<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the
commission only (as permitted
by rule 14A-6 (E) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ALTEON INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
<PAGE> 2
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 3
Preliminary Copy
ALTEON INC.
170 WILLIAMS DRIVE
RAMSEY, NEW JERSEY 07446
To Our Stockholders:
You are most cordially invited to attend the 1998 Annual Meeting of
Stockholders of Alteon Inc. at 9:00 AM, local time, on Wednesday, July 22, 1998,
at the Sheraton Crossroad Hotel, One International Boulevard, Mahwah, New
Jersey.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented to the meeting.
It is important that your shares be represented at this meeting to assure
the presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your stock represented by signing, dating and returning your
proxy in the enclosed envelope, which requires no postage if mailed in the
United States, as soon as possible. Your stock will be voted in accordance with
the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
JAMES J. MAUZEY
Chief Executive Officer
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
<PAGE> 4
ALTEON INC.
170 WILLIAMS DRIVE
RAMSEY, NEW JERSEY 07446
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 22, 1998
The Annual Meeting of Stockholders (the "Meeting") of Alteon Inc., a
Delaware corporation (the "Company"), will be held at the Sheraton Crossroad
Hotel, One International Boulevard, Mahwah, New Jersey on Wednesday, July 22,
1998, at 9:00 AM, local time, for the following purposes:
(1) To elect two directors to serve until the Annual Meeting of
Stockholders to be held in 2001 and until their successors shall have
been duly elected and qualified;
(2) To consider and vote upon a proposal to amend the Restated Certificate
of Incorporation of Alteon Inc. to increase the authorized number of
shares of Common Stock from 30,000,000 shares to 40,000,000 shares;
(3) To consider and vote upon a proposal to approve the removal of certain
limitations regarding the Company's Series G Preferred Stock and Series H
Preferred Stock;
(4) To ratify the appointment of Arthur Andersen LLP as the independent
public accountants of the Company for the fiscal year ending December 31,
1998; and
(5) To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
Holders of Common Stock of record at the close of business on May 28,
1998, are entitled to notice of and to vote at the Meeting, or any adjournment
or adjournments thereof. A complete list of such stockholders will be open to
the examination of any stockholder at the Company's principal executive offices
at 170 Williams Drive, Ramsey, New Jersey 07446 and at the Sheraton Crossroad
Hotel, One International Boulevard, Mahwah, New Jersey, for a period of 10 days
prior to the Meeting. The Meeting may be adjourned from time to time without
notice other than by announcement at the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER
OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL INSURE A QUORUM
AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY
BE REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS
VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
ELIZABETH A. O'DELL
Secretary
Ramsey, New Jersey
June 8, 1998
THE COMPANY'S 1997 ANNUAL REPORT ACCOMPANIES THE PROXY STATEMENT.
<PAGE> 5
ALTEON INC.
170 WILLIAMS DRIVE
RAMSEY, NEW JERSEY 07446
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Alteon Inc. (the "Company") of proxies to be voted at
the Annual Meeting of Stockholders of the Company to be held on July 22, 1998,
(the "Meeting") at the Sheraton Crossroad Hotel, One International Boulevard,
Mahwah, New Jersey, at 9:00 AM, local time, and at any adjournment or
adjournments thereof. Holders of record of Common Stock, $.01 par value ("Common
Stock"), as of the close of business on May 28, 1998, will be entitled to notice
of and to vote at the Meeting and any adjournment or adjournments thereof. As of
that date, there were _________ shares of Common Stock issued and outstanding
and entitled to vote. Each share of Common Stock is entitled to one vote on any
matter presented at the Meeting.
If proxies in the accompanying form are properly executed and returned,
the Common Stock represented thereby will be voted in the manner specified
therein. If not otherwise specified, the Common Stock represented by the proxies
will be voted (i) FOR the election of the nominees below as directors, (ii) FOR
the proposal to amend the Restated Certificate of Incorporation of Alteon Inc.
to increase the authorized number of shares of Common Stock from 30,000,000
shares to 40,000,000 shares, (iii) FOR the proposal to approve the removal of
certain limitations regarding the Company's Series G Preferred Stock and Series
H Preferred Stock, (iv) FOR the ratification of the appointment of Arthur
Andersen LLP as independent public accountants for the year ending December 31,
1998, and (v) in the discretion of the persons named in the enclosed form of
proxy, on any other proposals which may properly come before the Meeting or any
adjournment or adjournments thereof. Any stockholder who has submitted a proxy
may revoke it any time before it is voted by written notice addressed to and
received by the Secretary of the Company, by submitting a duly executed proxy
bearing a later date or by electing to vote in person at the Meeting. The mere
presence at the Meeting of the person appointing a proxy does not, however,
revoke the appointment.
The presence, in person or by proxy, of holders of Common Stock having a
majority of the votes entitled to be cast at the Meeting shall constitute a
quorum. Votes withheld, abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum.
Directors are elected by a plurality vote. All other actions proposed
herein may be taken upon the affirmative vote of stockholders possessing a
majority of the voting power represented at the Meeting, provided a quorum is
present in person or by proxy. Only votes cast "for" a matter will constitute
affirmative votes. Votes withheld or abstentions, because they are not cast
"for" a particular proposal, will have the same effect as negative votes or
votes cast "against" such a particular proposal. Proxies submitted by brokers
that do not indicate a vote for some of the proposals because such brokers do
not have discretionary voting authority on those proposals and have not received
instructions from their customers on those proposals (i.e., broker non-votes)
are not considered to be shares present for the purpose of calculating the vote
on such proposals and will not affect the outcome of such proposals.
This Proxy Statement, together with the related proxy card, is being
mailed to the stockholders of the Company on or about June 8, 1998. The Annual
Report to Stockholders of the Company for the year ended December 31, 1997,
including financial statements (the "Annual Report"), is being mailed
concurrently with this Proxy Statement to all stockholders of record as of May
28, 1998. In addition, the Company has provided brokers, dealers, banks, voting
trustees and their nominees, at the Company's expense, with additional copies of
the Annual Report so that such record holders may supply such material to
beneficial owners as of May 28, 1998.
ELECTION OF DIRECTORS
At the Meeting two directors are to be elected to hold office until the
Annual Meeting of Stockholders to be held in 2001 and until their successors
shall have been elected and qualified. The
<PAGE> 6
nominees for election to the Board of Directors are Marilyn G. Breslow and Alan
J. Dalby.
Pursuant to the Company's Restated Certificate of Incorporation, the
Board of Directors is divided into three classes, each of which serves a term of
three years. Class A consists of Ms. Breslow and Mr. Dalby, whose terms will
expire at the Meeting. Class B consists of Mr. Mauzey, Dr. Goyan and Dr. Cerami,
whose terms will expire at the Annual Meeting of Stockholders in 1999. Class C
consists of Dr. Butler, Mr. McCurdy, and Dr. Novitch, whose terms will expire at
the Annual Meeting of Stockholders in 2000.
It is the intention of the persons named in the enclosed form of proxy to
vote the stock represented thereby, unless otherwise specified in the proxy, for
the election as director of each of Ms. Breslow and Mr. Dalby, whose names and
biographies appear below. There are currently eight members of the Board. All of
the persons whose names and biographies appear below are at present directors of
the Company. In the event any nominee should become unavailable or unable to
serve as a director, it is intended that votes will be cast for a substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe that the nominees named will be unable to serve if elected.
The nominees have consented to being named in this Proxy Statement and to serve
if elected.
The current Board of Directors, including the nominees, is comprised of
the following persons:
<TABLE>
<CAPTION>
SERVED AS A
NAME AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY
- ---- --- -------------- --------------------------
<S> <C> <C> <C>
James J. Mauzey 49 1994 Chairman of the Board and
Chief Executive Officer
Jere E. Goyan 67 1993 President, Chief Operating
Officer and Director
Marilyn G. Breslow (1) 54 1988 Director
Robert N. Butler 71 1996 Director
Anthony Cerami 57 1993 Director
Alan J. Dalby (1) 61 1994 Director
David McCurdy 48 1997 Director
Mark Novitch 66 1994 Director
</TABLE>
(1) The nominees for election to the Board of Directors.
The principal occupations and business experience, for at least the past
five years, of each director are as follows:
James J. Mauzey, Chairman and Chief Executive Officer, joined the Company
in March 1994. From November 1992 until he joined the Company, Mr. Mauzey was a
Corporate Division President of Bristol- Myers Squibb Company. Mr. Mauzey has
over 20 years of experience in the pharmaceutical industry. He began his career
at American Cyanamid Company's Lederle Laboratories Division, where he held
numerous sales, marketing and executive positions during his 17 years with the
company, serving as both Vice President of the Lederle Laboratories U.S.
Pharmaceutical Division and Vice President of the Lederle International
Division. Mr. Mauzey joined The Squibb Corporation as President of its U.S.
Pharmaceutical Group in 1989. Following the merger of Bristol-Myers Company and
Squibb Corporation, Mr. Mauzey was named President of Bristol-Myers Squibb
Company's newly integrated U.S. Pharmaceutical Division, where he was
responsible for Squibb Pharmaceuticals, Bristol Laboratories and Mead Johnson
Pharmaceuticals.
2
<PAGE> 7
Jere E. Goyan, Ph.D., has been the Company's President and Chief
Operating Officer since May 1993. He also served as the Company's Acting Chief
Executive Officer from June 1993 to February 1994 and as Senior Vice President,
Research and Development from January 1993 through May 1993. Dr. Goyan is
Professor Emeritus of Pharmacy and Pharmaceutical Chemistry and Dean Emeritus of
the School of Pharmacy, University of California, San Francisco ("UCSF"). He has
been on the faculty of the School of Pharmacy at UCSF since 1963. He took a
leave of absence from 1979 to 1981 to serve as Commissioner of Food and Drugs of
the U.S. Food and Drug Administration. Dr. Goyan is Past President of the
American Association of Pharmaceutical Scientists and the American Association
of Colleges of Pharmacy. He is a member of the Institute of Medicine of the
National Academy of Sciences and a Fellow of the American Association for the
Advancement of Science. Dr. Goyan is a director of ATRIX Laboratories, Inc.,
Emisphere Technologies, Inc., and SciClone Pharmaceuticals, Inc., each a
biopharmaceutical firm, and Boehringer Ingelheim Corporation, a pharmaceutical
company. He received his Ph.D. in pharmaceutical chemistry from the University
of California, Berkeley.
Alan J. Dalby was elected as a director of the Company in December 1994.
Mr. Dalby is Chairman of Reckitt & Colman, plc, a household products company.
Mr. Dalby is the former Chairman and Chief Executive Officer and a founder of
Cambridge NeuroScience, Inc., an emerging pharmaceutical company focused on
neurobiology. Prior to joining Cambridge NeuroScience, Inc., he was Executive
Vice President and a member of the Board of Directors of SmithKline Beckman
Corporation, retiring in 1987. Mr. Dalby is a director of Medeva plc.
Marilyn G. Breslow has been a director of the Company since June 1988.
She has been a Portfolio Manager/Analyst for W.P. Stewart & Co., Inc., an
investment advisory firm in New York City, since 1990, and is a Principal and
Director of that firm. She was a General Partner of Concord Partners and a Vice
President of Dillon, Read & Co. Inc. from 1984 to 1990.
Robert N. Butler, M.D. was elected as a director of the Company in June
1996. He is the Chief Executive Officer of the International Longevity Center
(ILC-USA), which he co-founded in 1990, and Professor of Geriatrics at the Henry
L. Schwartz Department of Geriatrics and Adult Development at the Mount Sinai
Medical Center. From 1975 to 1982, he was the first and founding director of the
National Institute of Aging of the National Institutes of Health. In 1976, Dr.
Butler won the Pulitzer Prize for his book "Why Survive? Being Old in America."
He held the Brookdale Professorship of Geriatrics from 1982 to 1995 at the Mount
Sinai Medical Center where he founded the department. Dr. Butler serves on the
board of Neurogen Corporation, a development-stage biotechnology company working
on anxiolytics, and serves on the Scientific Advisory Boards of Geron
Corporation, a development-stage biotechnology company working on aging, with
emphasis on the effect of telomeres, and Genesis Health Ventures, a leading
eldercare company. He also serves as an independent trustee of the AARP-Scudder
Fund.
Anthony Cerami, Ph.D., is a founder of the Company and has been Chairman
of the Scientific Advisory Board of the Company since December 1987 and a member
of the Company's Board of Directors since October 1993. In October 1996, he
joined Cerami Consulting Corp., a biotechnology consulting corporation. Dr.
Cerami was the President of The Picower Institute for Medical Research, which he
helped establish in October 1991, prior to his retirement from such entity in
September 1996. Prior to joining The Picower Institute for Medical Research, he
was Dean of Graduate and Postgraduate Studies at The Rockefeller University
since 1986, a Professor at The Rockefeller University since 1978 and the Head of
the Laboratory of Medical Biochemistry at The Rockefeller University since 1972.
Dr. Cerami has been elected to membership in the National Academy of Sciences
and the Institute of Medicine. He received his Ph.D. from The Rockefeller
University.
David McCurdy, who became a director of the Company in June 1997, is
currently the Chairman and Managing Partner of the McCurdy Group LLC, a business
consulting and investment firm focused on high-growth companies in the fields of
healthcare, high technology and international business. Prior to forming the
McCurdy Group, he served for 14 years in the U.S. House of Representatives from
the fourth district of Oklahoma. In addition to serving as a consultant to over
a dozen healthcare and high technology
3
<PAGE> 8
companies, Mr. McCurdy is a partner in the Switzer Group, an organization that
invests in, owns and operates medical and healthcare facilities in the U.S. and
Asia.
Mark Novitch, M.D., was elected as a director of the Company in June
1994. Dr. Novitch is an Adjunct Professor of Health Care Sciences at The George
Washington University. He retired as Vice Chairman and Chief Compliance Officer
of the Upjohn Company in December 1993. Prior to joining Upjohn in 1985, he was
Deputy Commissioner of the U.S. Food and Drug Administration. Dr. Novitch is a
director of Guidant Corporation, a supplier of cardiology and minimally invasive
surgery products; Neurogen Corporation, a biopharmaceutical firm focused on
central nervous system disorders; Calypte Biomedical, a developer of urine-based
diagnostics; and Kos Pharmaceuticals, Inc., a developer of pharmaceutical
products for cardiovascular and respiratory conditions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES
FOR THE BOARD OF DIRECTORS.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors has a Compensation Committee, which reviews
salaries and incentive compensation for employees of and consultants to the
Company, and an Audit Committee, which reviews the results and scope of the
audit and other services provided by the Company's independent auditors. The
Compensation Committee is comprised of Marilyn G. Breslow, Robert N. Butler,
M.D., David McCurdy and Mark Novitch, M.D. The Compensation Committee held five
meetings during the year ended December 31, 1997. The Audit Committee is
comprised of Marilyn G. Breslow, Alan J. Dalby and Robert N. Butler, M.D. The
Audit Committee held one meeting during the year ended December 31, 1997. There
were thirteen meetings of the Board of Directors in 1997. With the exception of
Dr. Butler, each director and each committee member attended at least 75% of all
meetings of the Board of Directors and the committee(s) on which he or she
served, respectively, during the period in which he or she served as a director
or committee member.
COMPENSATION OF DIRECTORS
Directors of the Company not compensated as employees receive $1,500 per
meeting for their service to the Board. Furthermore, directors of the Company
not compensated as employees receive, upon election to the Board, a stock option
for 33,600 shares of Common Stock (subject to adjustment if they received stock
options upon appointment to the Board between Annual Meetings of Stockholders to
fill a vacancy or newly-created directorship) at an exercise price equal to the
fair market value of the Common Stock on the date of grant. The stock options
vest in three equal annual installments over the director's term of service. All
of the directors are reimbursed for their expenses for each Board and committee
meeting attended.
4
<PAGE> 9
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
<TABLE>
<CAPTION>
NAME AGE CAPACITIES IN WHICH SERVED IN CURRENT POSITIONS SINCE
---- --- -------------------------- --------------------------
<S> <C> <C> <C>
James J. Mauzey 49 Chairman of the Board and March 1994
Chief Executive Officer
Jere E. Goyan 67 President, Chief Operating May 1993
Officer and Director
Kenneth I. Moch(1) 43 Senior Vice President, Finance February 1995
and Business Development
and Chief Financial Officer
Kenneth Cartwright(2) 63 Senior Vice President, January 1994
Development and
Regulatory Affairs
Elizabeth A. O'Dell(3) 38 Vice President, Finance and October 1993
Administration, Secretary
and Treasurer
</TABLE>
(1) Kenneth I. Moch, Senior Vice President, Finance and Business Development
and Chief Financial Officer, joined Alteon in February 1995. From 1990 to
1995 he was President and Chief Executive Officer of Biocyte Corporation,
a cord blood stem cell-based cellular therapy company. He was a
co-founder and Managing General Partner of Catalyst Ventures, a
seed-stage venture capital partnership, from 1988 through 1989. He was a
founder and served as Vice President of The Liposome Company, Inc. from
1982 to 1988, where he was involved in all aspects of that company's
growth from a start-up research laboratory into a publicly-held
biopharmaceutical firm. From 1980 until 1982, Mr. Moch was a management
consultant with McKinsey & Company, Inc.
(2) Kenneth Cartwright, MB, ChB, MFCM, MRCPsych., has been Senior Vice
President, Development and Regulatory Affairs since January 1994. He
joined Alteon in May 1989 as Vice President, Clinical and Regulatory
Affairs. Prior to joining Alteon, Dr. Cartwright was Vice President,
Clinical Research of American Cyanamid Company, Lederle Laboratories from
1984 to 1989, where he was responsible for worldwide development and
implementation of strategical clinical plans. From 1982 to 1984, he also
served as Director of Clinical Research U.S.A. From 1980 to 1982, Dr.
Cartwright was Deputy Vice President and Marketing Director,
Pharmaceutical Division, Ciba-Geigy, Canada, Ltd., responsible for
product launch. From 1974 to 1980, he served as Medical Director where he
was responsible for clinical development and regulatory affairs. Dr.
Cartwright received his MB, ChB, from Liverpool University Medical
School. He received his Membership of the Faculty of Community Medicine
(MFCM) and his Membership of the Royal College of Psychiatrists
(MRCPsych.) from Royal College of Physicians, London.
(3) Elizabeth A. O'Dell has been Vice President, Finance and Administration,
Secretary and Treasurer since October 1993. She served as the Company's
Director of Finance from February 1993 to September 1993 and as the
Controller of the Company from February 1992 to February 1993. From
November 1991 to January 1992 she was the Controller of Radiodetection
Corp. She was the Director of Internal Operations of Kratos Analytical,
Inc. from May 1990 to November 1991 and Controller from March 1987 to
April 1990. Prior to that she served for five years in public accounting
in various positions at Coopers & Lybrand and Deloitte & Touche.
5
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for the fiscal years ended December 31, 1997,
1996, and 1995 of the Company's chief executive officer and the other four most
highly compensated executive officers of the Company who were serving as
executive officers at December 31, 1997 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION STOCK
------------------------------- OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (NUMBER OF SHARES) COMPENSATION
- --------------------------- ---- ------ ----- ------------------ ------------
<S> <C> <C> <C> <C> <C>
James J. Mauzey....................1997 $300,000 $ 50,000 50,000 ---
Chairman of the Board and 1996 300,000 150,000 (1) 150,000 ---
Chief Executive Officer 1995 300,000 110,000 (2) 20,000 $45,823 (3)
Jere E. Goyan .....................1997 $262,500 $16,666 33,333 $54,000 (5)
President and 1996 262,500 50,000 (4) 33,004 54,000 (5)
Chief Operating Officer 1995 262,500 35,000 15,000 54,000 (5)
Kenneth Cartwright ................1997 $200,280 $ 7,500 101,000 ---
Senior Vice President, 1996 194,922 --- 16,000 ---
Development and Regulatory 1995 191,100 --- --- ---
Affairs
Kenneth I. Moch ...................1997 $185,592 $12,500 (6) 25,000 ---
Senior Vice President, 1996 178,460 30,000 (7) 10,000 ---
Finance and Business Development 1995 141,964 55,000 (8) 170,000 ---
and Chief Financial Officer
Elizabeth A. O'Dell ...............1997 $120,841 $ 5,000 (9) 110,000 ---
Vice President, Finance and 1996 109,307 --- 9,000 ---
Administration, Secretary and 1995 112,815 --- 7,500 ---
Treasurer
</TABLE>
(1) Represents a deferred performance bonus for the year ending December 31,
1996
(2) Represents a deferred performance bonus for the year ending December 31,
1995.
(3) Represents reimbursement for certain moving expenses and relocation
expenses.
(4) Represents a deferred performance bonus for the year ending December 31,
1996.
(5) Represents a housing allowance.
(6) Represents a deferred performance bonus for the year ending December 31,
1997.
(7) Represents a deferred performance bonus for the year ending December 31,
1996.
(8) Includes a signing bonus of $25,000 and a deferred performance bonus of
$30,000 for the year ending December 31, 1995.
(9) Represents a deferred performance bonus for the year ending December 31,
1997.
6
<PAGE> 11
The following table sets forth certain information concerning grants of
stock options during the fiscal year ended December 31, 1997, to the Named
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENTAGE ANNUAL RATES OF
OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------
NAME GRANTED FISCAL 1997 PER SHARE DATE 5% 10%
---- ------- ----------- --------- ------ --- ----
<S> <C> <C> <C> <C> <C> <C>
James J. Mauzey (2)....... 50,000 7.9% $6.563 12/03/07 $206,356 $522,947
Jere E. Goyan (3)......... 33,333 5.3% $6.563 12/03/07 137,569 348,628
Kenneth Cartwright (4).... 36,000 5.7% $5.625 03/27/07 2,741 124,312
65,000 10.2% 6.563 12/03/07 268,263 679,831
Kenneth I. Moch (5) ...... 25,000 3.9% $6.563 12/03/07 103,178 261,473
Elizabeth A. O'Dell (6)... 50,000 7.9% $5.625 01/31/07 176,877 448,240
50,000 7.9% 5.625 10/21/07 248,141 561,716
10,000 1.6% 6.563 12/03/07 41,271 104,589
</TABLE>
(1) The dollar amounts under these columns are the result of calculations
assuming that the price of Common Stock on the date of the grant of the
option increases at the hypothetical 5% and 10% rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Company's stock
price over the option term of ten years.
(2) Option became exercisable as to 25,000 shares on December 4, 1997 and
will become exercisable as to 25,000 shares on December 4, 1999.
(3) Option became exercisable as to 16,666 shares on December 4, 1997 and
will become exercisable as to 16,667 shares on December 4, 1999.
(4) Option for 36,000 shares became exercisable as to 1,000 shares each month
commencing April 27, 1997. The options for 65,000 shares became
exercisable as to 7,500 shares on December 4, 1997 and will become
exercisable as to 7,500 shares on December 4, 1999 and as to 50,000
shares on an accepted filing of a New Drug Application for pimagedine, or
on December 3, 2007, whichever occurs earlier.
(5) Option became exercisable as to 12,500 shares on December 4, 1997 and
will become exercisable as to 12,500 shares on December 4, 1999.
(6) First option for 50,000 shares became exercisable as to 28,000 shares on
January 31, 1997 and as to 2,000 shares each month commencing February
28, 1997. Second option for 50,000 shares became exercisable as to 1,388
shares each month commencing October 21, 1997. Option for 10,000 shares
became exercisable as to 5,000 shares on December 4, 1997 and will become
exercisable as to 5,000 shares on December 4, 1999.
7
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
exercises of options to purchase Common Stock during the fiscal year 1997 by the
Named Officers and unexercised options to purchase Common Stock held by the
Named Officers at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1997 AT DECEMBER 31, 1997 (1)
ACQUIRED ON REALIZED ----------------- ------------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
James J. Mauzey......... --- --- 425,000 310,000 $ 45,958 $309,463
Jere E. Goyan........... --- --- 289,970 199,967 262,649 12,508
Kenneth Cartwright...... --- --- 203,601 92,000 1,116,447 103,265
Kenneth I. Moch......... --- --- 146,500 58,500 96,786 44,556
Elizabeth A. O'Dell..... --- --- 105,278 59,722 109,580 90,731
</TABLE>
(1) BASED ON THE CLOSING PRICE ON THE NASDAQ NATIONAL MARKET ON DECEMBER 31,
1997 ($7.313)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons who served as members of the Compensation Committee of the
Board of Directors during 1997 were Marilyn G. Breslow, Louis Fernandez, Ph.D.
(until his retirement on June 10, 1997), Mark Novitch, M.D., Robert N. Butler,
M.D., and David McCurdy. None of the members of the Compensation Committee was
an officer, former officer or employee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General Policies
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing and monitoring the general compensation policies
and compensation plans of the Company, as well as the specific compensation
levels for executive officers. It also makes recommendations to the Board of
Directors concerning the granting of options under the Company's Amended and
Restated 1987 Stock Option Plan and Amended 1995 Stock Option Plan. The
Committee currently consists of Mark Novitch, M.D., Marilyn G. Breslow, Robert
N. Butler, M.D. and David McCurdy, four non-employee directors of the Company.
Under the supervision of the Committee, the Company has developed and
implemented compensation policies, plans and programs which (1) provide a
total compensation package which is intended to be competitive within the
industry so as to enable the Company to attract and retain high-caliber
executive personnel, and (2) seek to align the financial interests of the
Company's employees with those of its stockholders by relying heavily on
long-term incentive compensation which is tied to performance.
The primary components of executive compensation include base salary and
long-term equity incentives in the form of stock options. As the Company has
not yet generated any revenue from the sale of pharmaceutical products, the
Company relies on long-term incentive compensation (i.e., stock options) to
motivate the executive officers and other employees. This allows the Company
to retain cash for research projects. In determining the size of such stock
option grants to individual executives, the Committee considers a number of
factors, including the following: the level of an executive's job
responsibilities; the executive's past performance; the size and frequency of
grants by comparable
8
<PAGE> 13
companies; the executive's salary level; performance of the Company as
measured by the accomplishment of key business development and clinical
milestones; the size of any prior grants; and the achievement of designated
milestones by the executive. The Committee assigns no specific weight to any
of the foregoing, other than achievement of designated milestones by the
executive in cases where the executive's employment agreement provides for a
grant of a specific size upon achievement of the milestone, when making
determinations as to the size of stock option grants.
Executive officers are also eligible to earn an annual cash incentive
award, the amount of which is based upon (1) the position level of the
executive officer, and (2) the attainment of specific individual non-financial
performance objectives. The Committee sets the performance objectives at the
beginning of the fiscal year.
The Chief Executive Officer and the Chief Operating Officer are
responsible for the development of the annual salary plan for executive
officers other than themselves. The plan is based on industry and peer group
comparisons and national surveys and on performance judgments as to the past
and expected future contributions of the individuals. To maintain a
competitive level of compensation, the Company targets base salary at the mid
to upper percentiles of a comparative group composed of other biotechnology
companies. Base salary may exceed this level as a result of individual
performance. The Committee reviews the annual plan and makes recommendations
to the Board of Directors, with any modifications it deems appropriate. The
Committee believes it has established executive compensation levels which are
competitive with companies in the industry taking into account individual
experience, performance of both the Company and the individual, company size,
location and stage of development.
Compensation of the Chief Executive Officer
Mr. Mauzey's compensation was determined on the basis of his expertise and
experience which include approximately 25 years of experience in the
pharmaceutical industry. Compensation awarded to Mr. Mauzey in 1997 included
base salary, a performance bonus based on the achievement of milestones
(including, inter alia, securing a corporate partnership for pimagedine,
maintaining the Company's cash burn rate from operations at budget, filing a
new investigational drug application with the U.S. Food and Drug
Administration, and completion of a Phase II trial for pimagedine) and stock
options.
Effective January 1, 1994, the Internal Revenue Code does not permit
corporations to deduct payment of certain compensation in excess of $1,000,000
to the chief executive officer and the four other most highly-paid executive
officers. All compensation paid to the Company's executive officers for 1997
will be fully deductible and the Committee anticipates that amounts paid as
cash compensation will continue to be fully deductible because the amounts are
expected to be less than the $1,000,000 threshold. Under certain
circumstances, the executive officers may realize compensation upon the
exercise of stock options granted under the Company's stock option plans which
would not be deductible by the Company. The Company expects to take such
action as is necessary to qualify its stock option plans as "performance-based
compensation," which is not subject to the limitation, if and when the
Committee determines that the effect of the limitation on deductibility
warrants such action.
Mark Novitch, M.D.
Marilyn G. Breslow
Robert N. Butler, M.D.
David McCurdy
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareowner return on the Company's Common Stock to the
cumulative total return of the NASDAQ CRSP Total Return Index for the NASDAQ
Stock Market (U.S. Companies) (the "NASDAQ-US") and the NASDAQ Pharmaceutical
Stocks Index (the "NASDAQ-Pharm") for the period commencing December
9
<PAGE> 14
31, 1992 and ended December 31, 1997.
ALTEON INC. RELATIVE STOCK PERFORMANCE
[INSERT GRAPH]
<TABLE>
<CAPTION>
31-Dec-92 31-Dec-93 31-Dec-94 31-Dec-95 31-Dec-96 31-Dec-97
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alteon Inc............ 100.00 54.84 36.29 104.03 33.87 47.18
NASDAQ US............. 100.00 114.79 112.21 158.68 195.19 239.63
NASDAQ Pharm.......... 100.00 89.13 67.08 122.73 122.86 127.19
</TABLE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
James J. Mauzey entered into a three year employment agreement with the
Company on February 28, 1994 which was amended on January 30, 1997 to extend
the term of employment through January 30, 2000. Under the terms of the
agreement, Mr. Mauzey serves as Chief Executive Officer and is currently
entitled to an annual salary of $300,000, which is subject to annual review by
the Board of Directors. Mr. Mauzey is also eligible, at the discretion of the
Compensation Committee, to receive a bonus of up to $50,000 and stock options
for each year during the term of the agreement.
Jere E. Goyan entered into an employment agreement with the Company on
July 13, 1993, which was amended on February 24, 1998 to extend the term of
employment through July 13, 1999. Under the agreement, he is currently
entitled to a salary of $262,500, which is subject to annual review by the
Board of Directors. Dr. Goyan is also eligible, at the discretion of the Board
of Directors, to receive a bonus of up to $50,000 in the form of cash and/or
stock options for the year ending December 31, 1998.
Kenneth I. Moch entered into a three year employment agreement with the
Company on February 27, 1995, which was amended on September 15, 1997 to
extend the term of employment through February 27, 2001. Under the terms of
the agreement, Mr. Moch is entitled to an annual salary of $195,000 during the
first year of the extended term of employment, $205,000 during the second
year, and $215,000 during the third year. Mr. Moch is eligible, at the
discretion of the Board of Directors, to receive a yearly bonus of up to
$15,000 and stock options for up to 30,000 shares of Common Stock.
Kenneth Cartwright entered into an employment agreement with the Company
on March 27, 1995, which was amended on March 27, 1997 to extend the term of
employment through March 27, 2000. Under the agreement, he is currently
entitled to an annual salary of $194,922, which is subject to annual review by
the Board of Directors. Dr. Cartwright is also eligible, at the discretion of
the Board of Directors, to receive a bonus in the form of cash and/or stock
options for 1998 and 1999.
Elizabeth A. O'Dell entered into an employment agreement with the Company
as of October 21, 1995, which was amended on October 21, 1997 to extend the
term through October 21, 2000. Under the agreement she is currently entitled
to an annual salary of $120,852, which is subject to annual review by the
Board of Directors. Ms. O'Dell is also eligible, at the discretion of the
Board of Directors, to receive
10
<PAGE> 15
a bonus in the form of cash and/or stock options for 1998 and 1999.
In addition to provisions in the above-described agreements requiring each
individual to maintain the confidentiality of Company information and assign
inventions to the Company, such executive officers have agreed that during the
terms of their agreements and for one year thereafter, they will not compete
with the Company by engaging in any capacity in any business which is
competitive with the business of the Company. Each of the above employment
agreements provides that either party may terminate the agreement upon 30
days' prior written notice, subject to certain salary continuation obligations
of the Company if it terminates the agreements without cause (as to Mr. Mauzey
12 months and as to Dr. Goyan, Mr. Moch, Dr. Cartwright, and Ms. O'Dell six
months).
All employment agreements between the Company and its Vice Presidents
provide that all unvested stock options held by such Vice Presidents will vest
and become exercisable immediately in the event of a change in control of the
Company.
CHANGE IN CONTROL SEVERANCE BENEFITS PLAN
In February 1996, the Company adopted the Alteon Inc. Change in Control
Severance Benefits Plan (the "Severance Plan"). The Severance Plan was adopted
to protect and retain qualified employees and to encourage their full
attention, free from distractions caused by personal uncertainties and risks
in the event of a pending or threatened change in control of the Company. The
Severance Plan provides for severance benefits to employees upon certain
terminations of employment after or in connection with a change in control of
the Company as defined in the Severance Plan. Following a qualifying
termination which occurs as a result of a change in control, officers of the
Company will be entitled to continuation of (i) their base salary for a period
of twenty-four months, and (ii) all benefit programs and plans providing for
health and insurance benefits for a period of up to eighteen months. In
addition, upon a change in control of the Company all outstanding
unexercisable stock options held by employees will become exercisable.
401(k) PLAN
In 1990, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit ($10,000 in
1998) and have the amount of such reduction contributed to the 401(k) Plan.
The 401(k) Plan does not require additional matching contributions to the Plan
by the Company on behalf of participants in the Plan. Contributions by
employees to the Plan and income earned on such contributions are not taxable
to employees until withdrawn from the 401(k) Plan. The Trustees under the
401(k) Plan, at the direction of each participant, invest the assets of the
401(k) Plan in any of eight investment options.
11
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were, as of April 30, 1998, approximately 327 holders of record of
the Company's Common Stock. The following table sets forth certain information
regarding the beneficial ownership of the Company's Common Stock as of April
30, 1998, except as otherwise set forth below, (i) by each person who is known
to the Company to own beneficially more than 5% of the Common Stock, and (ii)
by each current director and Named Officer, including the nominees, and by all
current directors and officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (1) CLASS (2)
---------------------------- ------------------------ ----------
<S> <C> <C>
(i) Certain Beneficial Owners:
Alberto W. Vilar
Gary A. Tanaka
c/o Amerindo Investment Advisors Inc.
One Embarcadero Center, Suite 2300
San Francisco, CA 94111.............................. 1,270,500 (3) 7.1%
Amerindo Investment Advisors Inc.
One Embarcadero Center, Suite 2300
San Francisco, CA 94111............................. 1,073,500 (3) 6.0%
Ardsley Advisory Partners
646 Steamboat Road
Greenwich, CT 06830.................................. 945,000 5.3%
(ii) Current Directors, including Nominees
and Named Officers:
James J. Mauzey......................................... 455,000 (4) 2.5%
Jere E. Goyan........................................... 307,501 (5) 1.7%
Marilyn G. Breslow **................................... 67,200 (6) *
Robert N. Butler........................................ 22,400 (7) *
Kenneth Cartwright...................................... 239,601 (8) 1.3%
Anthony Cerami ......................................... 638,846 (9) 3.5%
Alan J. Dalby **........................................ 40,131 (10) *
David McCurdy .......................................... 11,200 (11) *
Kenneth I. Moch......................................... 178,375 (12) *
Mark Novitch............................................ 49,800 (13) *
Elizabeth A. O'Dell..................................... 116,549 (14) *
All current directors and officers as a group (11 2,126,603 (15) 10.7%
persons)
</TABLE>
* Less than one percent.
** Nominee for election to the Board of Directors.
12
<PAGE> 17
(1) Except as discussed below, none of these shares are subject to rights to
acquire beneficial ownership, as specified in Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended, and the beneficial owner has
sole voting and investment power, subject to community property law,
where applicable.
(2) Applicable percentage of ownership is based on 17,974,125 shares of
Common Stock outstanding.
(3) The Schedule 13G, dated April 17, 1998, of Amerindo Investment Advisors
Inc., a California corporation ("Amerindo"), Amerindo Investment
Advisors, Inc., a Panama corporation ("Amerindo Panama"), Alberto W.
Vilar and Gary A. Tanaka reported that Amerindo and Amerindo Panama
beneficially owned 1,073,500 and 197,000 shares of Common Stock,
respectively. Messrs. Vilar and Tanaka, as the sole shareholders and
directors of Amerindo and Amerindo Panama, are each reported to
beneficially own the 1,270,500 shares of Common Stock held by Amerindo
and Amerindo Panama in the aggregate.
(4) Includes 455,000 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase
280,000 shares of Common Stock granted to Mr. Mauzey.
(5) Includes 306,601 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase
183,336 shares of Common Stock granted to Dr. Goyan.
(6) Includes 67,200 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998.
(7) Includes 22,400 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase 22,400
shares of Common Stock granted to Dr. Butler.
(8) Includes 209,601 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase 86,000
shares of Common Stock granted to Dr. Cartwright.
(9) Includes 250,866 shares of Common Stock and 387,980 shares of Common
Stock issuable to Dr. Cerami upon the exercise of options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase 26,180
shares of Common Stock granted to Dr. Cerami.
(10) Includes 40,131 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998.
(11) Includes 11,200 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase 22,400
shares of Common Stock granted to Mr. McCurdy.
(12) Includes 178,375 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase
226,625 shares of Common Stock granted to Mr. Moch.
(13) Includes 44,800 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase 22,400
shares of Common Stock granted to Dr. Novitch.
13
<PAGE> 18
(14) Includes 114,549 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998 and 2,000 shares of Common Stock held by Ms.
O'Dell's husband. Does not include options to purchase 50,451 shares of
Common Stock granted to Ms. O'Dell.
(15) Includes 1,837,837 shares of Common Stock subject to options which were
exercisable as of April 30, 1998 or which will become exercisable within
60 days after April 30, 1998. Does not include options to purchase
919,792 shares of Common Stock granted to the officers and directors.
14
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Consulting Agreements
The Company has entered into consulting arrangements with key consultants
and members of its Scientific Advisory Board who advise the Company about
present and long-term scientific planning, research and development.
The Company entered into a consulting agreement dated as of April 1, 1998
(the "Consulting Agreement") with Cerami Consulting Corporation ("Cerami
Consulting"), a corporation of which Dr. Anthony Cerami, a director of the
Company, is the President and his daughter, Dr. Carla Cerami, is the sole
shareholder. Pursuant to the Consulting Agreement, Cerami Consulting is paid a
fee of $250,000 per calendar year to provide services regarding advanced
glycosylation endproducts ("A.G.E.s") and certain glucose lowering agents.
Further, the Consulting Agreement provides that to the extent Cerami Consulting
provides material services with respect to the Company's A.G.E. breakers
program, the Company will pay Cerami Consulting a fee of $200,000 per calendar
year. Cerami Consulting was also granted options to purchase 100,000 shares of
the Common Stock of the Company at an exercise price of $5.125 per share, such
options to vest upon the accomplishment of milestones, as compensation for
certain prior services provided to the Company. The Consulting Agreement has an
initial term of three years, after which it is subject to automatic one year
extensions, unless it is terminated upon notice as set forth in the Consulting
Agreement.
In April 1998, the Company entered into a research agreement (the
"Research Agreement") with Kenneth S. Warren Laboratories, Inc. ("Warren
Laboratories"), a non-profit corporation of which Dr. Anthony Cerami is a
director and the President, and Dr. Carla Cerami is a director and the Secretary
and Treasurer. Warren Laboratories will conduct a research program for the
Company with respect to A.G.E.s and certain glucose lowering agents, and the
Company will provide funding up to an initial maximum of $400,000 per calendar
year. The maximum funding amount will be raised to $750,000 per calendar year in
the event the Company reaches certain financial objectives. The Company has also
agreed to grant to Warren Laboratories options to purchase up to 500,000 shares
of the Common Stock of the Company at an exercise price of $8.75 per share in
partial consideration of Warren Laboratories' services, such options to be
granted upon the occurrence of specified events. The Research Agreement has an
initial term of three years, after which it is subject to automatic one year
extensions, unless it is terminated upon notice as set forth in the Research
Agreement.
Registration Rights
In December 1990, the Company, the holders of each of the common shares
underlying certain preferred stock of the Company and certain holders of the
Common Stock, including Dr. Anthony Cerami, entered into an Amended and Restated
Registration and Right of First Offer Agreement (the "Rights Agreement")
pursuant to which the Company granted certain registration rights and rights of
first offer to certain stockholders. The Rights Agreement terminated March 1,
1997.
Indebtedness of Management
In July 1993, the Company lent $200,000 to Jere E. Goyan at an interest
rate equal to the prime rate as published in the Wall Street Journal, adjusted
quarterly, for the purpose of purchasing a home. Dr. Goyan is the President,
Chief Operating Officer and a director of the Company. The loan is secured by a
second mortgage on the premises purchased by Dr. Goyan. In February 1998, the
terms of the loan were amended so that interest will stop accruing as of July
1999 and the principal and interest shall be paid in equal installments in July,
1999, 2000 and 2001. In the event an installment is not paid when due, interest
shall accrue at a rate of one percent per month until payment is made. The
largest aggregate amount outstanding during fiscal year 1997 was $284,925 on
December 31, 1997. A $25,000 payment
15
<PAGE> 20
was made on December 31, 1997. As of April 30, 1998, $267,265, including accrued
interest, remained outstanding.
APPROVAL OF AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION OF ALTEON INC.
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
FROM 30,000,000 SHARES TO 40,000,000 SHARES
The Board of Directors has adopted a resolution recommending that the
stockholders consider and adopt at the Meeting an amendment to Article FOURTH of
the Company's Restated Certificate of Incorporation. The proposed amendment
would increase the number of authorized shares of Common Stock, $.01 par value
per share, from 30,000,000 to 40,000,000 shares.
For the reasons described below, the Board of Directors believes that the
proposed amendment is in the best interests of the Company and its stockholders.
If the amendment is approved, it will become effective upon the filing of a
Certificate of Amendment to the Restated Certificate of Incorporation with the
Secretary of State of Delaware. The text of the proposed amended Article FOURTH
is set forth below:
"FOURTH: The total number of shares of all classes of stock
which the Company shall have authority to issue is
44,000,000 shares. The Company is authorized to issue two
classes of stock designated "Common Stock" and "Preferred
Stock," respectively. The total number of shares of Common
Stock authorized to be issued by the Company is 40,000,000,
and each such share of Common Stock shall have a par value
of $.01 per share. The total number of shares of Preferred
Stock authorized to be issued by the Company is 4,000,000,
and each such share shall have a par value of $.01 per
share."
The Board of Directors believes that it is in the best interests of the
Company to increase the Company's authorized Common Stock in order to meet
possible contingencies and opportunities for which the issuance of Common Stock
may be deemed advisable. From time to time the Company has given, and in the
future is likely to give, consideration to the feasibility of obtaining funds
for appropriate corporate objectives, such as advancement of its A.G.E. breakers
program, through the public or private sale of equity securities. The ability to
issue additional shares of Common Stock in any future capital raising endeavor
or expansion transaction, without the costs and delays incident to obtaining
stockholder approval at the time of such issuance, is vital to the success of
the Company in a competitive marketplace.
The Company has no current plans and has not entered into any
arrangements or understandings whereby it would be required to issue any of the
additional shares of Common Stock for which authority is now sought. Purposes
for which the additional shares of Common Stock could be issued include
financing transactions, the acquisition of the shares or assets of other
corporations, stock splits or dividends, dividend reinvestment programs and
employee benefit plans.
As of April 30, 1998, there were 17,974,125 shares of Common Stock issued
and outstanding. The Company has reserved additional shares of Common Stock in
connection with the conversion of its outstanding preferred stock, the exercise
of outstanding warrants and the exercise of options granted under the Company's
Amended and Restated 1987 Stock Option Plan and Amended 1995 Stock Option Plan.
In the opinion of the Board of Directors, the remaining authorized and unissued
shares of Common Stock are insufficient to meet the capital needs of the
Company.
The newly authorized shares of Common Stock, which will be identical to
the shares of Common Stock presently authorized, may be issued for such
consideration as shall be authorized from
16
<PAGE> 21
time to time by the Board of Directors, subject to any required regulatory
approvals, but without further action by the stockholders unless specifically
required by applicable law or Nasdaq rules. In connection with any issuance and
sale of such shares, the number of shares to be issued and sold and the terms
upon which they may be issued and sold will necessarily be determined by
conditions existing at the time of such issuance and sale. Stockholders of the
Company do not have the preemptive right to subscribe on a pro-rata basis to any
future issuance of shares. If the Company elects to issue additional shares of
Common Stock, stockholders would not have any preferential right to purchase
them, and their ownership would therefore be diluted.
Although the Board is not aware of any effort by any person to acquire
control of the Company, the authorized but unissued shares could be used to make
it more difficult to effect a change in control, and thereby make it more
difficult for stockholders to obtain an acquisition premium for their shares or
remove incumbent management. Such shares could be used to create impediments for
persons seeking to gain control of the Company by means of a merger, tender
offer, proxy contest or other means. For example, substantial dilution of a
potential acquiring party could be achieved through private placement of
securities with purchasers who might cooperate with the Board of Directors in
opposing the potential acquiring party. The Amendment is not part of a plan by
the Company's Board of Directors to propose a series of new anti-takeover
measures and the Board of Directors does not presently intend to propose
additional anti-takeover measures in future proxy solicitations.
In accordance with the Delaware Corporation Act, the proposed amendment
to the Restated Certificate of Incorporation must be approved by the affirmative
vote of the holders of at least a majority of the outstanding shares of the
Company's Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO
THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM 30,00000 TO 40,000,000 SHARES.
APPROVAL OF REMOVAL OF CERTAIN LIMITATIONS
REGARDING THE COMPANY'S
SERIES G PREFERRED STOCK AND SERIES H PREFERRED STOCK
This proposal seeks stockholder approval of the removal of certain
limitations on the issuance and conversion of the Company's Series G Preferred
Stock and Series H Preferred Stock as described below.
Background
The Company entered into a Stock Purchase Agreement (the "Agreement")
dated as of December 1, 1997 with Genentech, Inc. ("Genentech") pursuant to
which Genentech agreed to purchase, and the Company agreed to sell, an aggregate
of $15,000,000 of the Company's Common Stock and Series G Preferred Stock and up
to $48,000,000 of the Company's Series H Preferred Stock. (The Series G
Preferred Stock and the Series H Preferred Stock are referred to in this Proxy
Statement as the "Preferred Stock"). At the same time, the Company and Genentech
entered into a Development Collaboration and License Agreement pursuant to which
Genentech received an exclusive license to use and sell certain of the Company's
products in certain areas of the world and the Company and Genentech agreed to
collaborate on the development of such products (the "License").
On April 29, 1998, the Company and Genentech entered into an amendment to
the Agreement and the License (the "Amendment") to address concerns regarding
compliance with Rule 4460 of the National Association of Securities Dealers,
Inc. (the "NASD"). Rule 4460 requires that stockholder approval be obtained
prior to the issuance, in a transaction other than a public offering, of
securities which are convertible into a number of shares of an issuer's common
stock equal to 20% or more of the common
17
<PAGE> 22
stock outstanding before the issuance for less than the greater of book or
market value of the common stock. The Preferred Stock is convertible into Common
Stock at a price based on the fair market value of the Common Stock at the time
of conversion. However, the NASD has advised the Company that it regards the day
prior to the date of the Agreement (rather than the date of conversion) as the
appropriate date for measuring the minimum fair market value, which minimum
value would be $5.6875.
Rule 4460 also provides that stockholder approval is required before the
issuance of Common Stock when the issuance will result in a change of control of
the issuer. Under the Agreement Genentech is permitted to own up to 40% percent
of the Company's Common Stock. The NASD has advised the Company that ownership
of more than 20% of the Company's outstanding Common Stock may be deemed to
constitute a change in control.
Because the conversion price of the Preferred Stock will be determined on
the basis of the fair market value of the Common Stock at the time of
conversion, it is mathematically possible that conversion of the Preferred Stock
could result in the issuance of (i) more than a number of shares of Common Stock
equal to 20% or more of the Common Stock outstanding before the issuance for
less than the greater of book or market value of the Common Stock on the date of
the Agreement or (ii) a number of shares of Common Stock sufficient to cause a
change in control within the meaning of Rule 4460.
The Amendment was entered into to address these issues of compliance with
Rule 4460. The Amendment provides that the conversion price of the Preferred
Stock will never be less than $5.6875, that Genentech will not be allowed to own
more than 19.99% percent of the Company's outstanding Common Stock and that
Genentech will not take or participate in any action the purpose or effect of
which is to change or influence the control of the Company. The Amendment also
provides for changes in the timing and amount of Genentech's funding obligations
under the Agreement and the License that will remain in effect unless and until
the Company's stockholders vote to approve the removal of the limitations
described in the preceding sentence (the "Limitations"). In conjunction with the
execution of the Amendment, the Company agreed to waive certain restrictions on
sale by Genentech of Common Stock contained in the Agreement unless and until
the stockholders vote to approve the removal of the Limitations. See "Effects of
the Amendment."
This proposal seeks stockholder approval of the removal of the
Limitations. If the stockholders do not approve this proposal, the changes in
Genentech's funding obligations imposed by the Amendment and the waiver of
restrictions on sale will remain in effect.
Effects of the Amendment
In addition to imposing the Limitations, the Amendment contains the
provisions described below.
Funding Dates and Amounts
Pursuant to the Agreement, on December 19, 1997, Genentech purchased
837,314 shares of Common Stock and 939 shares of Series G Preferred Stock. The
Company expects to use the proceeds of the sale of the Common Stock and Series G
Preferred Stock for general corporate purposes. The Agreement provided that
Genentech would purchase an initial $16,000,000 of Series H Preferred Stock on
January 31, 1998 and the balance thereafter in quarterly installments on July 1,
October 1, January 2, and April 1 of each year commencing July 1, 1998 until the
purchase price of Series H Preferred Stock purchased equals the lesser of
$48,000,000 or the Company's development costs for certain products, with the
amount to be purchased at each such quarterly closing to be determined in
accordance with the Company's annual development budget for such products in the
United States. Pursuant to the Agreement, the proceeds of the sale of shares of
Series H Preferred Stock will be used to fund development costs for pimagedine
or second generation products.
Pursuant to the Amendment, the January 31, 1998 purchase was deferred to
the date which is three days after the Meeting, at which time Genentech will buy
$8,000,000 of Series H Preferred Stock. Unless
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the stockholders approve this proposal, the subsequent closing dates will be
deferred so that the first subsequent closing will occur on the earlier of (i)
three days after the date on which the stockholders of the Company subsequently
approve the removal of the Limitations or (ii) 60 days after the date on which
data from the Company's ACTION I trials are unblinded to Genentech (the "Data
Release Date").
Pursuant to its terms, the License is subject to termination by Genentech
upon six months' notice to the Company. The License provides that in the event
of such termination if the proceeds received by the Company from Genentech's
purchase of Series H Preferred Stock are not sufficient to pay the costs during
the six-month termination notice period of continuing or terminating (as the
Company elects) certain then ongoing development programs, Genentech will pay to
the Company in cash an amount necessary to pay for such costs. The Amendment
provides that if notice of termination of the License is given prior to the Data
Release Date, unless the Company's stockholders have approved removal of the
Limitations, Genentech will be required to pay only the Company's actual costs
for the development programs to the date of the termination notice.
Restrictions on Sale
The Agreement provides that for a period of five years from the date of
the Agreement no holder of the Common Stock issued pursuant to the Agreement or
upon the conversion of Preferred Stock will sell a number of shares of Common
Stock which is equal to more than 25% of the average weekly trading volume of
the Common Stock for the four preceding calendar weeks. In conjunction with
execution of the Amendment, the Company agreed to waive these restrictions
unless the stockholders vote to approve the removal of the Limitations.
Terms of the Preferred Stock
The Preferred Stock has a liquidation value of $10,000 per share plus
accrued dividends ("Liquidation Preference"). In the event of the liquidation of
the Company, holders of the Preferred Stock will be entitled to receive an
amount equal to the Liquidation Preference before any distribution of assets of
the Company to the holders of any class of stock ranking junior to the Preferred
Stock.
The holders of the Series G and Series H Preferred Stock are entitled to
receive cumulative quarterly dividends, payable in shares of the Series G and
Series H Preferred Stock, respectively, at the per share rate equal to 8.50% in
the case of the Series G Preferred Stock and, in the case of the Series H
Preferred Stock, the prime rate published in The Wall Street Journal five
business days prior to the first issuance of a share of Series H Preferred
Stock. The Certificates of Designations for the Preferred Stock provide that no
dividends will be payable during any period when the holder of the Preferred
Stock and its affiliates beneficially own more than 40% of the outstanding
Common Stock. The Certificates of Designations prohibit the repurchase or
redemption by the Company of shares of stock ranking junior to or on a parity
with the Preferred Stock while there is an arrearage in the payment of
dividends.
Each share of Series G Preferred Stock is convertible at any time by the
holder thereof upon 70 days' notice to the Company into a number of shares of
Common Stock determined by dividing $10,000 by the average of the closing sales
prices of the Common Stock, as reported on the Nasdaq National Market, for the
20 business days preceding the date of conversion (such average being referred
to as the "Conversion Value"). Each share of Series H Preferred Stock is
convertible on the same terms at any time after 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 License); (ii) termination by Genentech of the License; or (iii)
December 1, 2002. The Preferred Stock is convertible into Common Stock or cash
by the Company on the basis of the Conversion Value. The Certificates of
Designations provide that the Preferred Stock may not be converted into Common
Stock if after such conversion the holder and its affiliates would be the
beneficial owners of more than 40% of the outstanding Common Stock. (Pursuant to
the Amendment, unless the stockholders approve removal of the Limitations, the
Conversion Value may not be less than $5.6875 and the percentage limitation is
19.99% percent). Issuance
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of Common Stock upon conversion of the Preferred Stock will have a dilutive
effect on holders of the Common Stock.
Holders of the Preferred Stock generally have no voting rights except as
required by the General Corporation Law of Delaware. However, the affirmative
vote of the holders of a majority of the outstanding Series G or Series H
Preferred Stock is necessary for any amendment of the powers, rights,
preferences, or privileges of the Series G or Series H Preferred Stock,
respectively, so as to affect them adversely.
The Company's Certificate of Incorporation includes a 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. For purposes of this provision, the
shares of Preferred Stock are not considered to be voting stock.
The Board of Directors believes that it is in the best interests of the
Company and its stockholders that the Limitations be removed so that the
original terms of the Agreement regarding Genentech's funding obligations and
the limitations on its Common Stock resale rights may continue in effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE REMOVAL OF THE LIMITATIONS.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has, subject to stockholder
ratification, retained Arthur Andersen LLP to serve as independent public
accountants of the Company for the fiscal year ending December 31, 1998 because
it is an internationally recognized accounting firm familiar with the unique
accounting, tax and financial issues that relate to and affect the
biopharmaceutical industry. Arthur Andersen LLP has a firm-wide effort and a
group of personnel that specialize in this industry and has assigned members of
this group to work with Alteon. Arthur Andersen LLP also served as independent
public accountants of the Company for the fiscal year ended December 31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
One or more representatives of Arthur Andersen LLP is expected to attend
the Meeting and have an opportunity to make a statement and/or respond to
appropriate questions from stockholders.
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SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission ("SEC") and the NASD. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1997 except Dr. Cerami's Form 4 for
December 1996 for four transactions was filed on April 21, 1997 and Ms. O'Dell's
Form 4 for January 1997 for one transaction was filed on February 12, 1997.
STOCKHOLDERS' PROPOSALS
Stockholders deciding to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 1999 Annual Meeting of
Stockholders must advise the Secretary of the Company of such proposals in
writing by January 1, 1999.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.
INCORPORATION BY REFERENCE
Items 7, 7A and 9 of the Company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 1997 and the financial statements
contained therein are incorporated herein by reference. A copy of the Company's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1997 is
included with the Company's annual report to stockholders which accompanies this
proxy statement.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by the
Company.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by directors, officers and other employees of
the Company who will not be specially compensated for these services. The
Company has retained the services of Registrar and Transfer Company to assist in
the proxy solicitation at a fee estimated to be $15,000. The Company will also
request that brokers, nominees, custodians and other fiduciaries forward
soliciting materials to the beneficial owners of shares held of record by such
brokers, nominees, custodians and other fiduciaries. The Company will reimburse
such persons for their reasonable expenses in connection therewith.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.
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ALTEON HAS FURNISHED, WITHOUT CHARGE, A COPY OF ITS REPORT ON FORM 10-K,
AS AMENDED, FOR THE YEAR ENDED DECEMBER 31, 1997, INCLUDING FINANCIAL STATEMENTS
AND SCHEDULES THERETO BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS STOCKHOLDERS OF
RECORD ON MAY 28, 1998 AND WILL FURNISH TO EACH BENEFICIAL STOCKHOLDER SUCH
REPORT UPON WRITTEN REQUEST MADE TO THE SECRETARY OF THE COMPANY. A REASONABLE
FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE
IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
ELIZABETH A. O'DELL,
Secretary
Ramsey, New Jersey
June 8, 1998
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REVOCABLE PROXY
ALTEON INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby constitutes and appoints Kenneth I. Moch and Elizabeth
A. O'Dell and each of them, his or her true and lawful agents and proxies with
full power of substitution in each, to represent and to vote on behalf of the
undersigned all of the shares and warrants of Alteon Inc. (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the Sheraton Crossroad Hotel, One International Boulevard,
Mahwah, New Jersey at 9:00 A.M., local time, on Wednesday, July 22, 1998, and at
any adjournment or adjournments thereof, upon the following proposals more fully
described in the Notice of Annual Meeting of Stockholders and Proxy Statement
for the Meeting (receipt of which is hereby acknowledged).
With- For All
For hold Except
1. ELECTION OF DIRECTORS. [ ] [ ] [ ]
(Mark one only)
NOMINEES: MARILYN G. BRESLOW AND ALAN J. DALBY
(INSTRUCTIONS: To withhold authority for any individual nominee, write that
nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
Please be sure to sign and date
this Proxy in the box below Dated:
------------------------
- ----------------------------- ----------------------------------------------
Signature of Stockholder Signature of Stockholder if held Jointly
2. Approval of proposal to amend the Restated Certificate of Incorporation
of Alteon Inc. to increase the authorized number of shares of Common
Stock from 30,000,000 shares to 40,000,000 shares.
For Against Abstain
[ ] [ ] [ ]
3. Approval of proposal to remove certain limitations regarding the
Company's Series G Preferred Stock and Series H Preferred Stock.
For Against Abstain
[ ] [ ] [ ]
4. Approval of proposal to ratify the appointment of Arthur Andersen LLP
as the independent public accountants of the Company for the fiscal
year ending December 31, 1998.
For Against Abstain
[ ] [ ] [ ]
5. In their discretion, the proxies are authorized to vote upon other matters as
may properly come before the Meeting.
I Will Will Not
Attend
[ ] [ ] the
Meeting
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
ALTEON INC.
- -------------------------------------------------------------------------------
This proxy must be signed exactly as the name appears hereon. When shares are
held by joint tenants, both should sign. If the signer is a corporation, please
sign full corporate name by duly authorized officer, giving full title as such.
If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
