SERIES H PREFERRED STOCK
The Company has authorized 8,000 shares of Series H
Preferred Stock, none of which have been issued on the date
hereof. Pursuant to the Stock Purchase Agreement dated as of
December 1, 1997 between the Company and Genentech (the
"Genentech Stock Purchase Agreement"), the Company has agreed to
sell, and Genentech has agreed to purchase, up to 4,800 shares of
Series H Preferred Stock to fund certain of the Company's product
development activities. The Genentech Stock Purchase Agreement
provides that Genentech will purchase 1,600 shares of Series H
Preferred Stock not later than January 31, 1998 and commencing
July 1, 1998 will purchase the balance in quarterly installments
16
<PAGE>
ending not later than January 2, 2002, subject to certain
conditions set forth in the License Agreement (as defined below).
The actual number of shares of Series H Preferred Stock which
will be issued, and the timing of such issuance, will depend on
the costs of the Company's development activities to be funded by
Genentech's purchases of Series H Preferred Stock. The Series H
Preferred Stock will be convertible into Common Stock at a
conversion price which reflects the average market price of the
Common Stock during the 20 business days immediately preceding
any date on which shares of the Series H Preferred Stock are
converted. The exact number of shares of Common Stock issuable
upon conversion of all of the Series H Preferred Stock will vary
inversely with the Fair Market Value of the Common Stock. The
holders of Common Stock may be materially diluted by conversion
of the Series H Preferred Stock depending on the future market
price of the Common Stock and the number of shares of Series H
Preferred Stock which are issued by the Company. See
"Description of Securities -- Series H Preferred Stock."
POTENTIAL ADVERSE EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE
As of December 31, 1997, 3,659,440 shares of Common Stock
were issuable upon the exercise of outstanding stock options and
an additional stock option exercisable for 200,000 shares of
Common Stock had been approved by the Board of Directors of the
Company. The issuance of Common Stock upon the exercise of stock
options, which will be freely tradeable, and the exercise of
warrants, the conversion of Series G Preferred Stock and Series H
Preferred Stock, as well as future sales of Common Stock by the
Company or of shares of Common Stock by existing stockholders, or
the perception that sales could occur, could adversely affect the
market price of the Common Stock. Two of the Company's corporate
partners, Yamanouchi and Genentech, are stockholders. A former
partner of the Company, HMRI, is also a stockholder. Any of them
could choose to sell its shares at any time for any reason. The
sale of these shares, particularly those held by Yamanouchi and
Genentech, could be viewed in the marketplace as a lack of
confidence in the Company regardless of the reason for such sale,
and could have a substantial negative impact on the market price
of the Common Stock.
VOLATILITY OF COMMON STOCK PRICE
The market prices for securities of biotechnology and
pharmaceutical companies, including Alteon, have historically
been highly volatile, and the market has from time to time
experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.
Factors such as fluctuations in the Company's operating results,
announcement of technological innovations or new therapeutic
products by the Company or others, clinical trial results,
developments concerning agreements with collaborators,
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<PAGE>
governmental regulation, developments in patent or other
proprietary rights, public concern as to the safety of drugs
developed by the Company or others, future sales of substantial
amounts of Common Stock by existing stockholders and general
market conditions can have an adverse effect on the market price
of the Common Stock. The realization of any of the risks
described in these "Risk Factors" could have a dramatic and
adverse impact on the market price of the Common Stock.
POTENTIAL ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation provides for
staggered terms for the members of the Board of Directors and
includes a provision (the "Fair Price Provision") that requires
the approval of the holders of 80% of the Company's voting stock
as a condition to a merger or certain other business transactions
with, or proposed by, a holder of 10% or more of the Company's
voting stock, except in cases where certain directors approve the
transaction or certain minimum price criteria and other
procedural requirements are met. The Company has entered into a
Stockholders' Rights Agreement pursuant to which each holder of a
share of Common Stock is granted a Right to purchase the
Company's Series F Preferred Stock under certain circumstances if
a person or group acquires or commences a tender offer for 20% of
the Company's outstanding Common Stock. The Company has also
adopted a Change in Control Severance Benefits Plan which
provides for severance benefits to employees upon certain events
of termination of employment after or in connection with a change
in control as defined in the Plan. In addition, the Board of
Directors has the authority, without further action by the
stockholders, to fix the rights and preferences of, and issue
shares of, Preferred Stock. The staggered board terms, Fair
Price Provision, Stockholders' Rights Agreement, Change in
Control Severance Benefits Plan, Preferred Stock provision and
other provisions of the Company's charter and Delaware corporate
law may discourage certain types of transactions involving an
actual or potential change in control of the Company.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the
Shares by the Selling Stockholders but will receive proceeds from
the exercise, if any, of the Warrants. Proceeds from the sale of
the Series G Preferred Stock to the Selling Stockholders and
proceeds from the exercise of the Warrants, if any, will be used
for general corporate purposes.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with
respect to the Selling Stockholders, including (i) the number of
shares of Common Stock beneficially owned by each Selling
Stockholder as of the date of this Prospectus, (ii) the maximum
number of shares of such Common Stock to be offered hereby, (iii)
the number of shares to be owned after completion of the Offering
(assuming all shares offered hereby are sold), and (iv) the
percentage of the Company's Common Stock to be owned by the
Selling Stockholders after completion of the Offering (assuming
all shares offered hereby are sold). The information in the table
is based upon information provided to the Company by the Selling
Stockholders, except for the assumed conversion ratio of shares
of Series G Preferred Stock into shares of Common Stock, which is
based solely on the assumptions discussed in the footnotes to the
table.
<TABLE>
<CAPTION>
Percentage
Number of Shares of Outstanding
Beneficially Owned Maximum Number of Number of Shares Common Stock
Name of Selling Prior to Offering Shares Being Beneficially Owned Beneficially Owned
Stockholder (1) Offered (1) After Offering(2) After Offering
<S> <C> <C> <C> <C>
Genentech, Inc. 2,033,492(3) 2,033,492(3) 0 0
Halifax Fund, L.P. 36,000(4) 36,000(4) 0 0
Galileo Capital, 3,600(5) 3,600(5) 0 0
L.L.C.
RGC International 8,400(6) 8,400(6) 0 0
Investors, LDC
Heracles Fund 3,600(7) 3,600(7) 0 0
Themis Partners, 8,400(8) 8,400(8) 0 0
L.P.
</TABLE>
(1) Except as set forth in footnote (3), beneficial ownership is
determined in accordance with Rule 13d-3 under the Exchange
Act.
(2) Assumes all shares are sold to parties which are not
affiliates of the Selling Stockholders.
(3) Represents 837,314 Shares and 1,196,178 Shares issuable to
Genentech, Inc., a Delaware corporation, upon conversion of
all of its 939 shares of the Series G Preferred Stock. The
number of shares of Common Stock issuable upon conversion of
the shares of Series G Preferred Stock was estimated based
upon a conversion price of $7.85, such price being the
average of the Fair Market Value of the Common Stock for the
twenty (20) business days immediately preceding January 14,
1998. The actual number of shares of Common Stock issuable
upon conversion of the Series G Preferred Stock is subject
to adjustment and could be materially less or more than the
estimated amount indicated depending upon factors which
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<PAGE>
cannot be predicted by the Company at this time, including,
among other factors, the date on which the Series G
Preferred Stock is converted and the future Fair Market
Value of the Common Stock. This presentation is not
intended to constitute a prediction as to the future market
price of the Common Stock. Pursuant to the terms of the
Certificate of Designations for the Series G Preferred
Stock, a holder of Series G Preferred Stock may convert the
Series G Preferred Stock upon seventy (70) days' prior
notice to the Company. Accordingly, the number of shares of
Common Stock set forth above for Genentech may exceed the
actual number of shares of Common Stock that such Selling
Stockholder would be deemed beneficially to own at any given
time through its ownership of the Series G Preferred Stock.
To the extent that beneficial ownership of Genentech set
forth in the table does not reflect the 70 days' notice
requirement for the conversion of the Series G Preferred
Stock, the information set forth in the table is not
determined in accordance with Rule 13d-3 under the Exchange
Act. The Series G Preferred Stock automatically converts
into Common Stock immediately upon transfer to a
non-affiliated third party. See "Risk Factors -- Effect of the
Conversion of the Series G Preferred Stock" and "Description
of Securities." Does not include shares of Common Stock
which may be issued upon conversion of shares of Series G
Preferred Stock issued as dividends before or after the date
of this Prospectus or upon conversion of shares of Series H
Preferred Stock acquired by Genentech after the date of this
Prospectus none of which are beneficially owned pursuant to
Rule 13d-3 under the Exchange Act. See "Risk Factors --
Effect of the Conversion of the Series H Preferred Stock"
and "Description of Securities -- Series H Preferred Stock."
(4) Represents Shares issuable to Halifax Fund, L.P., a Cayman
Islands limited partnership, upon exercise of Warrants to
purchase 36,000 shares of Common Stock.
(5) Represents Shares issuable to Galileo Capital, L.L.C., a
Delaware limited liability company, upon exercise of
Warrants to purchase 3,600 shares of Common Stock.
(6) Represents Shares issuable to RGC International Investors,
LDC, a Cayman Islands limited duration company, upon
exercise of Warrants to purchase 8,400 shares of Common
Stock.
(7) Represents Shares issuable to the Heracles Fund, a Cayman
Islands corporation, upon exercise of Warrants to purchase
3,600 shares of Common Stock.
(8) Represents Shares issuable to Themis Partners, L.P., a
Delaware limited partnership, upon exercise of Warrants to
purchase 8,400 shares of Common Stock.
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<PAGE>
DESCRIPTION OF SECURITIES
Series G Preferred Stock
Pursuant to the Genentech Stock Purchase Agreement the
Company sold to the Selling Stockholders 939 shares of Series G
Preferred Stock. The Company also agreed to file with the
Commission a registration statement for the resale of the Common
Stock issuable upon conversion of the Series G Preferred Stock
(and the resale of 837,314 shares of Common Stock also issued
pursuant to the Genentech Stock Purchase Agreement) and to keep
such registration statement in effect until all such Common Stock
is sold or eligible for resale pursuant to Rule 144 promulgated
under the Securities Act.
The Series G Preferred Stock is convertible into Common
Stock or, at the option of the Company, cash at any time by the
holder thereof upon seventy (70) days' prior notice to the
Company, provided that the Series G Preferred Stock may not be
converted if, following the conversion, the holder and its
affiliates would be the beneficial owners of more than forty
(40%) percent of the Company's outstanding Common Stock. The
number of shares of Common Stock which a holder of Series G
Preferred Stock is entitled to receive upon conversion of a share
of Series G Preferred Stock is the quotient obtained by dividing
$10,000 by the average of the Fair Market Value of the Common
Stock for the twenty (20) business days immediately preceding the
date of conversion. The Series G Preferred Stock automatically
converts into Common Stock immediately upon transfer to a
non-affiliated third party.
The Series G Preferred Stock bears cumulative quarterly
dividends, payable in shares of Series G Preferred Stock, at the
rate of [8.5]% per annum. Upon the liquidation, dissolution or
winding up of the Corporation, the holders of the Series G
Preferred Stock shall be entitled to receive, in preference to
the holders of shares of stock ranking junior to the Series G
Preferred Stock, an amount equal to $10,000 per share for each
share of the Series G Preferred Stock held and each share of
Series G Preferred Stock constituting accrued and unpaid
dividends.
The holders of shares of Series G Preferred Stock have no
voting rights except as required by the General Corporation Law
of Delaware.
The Certificate of Designations for the Series G Preferred
Stock contains restrictions on the repurchase or redemption of
shares of stock ranking junior to the Series G Preferred Stock by
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<PAGE>
the Company while there is an arrearage in the payment of
dividends.
Series H Preferred Stock
Except as provided in this section, the terms of the Series
H Preferred Stock are identical to the terms of the Series G
Preferred Stock described above. The Series H Preferred Stock
will not be convertible into Common Stock until the earlier of:
(i) the granting of approval by the U.S. Food and Drug
Administration (or any successor thereto) for the marketing and
sale of any product which contains as an active ingredient the
compound pimagedine and which is a licensed product(as such terms
are defined in the Development Collaboration and License
Agreement dated as of December 1, 1997 between the Company and
Genentech (the "License Agreement"); (ii) termination by
Genentech of the License Agreement pursuant to the License
Agreement; or (iii) December 1, 2002. In addition, Genentech may
convert into Common Stock at any time the number of shares of
Series H Preferred Stock necessary so that the market value of
the Company's outstanding Common Stock is at least twice the
aggregate price paid by Genentech to the Company for all shares
of Series G Preferred Stock and Series H Preferred Stock then
held by it.
The Series H Preferred Stock will bear a dividend equal to
the prime rate per annum as published in the Wall Street Journal
five (5) business days prior to the first issuance of a share of
Series H Preferred Stock.
Pursuant to the Genentech Stock Purchase Agreement, the
Company has granted to the holders of the Series H Preferred
Stock certain registration rights with regard to the Common Stock
to be issued upon conversion of the Series H Preferred Stock.
Issuance of Common Stock upon conversion of the Series G
Preferred Stock and the Series H Preferred Stock will have a
dilutive effect on holders of the Common Stock.
April 1997 Warrants
Pursuant to a Preferred Stock Investment Agreement dated as
of April 24, 1997 the Company sold to certain investors 5,000
shares of the Company's 6% Cumulative Convertible Preferred
Stock, $.01 par value per share, and the April 1997 Warrants for
an aggregate purchase price of $5,000,000. The Company also
entered into a Registration Rights Agreement with such investors
(the "Registration Rights Agreement") pursuant to which the
Company agreed to file with the Commission a registration
statement for the resale of the Common Stock issuable upon
exercise of the April 1997 Warrants and to keep such registration
statement in effect until all such Common Stock is sold or
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<PAGE>
eligible for resale pursuant to Rule 144 promulgated under the
Securities Act (i.e., a period of one years for holders who are
not affiliates of the Company).
The holders of the April 1997 Warrants are entitled to
purchase, in the aggregate, 50,000 shares of Common Stock for
$4.025 per share. The April 1997 Warrants may be exercised at
any time and from time to time, in whole or in part, prior to
April 24, 2004. The number of shares and kind of securities
issuable on exercise of the April 1997 Warrants is subject to
adjustment in the event of certain subdivisions or combinations
of the securities issuable upon exercise of the April 1997
Warrants, declarations of dividends or distributions on the
Common Stock, mergers or consolidations of the Company and
reorganizations or reclassifications of the securities issuable
upon exercise of the April 1997 Warrants.
January 1998 Warrants
In January 1998 the Company issued to certain of the Selling
Stockholders, the January 1998 Warrants to purchase, in the
aggregate, 10,000 shares of Common Stock for $4.025 per share.
The January 1998 Warrants may be exercised at any time and from
time to time, in whole or in part, prior to October 9, 2004. The
number of shares and kind of securities issuable on exercise of
the January 1998 Warrants is subject to adjustment in the event
of certain subdivisions or combinations of the securities
issuable upon exercise of the January 1998 Warrant, declarations
of dividends or distributions on the Common Stock, mergers or
consolidations of the Company and reorganizations or
reclassifications of the securities issuable upon exercise of the
January 1998 Warrant. The January 1998 Warrants are subject to
the Registration Rights Agreement.
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold by the Selling
Stockholders or their pledgees, donees, transferees, or other
successors in interest from time to time in one or more
transactions (which may include block transactions) in the
over-the-counter market, on the Nasdaq National Market or such
other market on which the Company's Common Stock may, from time
to time, be traded, in privately negotiated transactions, through
the writing of options on the Shares (whether such options are
listed on an options exchange or otherwise) or by a combination
of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related
to prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares
to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions
from the Selling Stockholders and/or the purchasers of the Shares
23
<PAGE>
for whom such broker-dealers may act as agents or to whom they
sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary
commissions). In connection with distributions of the Shares,
the Selling Stockholders may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales
of the Shares in the course of hedging the positions they assume
with the Selling Stockholder. The Selling Stockholders also may
sell the Shares short and deliver the Shares to close out such
short positions. The Selling Stockholders also may enter into
option or other transactions with broker-dealers that involve the
delivery of the Shares to the broker-dealers, which may then
resell or otherwise transfer such Shares. The Selling
Stockholders also may loan or pledge the Shares to a
broker-dealer and the broker-dealer may sell the Shares so loaned
or
upon a default may sell or otherwise transfer the pledged Shares.
In addition, any Shares that qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather
than pursuant to this Prospectus.
In order to comply with the securities laws of certain
states, if applicable, the Shares will be sold in such
jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states the Shares may not be
sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or
qualification requirements is available and is complied with.
The Selling Stockholders and any broker-dealers or agents
that participate with the Selling Stockholders in the
distribution of Shares may be deemed to be "underwriters" within
the meaning of the Securities Act, and any commissions received
by them and any profit on the resale of the Shares purchased by
them may be deemed to be underwriting commissions or discounts
under the Securities Act.
To the extent required, the type and number of Shares to be
sold, the purchase price and public offering price, the name or
names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offering
will be set forth in an accompanying Prospectus Supplement to
this Prospectus.
The Company agreed to indemnify and hold the Selling
Stockholders harmless against certain liabilities, including
certain liabilities under the Securities Act, that could arise in
connection with the sale by the Selling Stockholders of the
Shares. The Company has agreed to bear certain expenses (other
than selling commissions) in connection with the registration and
sale of the Shares being offered by the Selling Stockholders,
estimated to be $17,031.00.
24
<PAGE>
LEGAL MATTERS
The validity of the issuance of the Common Stock being
offered hereby has been passed upon by Smith, Stratton, Wise,
Heher & Brennan, Princeton, New Jersey. A member of Smith,
Stratton, Wise, Heher & Brennan holds an option to purchase
16,800 shares of Common Stock.
EXPERTS
The financial statements incorporated by reference in this
Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
25
<PAGE>
No dealer, salesperson or other
individual has been authorized to
give any information or to make any
representations other than those
contained in this Prospectus in
connection with the offer made by
this Prospectus and, if given or
made, such information or
representations must not be relied
upon as having been authorized by the
Company. This Prospectus does not Alteon Inc.
constitute an offer to sell or a 2,093,492 shares
solicitation of an offer to buy any Common Stock
securities in any jurisdiction in
which such offer or solicitation is
not authorized or in which the person
making such offer or solicitation is
not qualified to do so, or to any
person to whom it is unlawful to make --------
such offer or solicitation. Neither PROSPECTUS
the delivery of this Prospectus nor --------
any sale made hereunder shall, under
any circumstances, create any
implication that there has been no
change in the affairs of the Company _________, 1998
or that information contained herein
is correct as of any time subsequent
to the date hereof.
__________________
TABLE OF CONTENTS
Page
Additional Information........2
Available Information.........2
Incorporation of Certain
Documents by Reference......2
The Company...................3
Forward Looking Statements....4
Risk Factors..................5
Use of Proceeds...............18
Selling Stockholders..........19
Description of Securities.....21
Plan of Distribution..........23
Legal Matters.................25
Experts.......................25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized estimate (other
than the SEC registration fee which is the actual, not estimated,
fee) of fees and expenses payable by the registrant in connection
with the offering described in this registration statement, other
than underwriting discounts and commissions:
SEC registration fee ........................ $ 5,031.33
Printing, shipping & engraving expenses...... 1,000.00
Legal fees and expenses ..................... 7,500.00
Accounting fees ............................. 1,500.00
Miscellaneous expenses....................... 2,000.00
Total ....................................... $ 17,031.00
All expenses of registration incurred in connection herewith
are being borne by the Company, but all selling and other
expenses incurred by the Selling Stockholders will be borne by
the Selling Stockholders.
Item 15. Indemnification of Directors and Officers.
Subsection (a) of Section 145 of the General Corporation Law
of Delaware empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
Subsection (b) of Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect to
any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or
officer of a corporation has been successful in the defense of
any action, suit or proceeding referred to in subsections (a) and
(b) or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith;
that the indemnification provided by Section 145 shall not be
deemed exclusive of any other rights to which the indemnified
party may be entitled; and that the scope of indemnification
extends to directors, officers, employees, or agents of a
constituent corporation absorbed in a consolidation or merger and
persons serving in that capacity at the request of the
constituent corporation for another. Section 145 also empowers
the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability
asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities
under Section 145.
Article IX of the registrant's By-laws specifies that the
registrant shall indemnify its directors and officers to the full
extent permitted by the General Corporation Law of Delaware.
This provision of the By-laws is deemed to be a contract between
the registrant and each director and officer who serves in such
capacity at any time while such provision and the relevant
provisions of the General Corporation Law of Delaware are in
effect, and any repeal or modification thereof shall not offset
any rights or obligations then existing with respect to any state
of facts then or theretofore existing or in any action, suit or
proceeding theretofore or thereafter brought or threatened in
whole or in part upon any such state of facts.
Section 102(b)(7) of the Delaware General Corporation Law
enables a corporation in its certificate of incorporation to
limit the personal liability of members of its board of directors
for violation of a director's fiduciary duty of care. This
Section does not, however, limit the liability of a director for
breaching his duty of loyalty, failing to act in good faith,
engaging in intentional misconduct or knowingly violating a law,
or from any transaction in which the director derived an improper
personal benefit. This Section also will have no effect on
claims arising under the federal securities laws. The
registrant's certificate of incorporation limits the liability of
its directors as authorized by Section 102(b)(7).
The registrant currently carries liability insurance for the
benefit of its directors and officers which provides coverage for
losses of directors and officers for liabilities arising out of
claims against such persons acting as directors or officers of
the registrant (or any subsidiary thereof) due to any breach of
duty, neglect, error, misstatement, misleading statement,
omission or act done by such directors and officers, except as
prohibited by law. The liability limit, however, shall be
reduced by amounts incurred for legal defense, which amounts are
to be applied against the retention amount. The insurance policy
also provides for the advancement of reasonable fees, costs and
expenses including attorneys' fees under certain circumstances,
incurred by directors and officers in investigating, adjusting,
defending and appealing any claim, subject to repayment by such
director or officer if it is ultimately determined that such
insureds are not entitled under the terms of the policy to
payment of such loss.
The insurance policy will not provide coverage to the
directors and officers to the extent that the Company has
indemnified the directors or officers. The policy provides for
the reimbursement of the Company to the extent the Company has
indemnified the directors and officers pursuant to law, contract
or the Certificate of Incorporation or By-laws of the Company.
Moreover, the registrant would not be required to indemnify a
director or officer for any claim based upon: (i) the director or
officer gaining, in fact, a personal profit or advantage to which
he or she was not legally entitled, (ii) the director or officer
committing, in fact, any criminal or deliberately fraudulent act,
(iii) the payment to any director or officer of any remuneration
without the previous approval of the stockholders of the Company,
which payment without such previous approval shall be held to
have been illegal, (iv) any claim for accounting of profits made
in connection with a violation of 16(b) of the Exchange Act or a
similar state law, (v) any attempt, whether successful or
unsuccessful, by any person to acquire securities of the Company
against the opposition of the Board of Directors of the Company,
or any action, whether successful or unsuccessful, by the Company
or the Board of Directors to resist such attempts; provided
however that the exclusion shall not apply if the Company has
obtained a written opinion from legal counsel that such resistive
action is a lawful exercise of the Board of Directors' business
judgment and an opinion from an investment banking firm that the
price of such acquisition of securities is inadequate, (vi)
environmental claims and violations, (vii) violation of the
Employee Retirement Income Security Act of 1974, as amended, and
(viii) claims made against the directors or officers under
federal or state law based upon the filing of a registration
statement with the Securities and Exchange Commission or based
upon any underwriting agreement for the offer of any security.
At present, there is no pending litigation or proceeding
involving a director or officer of the registrant as to which
indemnification is being sought nor is the registrant aware of
any threatened litigation that may result in claims for
indemnification by any director or officer.
Item 16. Exhibits.
Exhibit
Number Description
4.1 - Restated Certificate of Incorporation. (Incorporated
by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (File Number
33-42574) which became effective on November 1, 1991).
4.2 - Certificate of the Voting Powers, Designations,
Preference and Relative Participating, Optional and
Other Special Qualifications, Limitations or
Restrictions of Series F Preferred Stock of the
Company. (Incorporated by reference to Exhibit 4.2 to
the Company's Current Report on Form 8-K filed on
August 4, 1995).
4.3 - By-laws, as amended. (Incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form
8-K filed on September 8, 1995).
4.4 - Stockholders' Rights Agreement dated as of July 27,
1995, between Alteon Inc. and Registrar and Transfer
Company, as Rights Agent. (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on August 4, 1995).
4.5 - Registration Rights Agreement dated as of April 24,
1997 between Alteon Inc. and the investors named on the
signature page thereof (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on May 9, 1997).
4.6 - Form of Common Stock Purchase Warrant dated as of April
1997 (Incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on May 9,
1997).
4.7 - Amendment to Stockholders' Rights Agreement between
Alteon Inc. and Registrar and Transfer Company, as
Rights Agent (Incorporated by reference to Exhibit 4.4
to the Company's Current Report on Form 8-K filed on
May 9, 1997).
4.8 - Amendment to Stockholders' Rights Agreement between
Alteon Inc. and Registrar and Transfer Company, as
Rights Agent (Incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K filed on
December 10, 1997).
4.9 - Form of Common Stock Purchase Warrant dated as of
October 9, 1997.
4.10 - Corrected Certificate of Designations of Series G
Preferred Stock.
4.11 - Corrected Certificate of Designations of Series H
Preferred Stock.
5.1 - Opinion of Smith, Stratton, Wise, Heher & Brennan.
23.1 - Consent of Arthur Andersen LLP, independent public
accountants.
23.2 - Consent of Smith, Stratton, Wise, Heher & Brennan.
(contained in Exhibit 5.1).
24.1 - Power of Attorney (see "Power of Attorney" below).
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement;
Provided, however, that paragraphs (1)(i) and
(1)(ii) above do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Exchange
Act that are incorporated by reference in the
registration statement.
(2) That for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated
by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the
Securities Act of 1933, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Ramsey,
State of New Jersey, on January 15, 1998.
ALTEON INC.
By: /s/ James J. Mauzey
--------------------------
James J. Mauzey
Chairman of the Board and
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James J. Mauzey,
Kenneth I. Moch and Elizabeth A. O'Dell, and each or any one of
them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and conforming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ James J. Mauzey Chairman of the Board January 15, 1998
- --------------------- Chief Executive Officer
James J. Mauzey and Director (principal
executive officer)
/s/ Jere E. Goyan President, Chief Operating January 15, 1998
- --------------------- Officer and Director
Jere E. Goyan
/s/ Kenneth I. Moch Senior Vice President January 15, 1998
- --------------------- Finance and Business
Kenneth I. Moch Development, Chief
Financial Officer
(principal financial
officer)
/s/ Elizabeth O'Dell Vice President, Finance January 15, 1998
- --------------------- and Administration,
Elizabeth A. O'Dell Treasurer, Secretary
(principal accounting
officer)
<PAGE>
/s/ Anthony Cerami Director January 8, 1998
- ---------------------
Anthony Cerami
/s/ Marilyn G. Breslow Director January 7, 1998
- ---------------------
Marilyn G. Breslow
/s/ Mark Novitch Director January 9, 1998
- ---------------------
Mark Novitch
/s/ David K. McCurdy Director January 7, 1998
- ---------------------
David K. McCurdy
/s/ Alan J. Dalby Director January 15, 1998
- ---------------------
Alan J. Dalby
/s/ Robert N. Butler Director January 15, 1998
- ---------------------
Robert N. Butler
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
4.1 - Restated Certificate of Incorporation. (Incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (File Number 33-42574) which
became effective on November 1, 1991).
4.2 - Certificate of the Voting Powers, Designations,
Preference and Relative Participating, Optional and
Other Special Qualifications, Limitations or
Restrictions of Series F Preferred Stock of the Company.
(Incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on August 4,
1995).
4.3 - By-laws, as amended. (Incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K
filed on September 8, 1995).
4.4 - Stockholders' Rights Agreement dated as of July 27,
1995, between Alteon Inc. and Registrar and Transfer
Company, as Rights Agent. (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on August 4, 1995).
4.5 - Registration Rights Agreement dated as of April 24, 1997
between Alteon Inc. and the investors named on the
signature page thereof (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on May 9, 1997).
4.6 - Form of Common Stock Purchase Warrant dated as of April
24, 1997 (Incorporated by reference to Exhibit 4.2 to
the Company's Current Report on Form 8-K filed on May 9,
1997).
4.7 - Amendment to Stockholders' Rights Agreement between
Alteon Inc. and Registrar and Transfer Company, as
Rights Agent (Incorporated by reference to Exhibit 4.4
to the Company's Current Report on Form 8-K filed on May
9, 1997).
4.8 - Amendment to Stockholders' Rights Agreement between
Alteon Inc. and Registrar and Transfer Company, as
Rights Agent (Incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K filed on
December 10, 1997).
4.9 - Form of Common Stock Purchase Warrant dated as of
October 9, 1997.
4.10 - Corrected Certificate of Designations of Series G
Preferred Stock.
4.11 - Corrected Certificate of Designations of Series H
Preferred Stock.
5.1 - Opinion of Smith, Stratton, Wise, Heher & Brennan.
23.1 - Consent of Arthur Andersen LLP, independent public
accountants.
23.2 - Consent of Smith, Stratton, Wise, Heher & Brennan.
(contained in Exhibit 5.1).
24.1 - Power of Attorney (see "Power of Attorney" above).
<PAGE>
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.
________________________
October 9, 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
HOLDER, having an address at 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 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
April 24, 1997, between the Company and certain investors.
(d) the term "Agreement" shall mean the
Preferred Stock Investment Agreement, dated April 24, 1997,
between the Company and certain investors.
(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.
The 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.
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<PAGE>
(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) This Warrant shall be deemed to be a
"Warrant" and the Warrant Shares shall be deemed to be "Warrant
Shares" within the meaning of the Registration Rights Agreement.
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"), provided, that the term "Closing Date" as used in
the Registration Rights Agreement shall mean the date that this
Warrant is delivered to the initial Holder thereof.
(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
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issuance to Warrant Holder the requisite number of shares of C
ommon 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
rights convertible into Common Stock ("Common Stock Equivalents")
without payment of
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<PAGE>
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
supplemental agreement reasonably satisfactory in form and
substance to the Warrant Holder, the due and punctual performance
and
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<PAGE>
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
6
<PAGE>
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 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
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.
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<PAGE>
(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
ADDRESS
8
<PAGE>
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.]
9
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<PAGE>
Dated: ______________________ ALTEON INC.
By: _________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By: ___________________________
Its
10
<PAGE>
(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 fact of the
Warrant)
_______________________________
(Address)
Signed in the presence of:
_______________________
12
CORRECTED CERTIFICATE OF DESIGNATIONS
OF SERIES G PREFERRED STOCK
OF ALTEON INC.
Pursuant to Section 103 of the General Corporation Law of
the State of Delaware, Alteon Inc., organized and existing under
the General Corporation Law of the State of Delaware, files this
Corrected Certificate of Designations of Series G Preferred
Stock of Alteon Inc. to correct the number of shares initially
constituting the Series G Preferred Stock as set forth in
Section 1 of the Certificate of Designations of Series G
Preferred Stock of Alteon Inc. filed on December 11, 1997. The
Certificate of Designations of Series G Preferred Stock of
Alteon Inc. in its corrected form is as follows:
CERTIFICATE OF DESIGNATIONS
OF SERIES G PREFERRED STOCK
OF ALTEON INC.
Pursuant to Section 151 of the General Corporation Law of
the State of Delaware, Alteon Inc. (the "Corporation"),
organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section
103 thereof, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of
Directors of the Corporation by Article Fifth of the Restated
Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), the Board of Directors of the
Corporation on December 3, 1997, adopted the following
resolution creating a series of Preferred Stock designated as
Series G Preferred Stock:
RESOLVED, that, pursuant to the authority vested in
the Board of Directors of the Corporation in accordance
with the provisions of the Certificate of Incorporation
of the Corporation, a series of Preferred Stock of the
Corporation is hereby created and that the designation and
number of shares thereof and the voting powers, preferences
and relative, participating, optional and other special
rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
SECTION 1. Designation and Number of Shares. The
shares of such series shall be designated as "Series G Preferred
Stock" (the "Series G Preferred Stock"), par value $0.01 per
share. The number of shares initially constituting the Series G
Preferred Stock shall be 1,200.
<PAGE>
SECTION 2. Dividends or Distributions.
(a) Quarterly Dividends. The holders of the shares of
Series G Preferred Stock shall be entitled to receive, out of
the assets of the Corporation legally available therefor,
cumulative quarterly dividends, payable in shares of Series G
Preferred Stock, whether or not declared, on the last day of
each fiscal quarter in each year (the "Dividend Payment Date"),
commencing upon the Dividend Payment Date next following the
first issuance of a share of Series G Preferred Stock, at the
rate per annum equal to the Prime Rate published in The Wall
Street Journal five (5) Business Days (as defined in Section
5(a)) prior to such issuance. Such dividend shall be calculated
by multiplying the number of shares of Series G Preferred Stock
held by a holder on the Dividend Payment Date by such Prime Rate
per annum.
(b) Record Date. The Dividend Payment Date shall be the
record date for the determination of holders of shares of Series
G Preferred Stock entitled to receive a dividend declared
thereon.
(c) Accrual and Accumulation. Dividends shall begin to
accrue and be cumulative on outstanding shares of Series G
Preferred Stock from and after the date of issue of such shares
of Series G Preferred Stock. Accrued but unpaid dividends shall
not bear interest. Notwithstanding anything to the contrary
contained herein, the Corporation shall not be required to
deliver certificates representing shares of Series G Preferred
Stock in payment of accrued dividends on any date other than a
Dividend Payment Date.
(d) Other Dividends and Distributions. The holders of the
shares of Series G Preferred Stock shall not be entitled to
receive any other dividends or distributions except as provided
herein.
(e) Necessary Actions. The Corporation shall take any and
all corporate action necessary to declare and pay such dividends
described in this Section 2.
(f) Limitation on Dividends. Dividends shall accrue but
shall not be payable on the shares of Series G Preferred Stock
held by any holder during any period when such holder, its
Affiliates (as hereinafter defined) and any group (a "Group")
(within the meaning of Rule 13d-5 promulgated pursuant to the
Securities and Exchange Act of 1934, as amended from time to
time (the "Exchange Act") of which such holder or any of its
Affiliates is a member is the beneficial owner (as defined in
Rule 13d-3 promulgated pursuant to the Exchange Act) (a
"Beneficial Owner"), in aggregate, directly or indirectly, of
more than forty (40%) percent of the Common Stock of the
Corporation. For purposes of this Certificate of Designations
of Series G Preferred Stock (the "Certificate"),
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<PAGE>
"Affiliate" shall have the meaning given it in Rule 405 promulgated under
the Securities Act of 1933, as amended from time to time (the
"Securities Act"), provided, however, that an affiliate which is
not controlled (within the meaning of Rule 405 promulgated under
the Securities Act) by a holder of Series G Preferred Stock
shall not be deemed to be an Affiliate unless such affiliate
files statements regarding the securities of the Corporation
pursuant to Regulation 13D-G under the Exchange Act, and
provided, further, that a holder and its Affiliate(s) shall not
be deemed to be a member of a Group unless a member of such
Group has filed statements regarding the securities of the
Corporation pursuant to Regulation 13D-G under the Exchange Act
stating that such holder or its Affiliate(s) is a member of such
Group.
SECTION 3. Voting Rights. The Series G Preferred Stock
shall have no voting rights whatsoever, except as required under
the General Corporation Law of Delaware.
SECTION 4. Certain Restrictions.
(a) Restrictions. Whenever quarterly dividends payable on
the Series G Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends,
whether or not declared, on shares of Series G Preferred Stock
outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series G Preferred Stock;
(ii) declare or pay dividends on, or make any
other distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series G Preferred Stock, except dividends
paid ratably on the Series G Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up)
with the Series G Preferred Stock, except for (x) redemptions,
purchases or other acquisitions made ratably of the Series G
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled, (y)
redemptions, purchases or other acquisitions made pursuant to
Section 8, or redemption, purchases
3
<PAGE>
or other acquisitions of the 6% Cumulative Convertible Preferred
Stock or Series H Preferred Stock made pursuant to the Certificate
of Designations for suchstock or any agreement with the holders thereof
in effect on the date this Certificate of Designations is executed.
SECTION 5. Conversion Rights. The shares of Series G
Preferred Stock may be converted into shares of Common Stock or
cash as set forth in this Section 5.
(a) Conversion by Holder. Subject to and in
compliance with the provisions of this Section 5, any shares of
Series G Preferred Stock may, at the option of the holder
thereof upon at least seventy (70) days prior written notice to
the Corporation, be converted into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock
which a holder of Series G Preferred Stock shall be entitled to
receive upon conversion of a share of Series G Preferred Stock
shall be the quotient (hereinafter, the "Conversion Ratio")
obtained by dividing $10,000 (the "Original Issuance Price") by
the average of the Fair Market Value of the Common Stock for the
twenty (20) Business Days immediately preceding the Conversion
Date (as such terms are hereinafter defined) (such average being
hereinafter referred to as the "Conversion Value"). For
purposes of this Certificate, (i) "Business Day" shall mean a
day on which the Nasdaq National Market or, if the Common Stock
is not then listed on the Nasdaq National Market, any other
established exchange or national system on which the Common
Stock is listed, is open for trading and (ii) "Fair Market
Value" shall mean, for any Business Day, the closing sales price
of the Common Stock (or the closing bid, if no sales were
reported) as quoted on the Nasdaq National Market, or if the
Common Stock is not then quoted on the Nasdaq National Market,
on any established stock exchange or national market system on
which the Common Stock is listed for such Business Day.
(b) Conversion by Corporation. Subject to and in
compliance with the provisions of this Section 5, any shares of
Series G Preferred Stock may at any time (subject to the
limitation in Section 5(e)(iii)) at the option of the
Corporation upon at least seventy (70) days prior written notice
to the holder of Series G Preferred Stock, be converted into
fully-paid and nonassessable shares of Common Stock or cash.
Upon conversion of shares of Series G Preferred Stock by the
Corporation, a holder of Series G Preferred Stock shall be
entitled to a number of shares of Common Stock equal to the
Conversion Ratio for each share of Series G Preferred Stock
converted.
(c) Conversion Procedure. In order to convert Series
G Preferred Stock into Common Stock, a holder of Series G
Preferred Stock or the Corporation, as the case may be, shall
deliver to the other written notice (a "Conversion Notice") of
its election to make such conversion at least seventy (70) days
prior to the
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intended date of conversion (the "Conversion Date"). The Conversion
Notice, if delivered by a holder, shall be delivered to the Corporation
at its principal office and if delivered by the Corporation shall be
delivered to the holder at its address as shown on the records of the
Corporation. The Conversion Notice shall specify the Conversion Date, set
forth the number of shares of Series G Preferred Stock to be converted
upon the Conversion Date and, in the case of conversion by the
holder, shall state the name or names (with address or
addresses) in which the certificate(s) for shares of Common
Stock issuable upon such conversion shall be issued and, in the
case of conversion by the Corporation, shall state that the
certificate(s) for shares of Common Stock issuable upon
conversion shall be issued in the name and address of the
holder, unless instructed otherwise by such holder. On the
Conversion Date the holder shall surrender the certificate(s)
representing the shares of Series G Preferred Stock being
converted, duly endorsed, to the Corporation at its principal
office or at the office of its transfer agent. As promptly as
possible after the Conversion Date, the Corporation shall issue
and deliver to such holder, at the Corporation's sole election,
such certificate(s) as such holder may request for the number of
whole shares of Common Stock issuable upon the conversion of
such shares of Series G Preferred Stock, in accordance with the
provisions of this Section 5, or cash in the amount equal to
$10,000 for each share of Series G Preferred Stock being
converted, or any combination of Common Stock and cash; as well
as cash as provided in Section 5(f) in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at
such time the rights of the holder of the converted shares of
Series G Preferred Stock shall cease (other than the right to
receive accrued but unpaid dividends, whether or not declared,
as of such Conversion Date), and the person or persons in whose
name or names any certificate(s) for shares of Common Stock
shall be issuable shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented
thereby unless the Corporation delivers cash to such holders as
permitted by this Section 5(c).
(d) Adjustments for Stock Splits, Recombinations, etc.
(i) The Conversion Date (as defined in Section
5(c)) shall be subject to adjustment from time to time as
follows:
(A) In the event the Corporation
should at any time or from time to time after the date hereof
fix a record date which is less than twenty-one (21) days prior
to a Conversion Date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or
entitling the holder
5
<PAGE>
thereof to receive directly or indirectly, additional shares of Common
Stock (hereinafter, the "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares
of Common Stock issuable upon conversion or exercise thereof), then such
Conversion Date shall be extended to the date which is
twenty-one (21) days after such record date.
(B) In the event the Corporation
should at any time or from time to time after the date hereof
fix a record date which is less than twenty-one (21) days prior
to a Conversion Date for a combination of the outstanding shares
of Common Stock, then such Conversion Date shall be extended to
the date which is twenty-one (21) days after such record date.
(ii) In the event that after the date hereof
the Corporation shall declare a dividend payable in securities
of other persons, evidences of indebtedness issued by this
Corporation or other persons, assets (excluding cash dividends),
or options or rights not referred to in Section 5(d)(i), then,
in each such case each holder of Series G Preferred Stock shall
be entitled to a proportionate share of any such distribution as
though such holder were the holder of the number of shares of
Common Stock into which such holder's shares of Series G
Preferred Stock are convertible as of the record date fixed for
the determination of the holders of Common Stock entitled to
receive such distribution. For purposes of the foregoing, the
average Fair Market Value of the Common Stock over the twenty
(20) Business Days prior to the record date shall be utilized in
calculating the Conversion Value and Conversion Ratio.
(iii) If at any time or from time to time after
the date hereof there shall be a recapitalization of the Common
Stock (other than a Corporate Reorganization under Section 7 or
a subdivision or combination provided for above in this Section
5(d)), provision shall be made so that each holder of Series G
Preferred Stock shall thereafter be entitled to receive upon any
conversion of the Series G Preferred Stock under this Section 5
the number of shares of stock or other securities or property of
the Corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion of Series G Preferred Stock pursuant
to Section 5 would have been entitled on such recapitalization,
all subject to further adjustment as provided hereinbelow or
with respect to such other securities or property by the terms
thereof. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 5 with
respect to the rights of the holders of Series G Preferred Stock
after the recapitalization to the end that the provisions of
this Section 5 (including the adjustment in the Conversion Ratio
and the number of shares of Common Stock issuable on conversion)
shall be applicable after that event as nearly equivalent as may
be practicable.
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(e) Limitations Upon Conversion. Notwithstanding any
other provision of this Section 5:
(i) In no event shall any holder of Series G
Preferred Stock be entitled to deliver a Conversion Notice with
respect to the conversion into Common Stock of any shares of
Series G Preferred Stock to the extent that, after giving
immediate effect to such conversion (but employing for purposes
of calculating the number of shares of Common Stock to be issued
upon such conversion, in lieu of any Conversion Value, the Fair
Market Value for the Business Day immediately preceding the date
of such Conversion Notice), such holder, its Affiliates and any
Group of which such holder or its Affiliates is a member would
be the Beneficial Owner, in aggregate, directly or indirectly,
of more than forty percent (40%) of the Common Stock that (but
for this Section 5(e)) would be outstanding following such
conversion. To the extent a Conversion Notice provides for the
conversion on the Conversion Date of shares of Series G
Preferred Stock in excess of that permitted under this Section
5(e)(i), then such Conversion Notice shall be deemed to cover
the maximum number of shares of Series G Preferred Stock which
the holder thereof is entitled to convert on such Conversion
Date.
(ii) In addition to the limitation imposed by
Section 5(e)(i), on a Conversion Date in no event shall any
holder of Series G Preferred Stock be entitled to convert into
Common Stock any shares of Series G Preferred Stock to the
extent that, after giving effect to such conversion pursuant to
the provisions of this Section 5, such holder, its Affiliates
and any Group of which such holder or its Affiliates is a member
would be the Beneficial Owner, in aggregate, directly or
indirectly, of more than forty percent (40%) of the Common Stock
that (but for this Section 5(e)) would be outstanding following
such conversion. To the extent a Conversion Notice provides for
the conversion on the Conversion Date of shares of Series G
Preferred Stock in excess of that permitted under this Section
5(e)(ii), then such Conversion Notice shall be deemed to cover
the maximum number of shares of Series G Preferred Stock which
the holder thereof is entitled to convert on such Conversion
Date.
(iii) The Corporation shall not be entitled to
convert any shares of Series G Preferred Stock into shares of
Common Stock if the holder of the Series G Preferred Stock and
its Affiliates would be the Beneficial Owner of more than ten
percent (10%) of the Common Stock that (but for this Section
5(e)) would be outstanding following any such conversion or if
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976 the holder of the shares of Common Stock to be issued upon
conversion would be required to make a filing in advance of the
acquisition of such shares. To the extent that a Conversion
Notice provides for the conversion on the Conversion Date of
shares of Series G Preferred Stock in excess of that permitted
pursuant to the prior sentence,
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<PAGE>
then upon written notice from the holder to the Corporation specifying
the holder's Beneficial Ownership percentage on the date of the
Conversion Notice, such Conversion Notice shall be deemed to cover
the maximum number of shares of Series G Preferred Stock which the
Corporation is entitled to convert on such Conversion Date. In addition,
at any time that the holder of the Series G Preferred Stock and its
Affiliates is the Beneficial Owner of more than ten percent
(10%) of the Common Stock, the Corporation shall not be entitled
to convert any shares of Series G Preferred Stock, provided,
however, that, on a Conversion Date which is after the later of
(A) the date which is six (6) months and one (1) Business Day
from the last date on which the holder of Series G Preferred
Stock or its Affiliates purchased or otherwise acquired (as
those terms have been interpreted by the courts for the purposes
of Section 16 of the Exchange Act) any Common Stock of the
Corporation or (B) the date which is six (6) months and one (1)
Business Day from the date on which the holder of Series G
Preferred Stock has purchased all shares of Series G Preferred
Stock and Series H Preferred Stock which it is obligated to
purchase pursuant to that certain Stock Purchase Agreement by
and between the Corporation and Genentech, Inc., dated as of
December 1, 1997 (the "Stock Purchase Agreement"), the
Corporation may convert to cash all, but not less than all, of
the shares of Series G Preferred Stock and Series H Preferred
Stock held by such holder. Any purchases or acquisitions of
Common Stock by the holder after receipt of a Conversion Notice
providing for conversion pursuant to the preceding sentence
shall not be included in calculating the time period described
in phrase (A) of such sentence. For purposes of this Section
5(e)(iii) only, a Conversion Date set forth in a Conversion
Notice delivered to the Company by a holder shall be deemed to
be a date on which the holder has purchased or acquired Common
Stock.
For purposes of this Section 5(e), all calculations of the
number of shares of Common Stock that (but for this Section
5(e)) would be outstanding following any conversion of Series G
Preferred Stock shall be made upon the assumption that the
Corporation would elect, pursuant to Section 5(b), to issue
shares of Common Stock, and not cash, in connection with such
conversion.
(f) Cash in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares
shall be issued upon the conversion of shares of Series G
Preferred Stock. In lieu of any fractional shares of Common
Stock that would otherwise be issuable upon conversion of Series
G Preferred Stock, the Corporation shall pay to the holder of
the shares of Series G Preferred Stock that were converted a
cash adjustment in respect of such fractional shares in an
amount equal to the same fraction of the Conversion Value. The
determination as to whether or not any fractional shares are
issuable shall be based upon the total number of shares of
Series G Preferred Stock being converted at any one time by any
holder thereof, and not upon each share of Series G Preferred
Stock being converted by such holder.
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<PAGE>
(g) Partial Conversion. In the event some but not
all of the shares of Series G Preferred Stock represented by a
certificate or certificates surrendered by a holder are
converted, then Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a
new certificate representing the number of shares of Series G
Preferred Stock that were not converted.
(h) Standstill. For a period of five (5) years
following the first issuance of a share of Series G Preferred
Stock, during each calendar week within a Restricted Period (as
hereinafter defined), no holder of Series G Preferred Stock
shall sell, transfer, assign, pledge, hypothecate or otherwise
dispose of, directly or indirectly, more than the Restricted
Amount (as hereinafter defined) in such calendar week in the
Restricted Period. A "Restricted Period" shall mean any period
commencing on the date which is twenty-five (25) Business Days
preceding the Conversion Date (provided that a Conversion Notice
has been provided to the Corporation under this Section 5) and
ending on the Conversion Date applicable to such Conversion
Notice, or any other period of time designated as a Restricted
Period in this Certificate. The "Restricted Amount" applicable
to any such calendar week within the Restricted Period shall
mean that number of shares of Common Stock equal to twenty-five
(25%) percent of the average weekly trading volume of the Common
Stock for the four (4) week period preceding the first Business
Day within the Restricted Period. Neither the Corporation nor
its transfer agent shall be required to register upon the books
and records of the Corporation any sale, transfer, assignment,
pledge, hypothecation or other disposition of Common Stock made
contrary to this Section 5(h). Furthermore, in the event of any
violation of this Section 5(h), then the Corporation shall not
be obligated to effect the subject conversion. In the case of
conversion of Series G Preferred Stock by the Corporation, the
Restricted Period shall begin on the date of delivery of the
Conversion Notice.
(i) Conversion Upon Default. In the event of a
material uncured default by the Corporation under any of the
Transaction Documents (as such term is defined in the Stock
Purchase Agreement), Genentech shall have the right to convert
its shares of Series G Preferred Stock into shares of Common
Stock according to the provisions of Section 5. Notwithstanding
the foregoing, for the purposes of Genentech's right to convert
under this Section 5(i), the limitations set forth in Sections
5(e)(i) and 5(e)(ii) shall not apply.
(j) Automatic Conversion. Each share of Series G
Preferred Stock shall automatically be converted into shares of
Common Stock at its then effective Conversion Ratio immediately
upon the transfer of ownership by the initial holder to a third
party which is not an Affiliate of such holder or a member of
any Group of which such holder or any of its Affiliates is a
member.
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In the event of such an automatic conversion, the
outstanding shares of Series G Preferred Stock shall be
converted automatically without any further action by the holder
of such shares and whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer
agent. The Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon
such automatic conversion unless the certificates evidencing
such shares of Series G Preferred Stock are delivered to the
Corporation or its transfer agent. Such conversion shall be
deemed to have been made on the date of transfer to such third
party holder and the person(s) entitled to receive shares of
Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of
Common Stock as of such date. For purposes of this Section 5(j)
only, "Affiliate" shall have the meaning given it in Rule 405
promulgated under the Securities Act.
SECTION 6. Liquidation Rights. Upon the liquidation,
dissolution or winding up of the Corporation, whether voluntary
or involuntary, no distribution shall be made (a) to the holders
of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series G
Preferred Stock unless, prior thereto, the holders of shares of
Series G Preferred Stock shall have received an amount equal to
(i) the Original Issuance Price per share for the Series G
Preferred Stock, plus (ii) the Original Issuance Price per share
for each share of Series G Preferred Stock constituting accrued
and unpaid dividends thereon, whether or not declared, to the
date of such distribution, or (b) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series G Preferred Stock,
except distributions made ratably on the Series G Preferred
Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up.
SECTION 7. Corporate Reorganization. If at any time
or from time to time there shall be a reorganization,
consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property (each
of such transactions, a "Corporate Reorganization"), then, at
such time and in any such case the Corporation shall provide
each holder of Series G Preferred Stock with notice of such
transaction and the details of such exchange at least fifteen
(15) days before the closing of such transaction, and each such
holder of Series G Preferred Stock shall have the right, at its
election, to convert such shares of Series G Preferred Stock
into shares of Common Stock prior to such closing, or to receive
in such transaction the amount of the liquidation preference set
forth in Section 6, as appropriate, in the form of the other
stock or securities, cash and/or other property as is received
by the holders of the Common
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Stock. For purposes of the foregoing, the average Fair Market Value
of the Common Stock over the twenty (20) Business Days prior to the
closing of such transaction shall be utilized in calculating the Conversion
Value and Conversion Ratio, and a Restricted Period shall
commence on the date the holder of the Series G Preferred Stock
receives notice of such transaction and shall terminate on the
date on which such transaction closes.
SECTION 8. Corporation's Repurchase Obligation. For
a period of five (5) years following the first issuance of
Series G Preferred Stock, if at any time the Corporation shall
repurchase (a "Common Stock Repurchase") any shares of Common
Stock from any person or entity other than a holder of Series G
Preferred Stock or Series H Preferred Stock or Common Stock
issued upon conversion of 6% Cumulative Convertible Preferred
Stock, then the Corporation shall repurchase from each holder of
shares of Series G Preferred Stock the number of whole shares of
Series G Preferred Stock determined by multiplying the number of
shares of Series G Preferred Stock then held by such holder by a
fraction, the numerator of which is the number of shares of
Common Stock repurchased by the Company from the other holder(s)
and the denominator of which is the number of shares of Common
Stock issued and outstanding on the date of the Common Stock
Repurchase. The repurchase price per share of Series G
Preferred Stock repurchased pursuant to this Section 8 shall be
the product of the number of shares of Common Stock into which a
share of Series G Preferred Stock is convertible on the date of
the Common Stock Repurchase and the price per share of Common
Stock paid by the Corporation in connection with the Common
Stock Repurchase. For purposes of the foregoing, the average
Fair Market Value of the Common Stock over the twenty (20)
Business Days prior to the closing of the Common Stock
Repurchase shall be utilized in calculating the Conversion Value
and Conversion Ratio, and a Restricted Period shall commence on
the date the holder of the Series G Preferred Stock receives
notice of the Common Stock Repurchase and shall terminate on the
date of the Common Stock Repurchase. Such repurchase of shares
of Series G Preferred Stock shall be effected on the date of the
Common Stock Repurchase.
SECTION 9. No Redemption; No Sinking Fund.
(a) No Redemption. The shares of Series G Preferred
Stock shall not be subject to redemption by the Corporation or
at the option of any holder of Series G Preferred Stock except
as set forth in the Certificate of Incorporation or in Section
8.1 of the Stock Purchase Agreement; provided, however, that,
subject to Section 4 hereof, the Corporation may purchase or
otherwise acquire outstanding shares of Series G Preferred Stock
by offer to any holder or holders of shares of Series G
Preferred Stock and the Corporation may deliver cash in lieu of
Common Stock upon the conversion of the shares of Series G
Preferred Stock by the holders thereof or by the Corporation.
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(b) No Sinking Fund. The shares of Series G
Preferred Stock shall not be subject to or entitled to the
operation of a retirement or sinking fund.
SECTION 10. Ranking. The Series G Preferred Stock
shall rank on parity in all respects with the 6% Cumulative
Convertible Preferred Stock and the Series H Preferred Stock and
superior in all respects to the Series F Preferred Stock.
Nothing contained herein shall limit or restrict the ability of
the Board of Directors of the Corporation, pursuant to Article
Fifth of the Certificate of Incorporation, to fix powers,
preferences or rights of the shares of one or more series of
Preferred Stock of the Corporation that are superior to the
powers, preferences or rights of the Series G Preferred Stock or
the ability of the Corporation to issue shares of such Preferred
Stock.
SECTION 11. Fractional Shares. To the extent
necessary, the Corporation shall issue fractions of shares of
Series G Preferred Stock issuable in payment of dividends. Such
fractions shall be rounded to two (2) decimal places.
SECTION 12. Re-acquired Shares. Any shares of Series
G Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever (including upon conversion
thereof) shall be retired and canceled promptly after the
acquisition thereof. All such shares, upon their cancellation,
shall become authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are once more
designated as part of a particular series by the Board of
Directors pursuant to the provisions of Article Fifth of the
Certificate of Incorporation.
SECTION 13. Reservation of Common Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the
shares of Series G Preferred Stock, such number of its shares of
Common Stock as from time to time shall be sufficient to effect
the conversion of all outstanding shares of Series G Preferred
Stock. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Series G Preferred
Stock, then the Corporation shall promptly take such corporate
action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including, without
limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to the
Certificate of Incorporation.
SECTION 14. Amendment. None of the powers,
preferences and relative, participating, optional and other
special rights of the Series G Preferred Stock as provided
herein
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or in the Certificate of Incorporation shall be amended
in any manner which would alter or change the powers,
preferences, rights or privileges of the holders of Series G
Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least sixty-seven (67%)
percent of the outstanding shares of Series G Preferred Stock,
voting as a separate class.
IN WITNESS WHEREOF, the Corporation has caused this
Corrected Certificate of Designations to be duly executed in its
corporate name on this 14th day of January, 1998.
ALTEON INC.
By: /s/ James J. Mauzey
-----------------------
Name: James J. Mauzey
---------------------
Title: President & CEO
--------------------
13
CORRECTED CERTIFICATE OF DESIGNATIONS
OF SERIES H PREFERRED STOCK
OF ALTEON INC.
Pursuant to Section 103 of the General Corporation Law
of the State of Delaware, Alteon Inc., organized and existing
under the General Corporation Law of the State of Delaware,
files this Corrected Certificate of Designations of Series H
Preferred Stock of Alteon Inc. to correct the number of shares
initially constituting the Series H Preferred Stock as set forth
in Section 1 of the Certificate of Designations of Series H
Preferred Stock of Alteon Inc. filed on December 11, 1997. The
Certificate of Designations of Series H Preferred Stock of
Alteon Inc. in its corrected form is as follows:
CERTIFICATE OF DESIGNATIONS
OF SERIES H PREFERRED STOCK
OF ALTEON INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware, Alteon Inc. (the "Corporation"),
organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section
103 thereof, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the
Board of Directors of the Corporation by Article Fifth of the
Restated Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), the Board of Directors of the
Corporation on December 3, 1997, adopted the following
resolution creating a series of Preferred Stock designated as
Series H Preferred Stock:
RESOLVED, that, pursuant to the authority vested
in the Board of Directors of the Corporation in
accordance with the provisions of the Certificate of
Incorporation of the Corporation, a series of Preferred
Stock of the Corporation is hereby created and that the
designation and number of shares thereof and the voting
powers, preferences and relative, participating,
optional and other special rights of the shares of such
series, and the qualifications, limitations or
restrictions thereof are as follows:
SECTION 1. Designation and Number of Shares. The shares
of such series shall be designated as "Series H Preferred Stock"
(the "Series H Preferred Stock"), par value $0.01 per share. The
number of shares initially constituting the Series H Preferred
Stock shall be 8,000.
<PAGE>
<PAGE>
SECTION 2. Dividends or Distributions.
(a) Quarterly Dividends. The holders of the shares of
Series H Preferred Stock shall be entitled to receive, out of
the assets of the Corporation legally available therefor,
cumulative quarterly dividends, payable in shares of Series H
Preferred Stock, whether or not declared, on the last day of
each fiscal quarter in each year (the "Dividend Payment Date"),
commencing upon the Dividend Payment Date next following the
first issuance of a share of Series H Preferred Stock, at the
rate per annum equal to the Prime Rate published in The Wall
Street Journal five (5) Business Days (as defined in Section
5(a)) prior to such issuance. Such dividend shall be calculated
by multiplying the number of shares of Series H Preferred Stock
held by a holder on the Dividend Payment Date by such Prime Rate
per annum.
(b) Record Date. The Dividend Payment Date shall be
the record date for the determination of holders of shares of
Series H Preferred Stock entitled to receive a dividend declared
thereon.
(c) Accrual and Accumulation. Dividends shall begin
to accrue and be cumulative on outstanding shares of Series H
Preferred Stock from and after the date of issue of such shares
of Series H Preferred Stock. Accrued but unpaid dividends shall
not bear interest. Notwithstanding anything to the contrary
contained herein, the Corporation shall not be required to
deliver certificates representing shares of Series H Preferred
Stock in payment of accrued dividends on any date other than a
Dividend Payment Date.
(d) Other Dividends and Distributions. The holders of
the shares of Series H Preferred Stock shall not be entitled to
receive any other dividends or distributions except as provided
herein.
(e) Necessary Actions. The Corporation shall take any
and all corporate action necessary to declare and pay such
dividends described in this Section 2.
(f) Limitation on Dividends. Dividends shall accrue
but shall not be payable on the shares of Series H Preferred
Stock held by any holder during any period when such holder, its
Affiliates (as hereinafter defined) and any group (a "Group")
(within the meaning of Rule 13d-5 promulgated pursuant to the
Securities and Exchange Act of 1934, as amended from time to
time (the "Exchange Act") of which such holder or any of its
Affiliates is a member is the beneficial owner (as defined in
Rule 13d-3 promulgated pursuant to the Exchange Act) (a
"Beneficial Owner"), in aggregate, directly or indirectly, of
more than forty (40%) percent of the Common Stock of the
Corporation. For purposes of this Certificate of Designations
of Series H Preferred Stock (the "Certificate"), "Affiliate"
shall have the meaning given it in Rule 405 promulgated
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under the Securities Act of 1933, as amended from time to time (the
"Securities Act"), provided, however, that an affiliate which is
not controlled (within the meaning of Rule 405 promulgated under
the Securities Act) by a holder of Series H Preferred Stock
shall not be deemed to be an Affiliate unless such affiliate
files statements regarding the securities of the Corporation
pursuant to Regulation 13D-G under the Exchange Act, and
provided, further, that a holder and its Affiliate(s) shall not
be deemed to be a member of a Group unless a member of such
Group has filed statements regarding the securities of the
Corporation pursuant to Regulation 13D-G under the Exchange Act
stating that such holder or its Affiliate(s) is a member of such
Group.
SECTION 3. Voting Rights. The Series H Preferred Stock
shall have no voting rights whatsoever, except as required under
the General Corporation Law of Delaware.
SECTION 4. Certain Restrictions.
(a) Restrictions. Whenever quarterly dividends
payable on the Series H Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid
dividends, whether or not declared, on shares of Series H
Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series H Preferred Stock;
(ii) declare or pay dividends on, or make any
other distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series H Preferred Stock, except dividends
paid ratably on the Series H Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up)
with the Series H Preferred Stock, except for (x) redemptions,
purchases or other acquisitions made ratably of the Series H
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled, (y)
redemptions, purchases or other acquisitions made pursuant to
Section 8, or redemption, purchases or other acquisitions of the
6% Cumulative Convertible Preferred
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Stock or Series G Preferred Stock made pursuant to the Certificate
of Designations for such stock or any agreement with the holders
thereof in effect on the date this Certificate of Designations is executed.
SECTION 5. Conversion Rights. The shares of Series H
Preferred Stock may be converted into shares of Common Stock or
cash as set forth in this Section 5 at any time following the
earlier of: (i) the granting of approval by the U.S. Food and
Drug Administration (or any successor thereto) for the marketing
and sale of any product which contains as an active ingredient
the compound "Pimagedine" and which is a "Licensed Product"(as
such terms are defined in that certain Development Collaboration
and License Agreement (the "License Agreement") entered into by
and between the Corporation and Genentech, Inc. ("Genentech") as
of December 1, 1997; (ii) termination by Genentech of the
License Agreement pursuant to Section 10.4(a) or 10.5 thereof;
or (iii) December 1, 2002. Notwithstanding the foregoing,
Genentech may convert up to that number of shares of Series H
Preferred Stock described in the following sentence at any time
when the product of (A) the average Fair Market Value (as
hereinafter defined) of the Corporation's Common Stock for the
twenty (20) days preceding the date of delivery of a Conversion
Notice (as hereinafter defined) times (B) the number of
outstanding shares of the Corporation's Common Stock on the date
of delivery of a Conversion Notice, is less than two (2) times
the aggregate price paid by Genentech to the Corporation for all
shares of Series G Preferred Stock and Series H Preferred Stock
then held by it (the "Purchase Price"). The number of shares of
Series H Preferred Stock which Genentech shall be entitled to
convert at any time shall not exceed that number of shares of
Series H Preferred Stock, the Original Issuance Price (as
hereinafter defined) of which, when added to the product of (A)
and (B) of the preceding sentence, after giving effect to such
conversion, will cause such sum to exceed two (2) times the
Purchase Price of the Series G Preferred Stock and Series H
Preferred Stock held by Genentech following such conversion,
provided, however, that such Original Issuance Price shall be
rounded up to the nearest multiple of $2,500,000. Genentech's
right to convert shares of Series H Preferred Stock pursuant to
the preceding sentence shall be suspended for a period of six
(6) months following the effective date of termination of the
License Agreement by Genentech under Section 10.5 of the License
Agreement, unless such termination occurs within sixty (60) days
after new technical data regarding the development of Pimagedine
becomes available to Genentech.
(a) Conversion by Holder. Subject to and in
compliance with the provisions of this Section 5, any shares of
Series H Preferred Stock may, at the option of the holder
thereof upon at least seventy (70) days prior written notice to
the Corporation, be converted into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock
which a holder of Series H
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<PAGE>
Preferred Stock shall be entitled to receive upon conversion of a
share of Series H Preferred Stock shall be the quotient (hereinafter,
the "Conversion Ratio") obtained by dividing $10,000 (the "Original
Issuance Price") by the average of the Fair Market Value of the
Common Stock for the twenty (20) Business Days immediately preceding
the Conversion Date (as such terms are hereinafter defined) (such
average being hereinafter referred to as the "Conversion Value"). For
purposes of this Certificate, (i) "Business Day" shall mean a
day on which the Nasdaq National Market or, if the Common Stock
is not then listed on the Nasdaq National Market, any other
established exchange or national system on which the Common
Stock is listed, is open for trading and (ii) "Fair Market
Value" shall mean, for any Business Day, the closing sales price
of the Common Stock (or the closing bid, if no sales were
reported) as quoted on the Nasdaq National Market, or if the
Common Stock is not then quoted on the Nasdaq National Market,
on any established stock exchange or national market system on
which the Common Stock is listed for such Business Day.
(b) Conversion by Corporation. Subject to and in
compliance with the provisions of this Section 5, any shares of
Series H Preferred Stock may at any time (subject to the
limitation in Section 5(e)(iii)) at the option of the
Corporation upon at least seventy (70) days prior written notice
to the holder of Series H Preferred Stock, be converted into
fully-paid and nonassessable shares of Common Stock or cash.
Upon conversion of shares of Series H Preferred Stock by the
Corporation, a holder of Series H Preferred Stock shall be
entitled to a number of shares of Common Stock equal to the
Conversion Ratio for each share of Series H Preferred Stock
converted.
(c) Conversion Procedure. In order to convert Series
H Preferred Stock into Common Stock, a holder of Series H
Preferred Stock or the Corporation, as the case may be, shall
deliver to the other written notice (a "Conversion Notice") of
its election to make such conversion at least seventy (70) days
prior to the intended date of conversion (the "Conversion
Date"). The Conversion Notice, if delivered by a holder, shall
be delivered to the Corporation at its principal office and if
delivered by the Corporation shall be delivered to the holder at
its address as shown on the records of the Corporation. The
Conversion Notice shall specify the Conversion Date, set forth
the number of shares of Series H Preferred Stock to be converted
upon the Conversion Date and, in the case of conversion by the
holder, shall state the name or names (with address or
addresses) in which the certificate(s) for shares of Common
Stock issuable upon such conversion shall be issued and, in the
case of conversion by the Corporation, shall state that the
certificate(s) for shares of Common Stock issuable upon
conversion shall be issued in the name and address of the
holder, unless instructed otherwise by such holder. On the
Conversion Date the holder shall surrender the certificate(s)
representing the shares of Series H Preferred Stock
5
<PAGE>
being converted, duly endorsed, to the Corporation at its principal
office or at the office of its transfer agent. As promptly as
possible after the Conversion Date, the Corporation shall issue
and deliver to such holder, at the Corporation's sole election,
such certificate(s) as such holder may request for the number of
whole shares of Common Stock issuable upon the conversion of
such shares of Series H Preferred Stock, in accordance with the
provisions of this Section 5, or cash in the amount equal to
$10,000 for each share of Series H Preferred Stock being
converted, or any combination of Common Stock and cash; as well
as cash as provided in Section 5(f) in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at
such time the rights of the holder of the converted shares of
Series H Preferred Stock shall cease (other than the right to
receive accrued but unpaid dividends, whether or not declared,
as of such Conversion Date), and the person or persons in whose
name or names any certificate(s) for shares of Common Stock
shall be issuable shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented
thereby unless the Corporation delivers cash to such holders as
permitted by this Section 5(c).
(d) Adjustments for Stock Splits, Recombinations,
etc.
(i) The Conversion Date (as defined in Section
5(c)) shall be subject to adjustment from time to time as
follows:
(A) In the event the Corporation
should at any time or from time to time after the date hereof
fix a record date which is less than twenty-one (21) days prior
to a Conversion Date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter, the "Common
Stock Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common
Stock Equivalents (including the additional shares of Common
Stock issuable upon conversion or exercise thereof), then such
Conversion Date shall be extended to the date which is
twenty-one (21) days after such record date.
(B) In the event the Corporation
should at any time or from time to time after the date hereof
fix a record date which is less than twenty-one (21) days prior
to a Conversion Date for a combination of the outstanding shares
of Common Stock, then such Conversion Date shall be extended to
the date which is twenty-one (21) days after such record date.
(ii) In the event that after the date hereof
the Corporation shall declare a dividend payable in securities
of other persons, evidences of indebtedness issued by this
Corporation or other persons, assets (excluding cash dividends),
or options or rights not referred to in Section 5(d)(i), then,
in each such case each holder of Series H Preferred Stock shall
be entitled to a proportionate share of any such distribution as
though such holder were the holder of the number of shares of
Common Stock into which such holder's shares of Series H
Preferred Stock are convertible as of the record date fixed for
the determination of the holders of Common Stock entitled to
receive such distribution. For purposes of the foregoing, the
average Fair Market Value of the Common Stock over the twenty
(20) Business Days prior to the record date shall be utilized in
calculating the Conversion Value and Conversion Ratio.
(iii) If at any time or from time to time after
the date hereof there shall be a recapitalization of the Common
Stock (other than a Corporate Reorganization under Section 7 or
a subdivision or combination provided for above in this Section
5(d)), provision shall be made so that each holder of Series H
Preferred Stock shall thereafter be entitled to receive upon any
conversion of the Series H Preferred Stock under this Section 5
the number of shares of stock or other securities or property of
the Corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion of Series H Preferred Stock pursuant
to Section 5 would have been entitled on such recapitalization,
all subject to further adjustment as provided hereinbelow or
with respect to such other securities or property by the terms
thereof. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 5 with
respect to the rights of the holders of Series H Preferred Stock
after the recapitalization to the end that the provisions of
this Section 5 (including the adjustment in the Conversion Ratio
and the number of shares of Common Stock issuable on conversion)
shall be applicable after that event as nearly equivalent as may
be practicable.
(e) Limitations Upon Conversion. Notwithstanding any
other provision of this Section 5:
(i) In no event shall any holder of Series H
Preferred Stock be entitled to deliver a Conversion Notice with
respect to the conversion into Common Stock of any shares of
Series H Preferred Stock to the extent that, after giving
immediate effect to such conversion (but employing for purposes
of calculating the number of shares of Common Stock to be issued
upon such conversion, in lieu of any Conversion Value, the Fair
Market Value for the Business Day immediately preceding the date
of such Conversion Notice), such holder, its Affiliates and any
Group of which such holder or its Affiliates is a member would
be the Beneficial Owner, in aggregate, directly or indirectly,
of more than forty percent (40%) of the Common Stock that (but
for this Section 5(e)) would be
7
<PAGE>
outstanding following such conversion. To the extent a Conversion
Notice provides for the conversion on the Conversion Date of shares
of Series H Preferred Stock in excess of that permitted under this Section
5(e)(i), then such Conversion Notice shall be deemed to cover
the maximum number of shares of Series H Preferred Stock which
the holder thereof is entitled to convert on such Conversion
Date.
(ii) In addition to the limitation imposed by
Section 5(e)(i), on a Conversion Date in no event shall any
holder of Series H Preferred Stock be entitled to convert into
Common Stock any shares of Series H Preferred Stock to the
extent that, after giving effect to such conversion pursuant to
the provisions of this Section 5, such holder, its Affiliates
and any Group of which such holder or its Affiliates is a member
would be the Beneficial Owner, in aggregate, directly or
indirectly, of more than forty percent (40%) of the Common Stock
that (but for this Section 5(e)) would be outstanding following
such conversion. To the extent a Conversion Notice provides for
the conversion on the Conversion Date of shares of Series H
Preferred Stock in excess of that permitted under this Section
5(e)(ii), then such Conversion Notice shall be deemed to cover
the maximum number of shares of Series H Preferred Stock which
the holder thereof is entitled to convert on such Conversion
Date.
(iii) The Corporation shall not be entitled to
convert any shares of Series H Preferred Stock into shares of
Common Stock if the holder of the Series H Preferred Stock and
its Affiliates would be the Beneficial Owner of more than ten
percent (10%) of the Common Stock that (but for this Section
5(e)) would be outstanding following any such conversion or if
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976 the holder of the shares of Common Stock to be issued upon
conversion would be required to make a filing in advance of the
acquisition of such shares. To the extent that a Conversion
Notice provides for the conversion on the Conversion Date of
shares of Series H Preferred Stock in excess of that permitted
pursuant to the prior sentence, then upon written notice from
the holder to the Corporation specifying the holder's Beneficial
Ownership percentage on the date of the Conversion Notice, such
Conversion Notice shall be deemed to cover the maximum number of
shares of Series H Preferred Stock which the Corporation is
entitled to convert on such Conversion Date. In addition, at
any time that the holder of the Series H Preferred Stock and its
Affiliates is the Beneficial Owner of more than ten percent
(10%) of the Common Stock, the Corporation shall not be entitled
to convert any shares of Series H Preferred Stock, provided,
however, that, on a Conversion Date which is after the later of
(A) the date which is six (6) months and one (1) Business Day
from the last date on which the holder of Series H Preferred
Stock or its Affiliates purchased or otherwise acquired (as
those terms have been interpreted by the courts for the purposes
of Section 16 of the Exchange Act) any Common Stock of the
Corporation
8
<PAGE>
or (B) the date which is six (6) months and one (1)
Business Day from the date on which the holder of Series H
Preferred Stock has purchased all shares of Series G Preferred
Stock and Series H Preferred Stock which it is obligated to
purchase pursuant to that certain Stock Purchase Agreement by
and between the Corporation and Genentech, Inc., dated as of
December 1, 1997 (the "Stock Purchase Agreement"), the
Corporation may convert to cash all, but not less than all, of
the shares of Series H Preferred Stock and Series G Preferred
Stock held by such holder. Any purchases or acquisitions of
Common Stock by the holder after receipt of a Conversion Notice
providing for conversion pursuant to the preceding sentence
shall not be included in calculating the time period described
in phrase (A) of such sentence. For purposes of this Section
5(e)(iii) only, a Conversion Date set forth in a Conversion
Notice delivered to the Company by a holder shall be deemed to
be a date on which the holder has purchased or acquired Common
Stock.
For purposes of this Section 5(e), all calculations of the
number of shares of Common Stock that (but for this Section
5(e)) would be outstanding following any conversion of Series H
Preferred Stock shall be made upon the assumption that the
Corporation would elect, pursuant to Section 5(b), to issue
shares of Common Stock, and not cash, in connection with such
conversion.
(f) Cash in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares
shall be issued upon the conversion of shares of Series H
Preferred Stock. In lieu of any fractional shares of Common
Stock that would otherwise be issuable upon conversion of Series
H Preferred Stock, the Corporation shall pay to the holder of
the shares of Series H Preferred Stock that were converted a
cash adjustment in respect of such fractional shares in an
amount equal to the same fraction of the Conversion Value. The
determination as to whether or not any fractional shares are
issuable shall be based upon the total number of shares of
Series H Preferred Stock being converted at any one time by any
holder thereof, and not upon each share of Series H Preferred
Stock being converted by such holder.
(g) Partial Conversion. In the event some but not
all of the shares of Series H Preferred Stock represented by a
certificate or certificates surrendered by a holder are
converted, then Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a
new certificate representing the number of shares of Series H
Preferred Stock that were not converted.
(h) Standstill. For a period of five (5) years
following the first issuance of a share of Series H Preferred
Stock, during each calendar week within a Restricted Period (as
hereinafter defined), no holder of Series H Preferred Stock
shall sell, transfer, assign, pledge, hypothecate or otherwise
dispose of, directly or indirectly, more than the Restricted
Amount (as
9
<PAGE>
hereinafter defined) in such calendar week in the
Restricted Period. A "Restricted Period" shall mean any period
commencing on the date which is twenty-five (25) Business Days
preceding the Conversion Date (provided that a Conversion Notice
has been provided to the Corporation under this Section 5) and
ending on the Conversion Date applicable to such Conversion
Notice, or any other period of time designated as a Restricted
Period in this Certificate. The "Restricted Amount" applicable
to any such calendar week within the Restricted Period shall
mean that number of shares of Common Stock equal to twenty-five
(25%) percent of the average weekly trading volume of the Common
Stock for the four (4) week period preceding the first Business
Day within the Restricted Period. Neither the Corporation nor
its transfer agent shall be required to register upon the books
and records of the Corporation any sale, transfer, assignment,
pledge, hypothecation or other disposition of Common Stock made
contrary to this Section 5(h). Furthermore, in the event of any
violation of this Section 5(h), then the Corporation shall not
be obligated to effect the subject conversion. In the case of
conversion of Series H Preferred Stock by the Corporation, the
Restricted Period shall begin on the date of delivery of the
Conversion Notice.
(i) Conversion Upon Default. In the event of a
material uncured default by the Corporation under any of the
Transaction Documents (as such term is defined in the Stock
Purchase Agreement), Genentech shall have the right to convert
its shares of Series H Preferred Stock into shares of Common
Stock according to the provisions of Section 5. Notwithstanding
the foregoing, for the purposes of Genentech's right to convert
under this Section 5(i), the limitations set forth in Sections
5(e)(i) and 5(e)(ii) shall not apply.
(j) Automatic Conversion. Each share of Series H
Preferred Stock shall automatically be converted into shares of
Common Stock at its then effective Conversion Ratio immediately
upon the transfer of ownership by the initial holder to a third
party which is not an Affiliate of such holder or a member of
any Group of which such holder or any of its Affiliates is a
member. In the event of such an automatic conversion, the
outstanding shares of Series H Preferred Stock shall be
converted automatically without any further action by the holder
of such shares and whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer
agent. The Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon
such automatic conversion unless the certificates evidencing
such shares of Series H Preferred Stock are delivered to the
Corporation or its transfer agent. Such conversion shall be
deemed to have been made on the date of transfer to such third
party holder and the person(s) entitled to receive shares of
Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of
Common Stock as of such date. For purposes of this
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<PAGE>
Section 5(j) only, "Affiliate" shall have the meaning given it
in Rule 405 promulgated under the Securities Act.
SECTION 6. Liquidation Rights. Upon the liquidation,
dissolution or winding up of the Corporation, whether voluntary
or involuntary, no distribution shall be made (a) to the holders
of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series H
Preferred Stock unless, prior thereto, the holders of shares of
Series H Preferred Stock shall have received an amount equal to
(i) the Original Issuance Price per share for the Series H
Preferred Stock, plus (ii) the Original Issuance Price per share
for each share of Series H Preferred Stock constituting accrued
and unpaid dividends thereon, whether or not declared, to the
date of such distribution, or (b) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series H Preferred Stock,
except distributions made ratably on the Series H Preferred
Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up.
SECTION 7. Corporate Reorganization. If at any time
or from time to time there shall be a reorganization,
consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property (each
of such transactions, a "Corporate Reorganization"), then, at
such time and in any such case the Corporation shall provide
each holder of Series H Preferred Stock with notice of such
transaction and the details of such exchange at least fifteen
(15) days before the closing of such transaction, and each such
holder of Series H Preferred Stock shall have the right, at its
election, to convert such shares of Series H Preferred Stock
into shares of Common Stock prior to such closing, or to receive
in such transaction the amount of the liquidation preference set
forth in Section 6, as appropriate, in the form of the other
stock or securities, cash and/or other property as is received
by the holders of the Common Stock. For purposes of the
foregoing, the average Fair Market Value of the Common Stock
over the twenty (20) Business Days prior to the closing of such
transaction shall be utilized in calculating the Conversion
Value and Conversion Ratio, and a Restricted Period shall
commence on the date the holder of the Series H Preferred Stock
receives notice of such transaction and shall terminate on the
date on which such transaction closes.
SECTION 8. Corporation's Repurchase Obligation. For
a period of five (5) years following the first issuance of
Series H Preferred Stock, if at any time the Corporation shall
repurchase (a "Common Stock Repurchase") any shares of Common
Stock from any person or entity other than a holder of Series G
Preferred Stock or Series H Preferred Stock or Common Stock
issued upon conversion of
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<PAGE>
6% Cumulative Convertible Preferred Stock, then the Corporation
shall repurchase from each holder of shares of Series H Preferred
Stock the number of whole shares of Series H Preferred Stock
determined by multiplying the number of shares of Series H Preferred
Stock then held by such holder by a fraction, the numerator of which
is the number of shares of Common Stock repurchased by the Company
from the other holder(s) and the denominator of which is the number
of shares of Common Stock issued and outstanding on the date of the
Common Stock Repurchase. The repurchase price per share of Series H
Preferred Stock repurchased pursuant to this Section 8 shall be
the product of the number of shares of Common Stock into which a
share of Series H Preferred Stock is convertible on the date of
the Common Stock Repurchase and the price per share of Common
Stock paid by the Corporation in connection with the Common
Stock Repurchase. For purposes of the foregoing, the average
Fair Market Value of the Common Stock over the twenty (20)
Business Days prior to the closing of the Common Stock
Repurchase shall be utilized in calculating the Conversion Value
and Conversion Ratio, and a Restricted Period shall commence on
the date the holder of the Series H Preferred Stock receives
notice of the Common Stock Repurchase and shall terminate on the
date of the Common Stock Repurchase. Such repurchase of shares
of Series H Preferred Stock shall be effected on the date of the
Common Stock Repurchase.
SECTION 9. No Redemption; No Sinking Fund.
(a) No Redemption. The shares of Series H Preferred
Stock shall not be subject to redemption by the Corporation or
at the option of any holder of Series H Preferred Stock except
as set forth in the Certificate of Incorporation, the Stock
Purchase Agreement or the License Agreement; provided, however,
that, subject to Section 4 hereof, the Corporation may purchase
or otherwise acquire outstanding shares of Series H Preferred
Stock by offer to any holder or holders of shares of Series H
Preferred Stock and the Corporation may deliver cash in lieu of
Common Stock upon the conversion of the shares of Series H
Preferred Stock by the holders thereof or by the Corporation.
(b) No Sinking Fund. The shares of Series H
Preferred Stock shall not be subject to or entitled to the
operation of a retirement or sinking fund.
SECTION 10. Ranking. The Series H Preferred Stock
shall rank on parity in all respects with the 6% Cumulative
Convertible Preferred Stock and the Series G Preferred Stock and
superior in all respects to the Series F Preferred Stock.
Nothing contained herein shall limit or restrict the ability of
the Board of Directors of the Corporation, pursuant to Article
Fifth of the Certificate of Incorporation, to fix powers,
preferences or rights of the shares of one or more series of
Preferred Stock of the Corporation that are superior to the
powers, preferences or rights
12
<PAGE>
of the Series H Preferred Stock or the ability of the Corporation
to issue shares of such Preferred Stock.
SECTION 11. Fractional Shares. To the extent
necessary, the Corporation shall issue fractions of shares of
Series H Preferred Stock issuable in payment of dividends. Such
fractions shall be rounded to two (2) decimal places.
SECTION 12. Re-acquired Shares. Any shares of Series
H Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever (including upon conversion
thereof) shall be retired and canceled promptly after the
acquisition thereof. All such shares, upon their cancellation,
shall become authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are once more
designated as part of a particular series by the Board of
Directors pursuant to the provisions of Article Fifth of the
Certificate of Incorporation.
SECTION 13. Reservation of Common Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the
shares of Series H Preferred Stock, such number of its shares of
Common Stock as from time to time shall be sufficient to effect
the conversion of all outstanding shares of Series H Preferred
Stock. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Series H Preferred
Stock, then the Corporation shall promptly take such corporate
action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including, without
limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to the
Certificate of Incorporation.
SECTION 14. Amendment. None of the powers,
preferences and relative, participating, optional and other
special rights of the Series H Preferred Stock as provided
herein or in the Certificate of Incorporation shall be amended
in any manner which would alter or change the powers,
preferences, rights or privileges of the holders of Series H
Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least sixty-seven (67%)
percent of the outstanding shares of Series H Preferred Stock,
voting as a separate class.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this
Corrected Certificate of Designations to be duly executed in its
corporate name on this 14th day of January, 1998.
ALTEON INC.
By: /s/ James J. Mauzey
-----------------------
Name: James J. Mauzey
---------------------
Title: President & CEO
--------------------
14
[Smith, Stratton, Wise, Heher & Brennan
Letterhead]
January 16, 1997
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07647
Ladies and Gentlemen:
We have acted as counsel to Alteon Inc., a Delaware
corporation (the "Company"), in connection with the filing by
the Company of a registration statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as
amended, relating to the registration of an aggregate of
2,093,492 shares (the "Shares") of the Company's common stock,
$.01 par value, including Shares issuable upon conversion of the
Company's Series G Preferred Stock (the "Preferred Stock") and
Common Stock Purchase Warrants, dated as of October 9, 1997 (the
"Warrants"), which are to be offered by the Selling Stockholders
named in the Registration Statement.
In connection with the Registration Statement, we have
examined such corporate records and documents, other documents,
and such questions of law as we have deemed necessary or
appropriate for purposes of this opinion. On the basis of such
examination, it is our opinion that the Shares, when issued and
delivered upon conversion of the Preferred Stock in accordance
with the terms of Certificate of Designations therefor and the
exercise of the Warrants in accordance with the terms thereof
will be legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as Exhibit 5.1 to
the Registration Statement and to the reference to this firm
under the heading "Legal Matters" in the Registration Statement.
Very truly yours,
/s/ Smith, Stratton, Wise,
Heher & Brennan
[Arthur Andersen LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Alteon Inc.:
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our
report dated February 20, 1997 included in Alteon Inc.'s Form
10-K for the year ended December 31, 1996 and to all references
to our firm, included in or made part of this Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 16, 1998
