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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended MARCH 31, 1999
Commission File Number 0-19529
ALTEON INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3304550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
170 WILLIAMS DRIVE, RAMSEY, NEW JERSEY 07446
(Address of principal executive offices) (Zip Code)
(201) 934-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES: x NO:
-- --
On April 29, 1999, 18,888,660 shares of Registrant's Common Stock were
outstanding.
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ALTEON INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. - Financial Statements:
Balance sheets as of December 31, 1998
and March 31, 1999...................................................3
Statements of operations for the three months ended
March 31, 1998 and 1999..............................................4
Statements of cash flows for the three months ended
March 31, 1998 and 1999..............................................5
Notes to financial statements........................................6
Item 2. - Management's Discussion and
Analysis of Financial Condition and
Results of Operations....................................................8
Item 3. - Quantitative and Qualitative Disclosures About Market Risk....19
PART II. OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K..............................20
SIGNATURES....................................................................22
INDEX TO EXHIBITS.............................................................23
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PART I
ITEM 1. FINANCIAL STATEMENTS.
ALTEON INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................... $ 10,839,586 $ 7,327,983
Short-term investments ...................................... 13,292,666 11,972,063
Other current assets ........................................ 274,145 307,012
------------- -------------
Total current assets ..................................... 24,406,397 19,607,058
Property and equipment, net ................................. 2,985,156 2,828,919
Deposits and other assets ................................... 260,080 265,027
------------- -------------
Total assets ................................................ $ 27,651,633 $ 22,701,004
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................ $ 1,035,417 $ 931,614
Accrued expenses ............................................ 3,277,858 3,683,837
------------- -------------
Total current liabilities ................................ 4,313,275 4,615,451
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,993,086 shares authorized,
and 771 and 787 of Series G, and 2,315 and 2,364 of Series
H shares issued and outstanding, as of December 31, 1998,
and March 31, 1999, respectively .......................... 31 32
Common stock, $.01 par value; 30,000,000 shares
authorized and 18,814,740 and 18,888,660 shares issued
and outstanding, as of December 31, 1998, and March 31,
1999, respectively ........................................ 188,147 188,887
Additional paid-in capital .................................. 131,005,033 131,748,912
Accumulated deficit ......................................... (107,856,621) (113,848,217)
Unrealized other comprehensive income/(loss) ................ 1,768 (4,061)
------------- -------------
Total stockholders' equity ............................... 23,338,358 18,085,553
------------- -------------
Total liabilities and stockholders' equity .................. $ 27,651,633 $ 22,701,004
============= =============
</TABLE>
See accompanying notes to financial statements
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ALTEON INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
-----------------------------
1998 1999
------------ ------------
<S> <C> <C>
Revenues:
Investment income ............................ $ 385,452 $ 278,310
Expenses:
Research and development ..................... 5,803,596 4,529,692
General and administrative ................... 1,105,183 1,093,435
Interest ..................................... 2,572 --
------------ ------------
Total expenses ............................ 6,911,351 5,623,127
------------ ------------
Net loss ....................................... $ (6,525,899) $ (5,344,817)
------------ ------------
Preferred stock dividends ...................... 198,735 646,778
------------ ------------
Net loss applicable to common stockholders ..... $ (6,724,634) $ (5,991,595)
============ ============
Basic loss per share to common stockholders .... $ (0.37) $ (0.32)
============ ============
Diluted loss per share to common stockholders .. $ (0.37) $ (0.32)
============ ============
Weighted average common shares used in computing
basic and diluted loss per share ............. 17,954,962 18,868,948
============ ============
</TABLE>
See accompanying notes to financial statements
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ALTEON INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
-----------------------------
1998 1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ................................................... $ (6,525,899) $ (5,344,817)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ........................ 162,529 173,362
Amortization of deferred compensation ................ 200,154 75,664
Changes in operating assets and liabilities:
Other current assets .............................. (146,085) (32,867)
Other assets ...................................... (6,868) (4,948)
Accounts payable and accrued expenses ............. (24,024) 302,177
------------ ------------
Net cash used in operating activities ............. (6,340,193) (4,831,429)
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures ....................................... (19,630) (17,124)
Purchases of marketable securities ......................... (48,664,422) (20,989,829)
Sales and maturities of marketable securities .............. 38,316,319 22,304,603
------------ ------------
Net cash provided by (used in) investing activities (10,367,733) 1,297,650
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock ..................... 183,649 22,176
Payments under capital lease obligations ................... (80,023) --
------------ ------------
Net cash provided by financing activities ......... 103,626 22,176
------------ ------------
Net (decrease)/increase in cash and cash equivalents ......... (16,604,300) (3,511,603)
Cash and cash equivalents, beginning of period ............... 20,423,675 10,839,586
------------ ------------
Cash and cash equivalents, end of period ..................... $ 3,819,375 $ 7,327,983
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest ............................ $ 2,572 $ --
============ ============
</TABLE>
See accompanying notes to financial statements
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ALTEON INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION - The accompanying unaudited financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1999, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information refer to
the financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - Cash and cash
equivalents include highly liquid investments which have a maturity of less than
three months at the time of purchase. Short-term investments are recorded at
fair market value. As of March 31, 1999, short-term investments were invested in
debt instruments of the U.S. Government, government agencies, financial
institutions and corporations with strong credit ratings.
At March 31, 1999, $11,972,063 of the Company's short term investments are
classified as available for sale. A net unrealized loss of $4,061 relating to
the available for sale securities has been recorded as a separate component of
stockholders' equity at March 31, 1999.
3. NET LOSS PER SHARE - Basic loss per share is based on the average numbers
of shares outstanding during the year. Diluted loss per share is the same as
basic loss per share, as the inclusion of common stock equivalents would be
antidilutive.
4. COMPREHENSIVE INCOME - The following sets forth comprehensive income as
required by SFAS 130 for the periods ended March 31, 1998 and 1999 (dollars in
thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Net Loss ........................................... $(6,526) $(5,345)
Net Unrealized Loss on Marketable Securities ....... (15) (4)
------- -------
Comprehensive Loss ................................. $(6,541) $(5,349)
======= =======
</TABLE>
5. EVENTS CONCERNING COLLABORATIVE PARTNERS - In December 1997, Alteon and
Genentech, Inc. ("Genentech") entered into a stock purchase agreement and a
development collaboration and license agreement providing for the development
and marketing of pimagedine and second-generation A.G.E.-formation inhibitors.
In December 1997, Genentech purchased Common Stock and Series G Preferred Stock
for an aggregate purchase price of $15,000,000. The use of these funds was
unrestricted to the Company. The agreement provided for Genentech to fund the
continued development of pimagedine and support possible additional clinical
trials for expanded indications of the drug through the periodic purchase of up
to $48,000,000 in Series H Preferred Stock. As of December 31, 1998, Genentech
had
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purchased $22,544,000 of Series H Preferred Stock. The agreements also provide
for Genentech to fund agreed-upon development costs for second-generation
A.G.E.-formation inhibitors.
Pursuant to the development collaboration and license agreement, Alteon
granted Genentech an exclusive license to use and sell pimagedine in all areas
of the world except for Japan, China, South Korea and Taiwan, territories
covered under Alteon's agreement with Yamanouchi Pharmaceutical Co., Ltd.
("Yamanouchi"), and Israel, Jordan, Bulgaria, Cyprus and South Africa,
territories covered under Alteon's agreement with Gamida for Life, formerly
Eryphile BV ("Gamida") (the "Genentech Territory"). Alteon also granted
Genentech an exclusive license to use and sell second-generation
A.G.E.-formation inhibitor products (and any future Alteon compounds in this
class), to be selected by Genentech after review of Alteon's A.G.E-formation
inhibitor portfolio, in the Genentech Territory. The license provided that
Alteon receive cash payments from Genentech upon meeting certain milestones and
royalties on net sales of pimagedine and second-generation A.G.E.-formation
products within the Genentech Territory.
By letter agreement dated February 11, 1999, Alteon and Genentech agreed
that the development collaboration and license agreement will terminate
effective June 30, 1999, unless prior to that date the parties agree to amend
the agreement. The parties further agreed that Genentech's obligations to
purchase shares of stock of Alteon, pursuant to the stock purchase agreement,
terminated effective December 31, 1998. The letter agreement provides that
Genentech will continue to provide funding (in cash rather than through
purchases of Series H Preferred Stock) for agreed-upon development costs for
pimagedine until June 30, 1999.
6. PREFERRED STOCK TRANSACTIONS - In December 1997, the Company and Genentech
entered into a stock purchase agreement pursuant to which Genentech agreed to
buy shares of Common Stock, Series G Preferred Stock and Series H Preferred
Stock. In December 1997, Genentech purchased Common Stock and Series G Preferred
Stock for an aggregate purchase price of $15,000,000. On July 27, 1998, and
October 1, 1998, Genentech purchased $8,000,000 (800 shares) and $14,544,000
(1,454.37 shares), respectively of Series H Preferred Stock. As of March 31,
1999, approximately $2,854,000 of Preferred Stockholder Dividends and
amortization of Preferred Stock conversion discount was recorded. Series G
Preferred Stock and Series H Preferred Stock Dividends are payable quarterly in
shares at a rate of 8.5%. Each share of Series G Preferred Stock is convertible
at any time into a number of shares of Common Stock determined by dividing
$10,000 by the average of the closing sales price of the Common Stock, as
reported on the Nasdaq National Market for the twenty business days immediately
preceding the date of conversion (the "Conversion Price"). The shares of Series
H Preferred Stock will be convertible on the same basis at any time after the
earlier of (i) the granting of approval by the U.S. Food and Drug Administration
("FDA") for the marketing and sale of any pimagedine product specified in the
Development Collaboration and License Agreement between the Company and
Genentech, (ii) termination by Genentech of the Development Collaboration and
License Agreement or, (iii) December 1, 2002. In addition, subject to certain
volume limitations, the Series H Preferred Stock may be converted at any time
when the Company's market capitalization is less than twice the price paid by
Genentech for all shares of Series G Preferred Stock and Series H Preferred
Stock then held by Genentech.
7. OTHER RELATED PARTY TRANSACTIONS - In July 1993, a former Company officer
received a loan which bore interest at a rate equal to the prime rate as
published in the Wall Street Journal, adjusted quarterly, for the purpose of
purchasing a home. The loan is secured by a second mortgage on the home
purchased by the former officer. In February 1999, the terms of the loan were
amended to require payment of the principal amount and interest in full in the
event such home is sold; otherwise, interest will stop
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accruing as of July 1999 and the principal and interest shall be paid in equal
installments in January 2000, July 2000 and July 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. As of March 31, 1999, $262,212, including
accrued interest, remained outstanding. In 1997 and 1998 interest payments of
$25,000 were made.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Since its inception in October 1986, Alteon has devoted substantially all
of its resources to its research, drug discovery and development programs. To
date, Alteon has not generated any revenues from the sale of products and does
not expect to generate any such revenues for several years, if at all. Alteon
has incurred an accumulated deficit of $113,848,217 as of March 31, 1999, and
expects to incur operating losses, potentially greater than losses in prior
years, for a number of years.
Alteon has financed its operations through proceeds from an initial public
offering of Common Stock in 1991, a follow-on offering of Common Stock completed
in 1995, private placements of common and preferred equity securities, revenue
from its collaborations with Hoechst Marion Roussel, Inc. ("HMRI") and
Yamanouchi, reimbursement of certain of Alteon's research and development
expenses by its collaborative partners, and investment income earned on cash
balances and short-term investments.
In December 1997, Alteon and Genentech entered into a stock purchase
agreement and a development collaboration and license agreement providing for
the development and marketing of pimagedine and second-generation
A.G.E.-formation inhibitors. In December 1997, Genentech purchased Common Stock
and Series G Preferred Stock for an aggregate purchase price of $15,000,000. On
July 27, 1998 and October 1, 1998, Genentech purchased $8,000,000 and
$14,544,000 respectively, of Series H Preferred Stock.
By letter agreement dated February 11, 1999, Alteon and Genentech agreed
that Genentech's obligations to purchase shares of stock of Alteon pursuant to
the stock purchase agreement terminated effective December 31, 1998. The letter
agreement provides that Genentech will continue to provide funding (in cash
rather than through purchases of Series H Preferred Stock) for agreed-upon
development costs for pimagedine until June 30, 1999.
Although the Company anticipates increased expenditures in research and
development expenses as it develops products and conducts its clinical trials, a
portion of such development expenses are expected to be reimbursed by Alteon's
collaborative partners. Yamanouchi has agreed to fund preclinical studies,
including most toxicology studies, on pimagedine and any other products that the
parties jointly agree to develop, including a second generation A.G.E.-formation
inhibitor and a macrophage stimulator. Gamida conducted, at its own expense, a
Phase II clinical trial in Israel to evaluate pimagedine in patients with
diabetes and elevated serum cholesterol levels, which was completed in April
1997. Yamanouchi and Gamida do not fund Alteon's research or early product
development expenses.
The Company anticipates that during 1999 it will review with its corporate
partners their arrangements in light of the Company's current development plans
and priorities.
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The Company's business is subject to significant risks including, but not
limited to, (i) its ability to obtain funding, (ii) the risks inherent in its
research and development efforts, including clinical trials, (iii) uncertainties
associated both with obtaining and enforcing its patents and with the patent
rights of others, (iv) the lengthy, expensive and uncertain process of seeking
regulatory approvals, (v) uncertainties regarding government reforms and product
pricing and reimbursement levels, (vi) technological change and competition,
(vii) manufacturing uncertainties, and (viii) dependence on collaborative
partners and other third parties. Even if the Company's product candidates
appear promising at an early stage of development, they may not reach the market
for numerous reasons. Such reasons include the possibilities that the products
will prove ineffective or unsafe during clinical trials, will fail to receive
necessary regulatory approvals, will be difficult to manufacture on a large
scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Total revenues for the three months ended March 31, 1999, and the three
months ended March 31, 1998, were $278,000 and $385,000, respectively. Revenues
were derived from interest earned on cash and cash equivalents and short-term
investments. The 27.8% decrease in investment income was attributed to the
decrease in cash, cash equivalents and short-term investment balances.
The Company's total expenses decreased to $5,623,000 for the three months
ended March 31, 1999, from $6,911,000 for the three months ended March 31, 1998,
and consisted primarily of research and development expenses. Research and
development expenses were $4,530,000 for the three months ended March 31, 1999,
and $5,804,000 for the three months ended March 31, 1998, a 22.0% decrease. This
decrease was primarily due to decreased expenses related to the clinical trial
costs.
General and administrative expenses decreased to $1,093,000 for the three
months ended March 31, 1999 from $1,105,000 for the three months ended March 31,
1998, a 1.1% decrease. This decrease is due primarily to decreased
personnel-related expenses and investor relations expenses offset by increased
consulting expenses.
The Company's net loss applicable to common stockholders decreased to
$5,992,000 for the three months ended March 31, 1999, from $6,725,000 in the
same period in 1998, a decrease of 10.9%. This was primarily a result of
decreased research and development expenses and general and administrative
expenses offset by decreased investment income. Included in the net loss
applicable to common stockholders are preferred stock dividends of approximately
$647,000.
LIQUIDITY AND CAPITAL RESOURCES
Alteon had cash, cash equivalents and short-term investments at March 31,
1999, of $19,300,000 compared to $24,132,000 at December 31, 1998. This is a
decrease in cash, cash equivalents and short-term investments for the three
months ended March 31, 1999, of $4,832,000. This consisted of $4,831,000 of cash
used in operations consisting primarily of research and development expenses,
personnel and related costs and facility expenses, $17,000 of capital
expenditures and $6,000 of additional unrealized losses. This was offset by
$22,000 of financing activities related to proceeds from stock option exercises.
As of March 31, 1999, Alteon had invested $7,837,000 in capital equipment and
leasehold improvements.
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The Company's research and development expenses, to date, have been funded
primarily by research and development collaborative arrangements and sales of
equity securities. In programs that are subject to joint development agreements,
the Company expects to incur substantial additional research and development
costs, including costs related to drug discovery, preclinical research and
clinical trials. The Company anticipates that it will be able to offset a
portion of its research and development expenses and its clinical development
expenses with funding from its collaborative partners.
Alteon anticipates that its existing available cash and cash equivalents
and short-term investments will be adequate to satisfy its working capital
requirements for its current and planned operations into 2000.
In December 1997, Alteon and Genentech entered into a stock purchase
agreement and a development collaboration and license agreement providing for
the development and marketing of pimagedine and second-generation
A.G.E.-formation inhibitors. In December 1997, Genentech purchased Common Stock
and Series G Preferred Stock for an aggregate purchase price of $15,000,000. On
July 27, 1998 and October 1, 1999, Genentech purchased $8,000,000 and
$14,544,000, respectively of Series H Preferred Stock.
By letter agreement dated February 11, 1999, Alteon and Genentech agreed
that Genentech's obligations to purchase shares of stock of Alteon pursuant to
the stock purchase agreement terminated effective December 31, 1998. The letter
agreement provides that Genentech will continue to provide funding (in cash
rather than through purchases of Series H Preferred Stock) for agreed-upon
development costs for pimagedine until June 30, 1999.
The amount of the Company's future capital requirements will depend on
numerous factors, including the progress of the Company's research and
development programs, the conduct of preclinical tests and clinical trials, the
development of regulatory submissions, the costs associated with protecting
patents and other proprietary rights, the development of marketing and sales
capabilities and the availability of third party funding.
Because of the Company's long-term capital requirements, it may seek
access to the public or private equity markets whenever conditions are
favorable. The Company may also seek additional funding through corporate
collaborations and other financing vehicles, potentially including off-balance
sheet financing through limited partnerships or corporations. There can be no
assurance that such funding will be available at all or on terms acceptable to
the Company. If adequate funds are not available, the Company may be required to
curtail significantly one or more of its research or development programs. If
the Company obtains funds through arrangements with collaborative partners or
others it may be required to relinquish rights to certain of its technologies or
product candidates.
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.
The Company's current priorities are the evaluation and possible continued
development of pimagedine and the development of ALT-711, its lead A.G.E.
crosslink breaker candidate. If the
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Company decides to continue the development of pimagedine after its
consultations with the FDA, it expects to seek one or more corporate partners to
provide necessary funding. The Company is actively seeking one or more corporate
partners to help fund the development of ALT-711. The Company believes that
additional development of this compound and other product candidates will
require the Company to find sources of funding.
The Company has received notification from the Nasdaq Stock Market, Inc.
("Nasdaq") that the Company is not presently in compliance with the Nasdaq
maintenance standard which requires that the Company's Common Stock maintain a
closing bid price of greater than or equal to $1.00. Pursuant to the Nasdaq
rules the Company has ninety (90) calendar days in which to regain compliance
with this requirement. During this time the Company's Common Stock will continue
to be listed on Nasdaq. If within this period the Common Stock complies with the
closing bid price requirement for a minimum of ten (10) consecutive trading
days, the Common Stock will continue to be listed on Nasdaq at the end of the
ninety (90) day period. If the Company is unable to comply with this requirement
on or before the end of the ninety (90) day period ending June 22, 1999, the
Company's Common Stock will be delisted from Nasdaq effective at the opening of
business on June 24, 1999. No assurance can be given that the Common Stock will
meet the closing bid price requirement during this period. Delisting could have
a material adverse effect on the Company and its ability to raise additional
capital on favorable terms as well as on stockholder liquidity.
The Company is conducting a review of its computer systems to identify any
issues which may result from the year 2000 date recognition problem, which is
the result of computer programs being written using two digits rather than four
to define the applicable year. The Company believes that with minor
modifications to its systems, which it expects to complete before December 31,
1999, the year 2000 issue will not pose significant operation problems for its
internal computer systems as so modified. The year 2000 assessments and
modifications are generally being done in-house. Therefore, the primary costs
associated with this project are included in payroll expenditures.
The Company is assessing the possible effect on its operations of year
2000 problems faced by its third party vendors. The Company believes that the
primary area in which its operations could be materially affected by year 2000
problems of its vendors relates to its use of contract research organizations
("CROs") to provide services in connection with portions of its clinical trials.
The CROs have advised the Company that they are addressing the year 2000
compliance issue and are in the process of assessing their systems which may be
vulnerable to the year 2000 issue. The Company continues to monitor their
readiness. However, if year 2000 problems prevent the CROs from performing their
work for the Company, the Company will not be able to develop internal systems
to replace the CROs and will have to find other CROs which are able to perform.
As a result, the Company could incur substantial delays in its data analysis and
any then ongoing clinical trials. In addition, power failures caused by year
2000 problems faced by utilities could compromise animal studies in progress at
the Company's facilities. This could cause material delays in the Company's
research and development programs.
The Company's operations and financial conditions could be adversely and
materially affected by other year 2000 problems including, without limitation,
(i) unexpected failures by third party vendors, (ii) failures by governmental
agencies causing delays in approval of new products, (iii) failures in global
banking systems and capital markets, and (iv) failures to identify year 2000
problems in critical systems within the Company.
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In February 1999, the Board of Directors approved the repricing of stock
options outstanding as of February 2, 1999.
Statements in this Form 10-Q that are not statements or descriptions of
historical facts are "forward-looking" statements under Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995 and are subject to numerous risks and
uncertainties. These forward-looking statements and other forward-looking
statements made by the Company or its representatives are based on a number of
assumptions. The words "believes," "expects," "anticipates," "intends,"
"estimates" or other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements as they involve risks and uncertainties, and
actual results could differ materially from those currently anticipated due to a
number of factors, including those set forth in this section and elsewhere in,
or incorporated by reference into, this Form 10-Q. These factors include, but
are not limited to, the risks set forth below. The forward-looking statements
represent the Company's judgment and expectations as of the date of this Report.
The Company assumes no obligation to update any such forward-looking statements.
Need for Future Funding; Uncertainty of Access to Capital
Alteon anticipates that its existing available cash and cash equivalents
and short-term investments will be adequate to satisfy its working capital
requirements for its current and planned operations into 2000. Alteon will
require substantial new funding in order to continue the research, product
development, preclinical testing and clinical trials of its product candidates,
including pimagedine if the Company decides to continue its development and
ALT-711, the Company's lead A.G.E. crosslink breaker candidate. 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, progress
with preclinical 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 initially through arrangements with
corporate collaborators. It may in the future seek funding through public or
private sales of the Company's securities, including equity securities, when and
if conditions permit. In addition, the Company may pursue opportunities to
obtain debt financing, including capital leases, 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. If Alteon obtains funds through arrangements with
collaborative partners or others, it may be required to relinquish rights to
certain of its technologies or product candidates.
12
<PAGE> 13
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. Before obtaining regulatory
approvals for the commercial sale of any of its products under development, the
Company must demonstrate through preclinical studies and clinical trials that
the product is safe and effective for use in each target indication. The results
from preclinical 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 any clinical trials undertaken by the Company will demonstrate
sufficient safety and efficacy to obtain the requisite regulatory approvals or
will result in marketable products.
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 preclinical 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. 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 preclinical 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. There can be no
assurance that the Company will undertake additional clinical trials or 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 March 31, 1999, the Company had an accumulated deficit of $113,848,217.
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.
13
<PAGE> 14
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,
Roche Diagnostics, GmbH, formerly Corange International Ltd., acting through
Boehringer Mannheim Diagnostics, IDEXX Laboratories, Inc. and Genentech with
respect to the development of drug therapies and diagnostics utilizing the
Company's scientific platforms. The arrangement with Genentech will terminate on
June 30, 1999 unless the parties agree to amend their arrangements. The Company
anticipates that during 1999 it will review with its corporate partners their
arrangements in light of the Company's current development plans and priorities.
Alteon is seeking to establish new collaborative relationships to provide the
funding necessary for continuation of its product development but there can be
no assurance that such effort will be successful. The Company will, in some
cases, be dependent upon these outside partners to conduct preclinical 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 preclinical 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.
14
<PAGE> 15
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.
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.
crosslink formation.
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 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, preclinical 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
preclinical testing and clinical
15
<PAGE> 16
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 preclinical 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
preclinical 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
Investigational New Drug ("IND") for treatment of stroke (intravenous), the
Company has not submitted any other IND application for any product candidate in
the United States, and no products have been approved 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
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
16
<PAGE> 17
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.
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.
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
17
<PAGE> 18
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 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 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 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.
18
<PAGE> 19
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.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment in marketable securities. The
Company does not use derivative financial instruments in its investments. The
Company's investments consist primarily of debt instruments of the U.S.
government, government agencies, financial institutions and corporations with
strong credit ratings. The Company prepared a detailed market risk disclosure of
these investments in the Company's 1998 annual report on Form 10-K. There have
been no material changes in the Company's market risk position since December
31, 1998.
19
<PAGE> 20
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
Exhibit
No. Description of Exhibit
--- ----------------------
3.1 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).
3.2 Certificate of the Voting Powers, Designations, Preference and
Relative Participating, Optional and Other Special Rights and
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).
3.3 Certificate of Designations of Series G Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
3.4 Certificate of Amendment of Certificate of Designations of
Series G Preferred Stock of Alteon Inc. (Incorporated by
reference to Exhibit 3.4 to the Company's Report on Form 10-Q
filed on August 14, 1998).
3.5 Certificate of Designations of Series H Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.5 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
3.6 Amended Certificate of Designations of Series H Preferred
Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.6
to the Company's Report on Form 10-Q filed on August 14,
1998).
3.7 By-laws, as amended.
4.1 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).
4.2 Amendment to Stockholders' Rights Agreement dated as of April
24, 1997 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).
20
<PAGE> 21
4.3 Amendment to Stockholders' Rights Agreement dated as of
December 1, 1997 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).
10.1 Letter Agreement dated February 11, 1999 between Alteon Inc.
and Genentech, Inc. (Incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K filed on February
19, 1999).
10.2 Amended 1995 Stock Option Plan.
27 Financial Data Schedule.
b) The following reports on Form 8-K were filed during the quarter ended
March 31, 1999:
On January 4, 1999 the Company filed a Current Report on Form 8-K,
dated December 18, 1998, which reported certain changes to the Company's
management and Board of Directors.
On February 19, 1999, the Company filed a Current Report on Form
8-K, dated February 9, 1999, which reported that the Company regained its rights
to pimagedine after Genentech, Inc. announced its intent to withdraw support
from the Company's pimagedine development program.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 1999
ALTEON INC.
By: /s/ Kenneth I. Moch
----------------------------------------
Kenneth I. Moch
President and Chief Executive Officer
(principal executive officer)
By: /s/ Elizabeth A. O'Dell
----------------------------------------
Elizabeth A. O'Dell
Vice President Finance and Administration,
Secretary and Treasurer
(principal finance and accounting officer)
22
<PAGE> 23
INDEX TO EXHIBITS
Exhibit
No Description of Exhibit
-- ----------------------
3.1 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).
3.2 Certificate of the Voting Powers, Designations, Preference and
Relative Participating, Optional and Other Special Rights and
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).
3.3 Certificate of Designations of Series G Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
3.4 Certificate of Amendment of Certificate of Designations of
Series G Preferred Stock of Alteon Inc. (Incorporated by
reference to Exhibit 3.4 to the Company's Report on Form 10-Q
filed on August 14, 1998).
3.5 Certificate of Designations of Series H Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.5 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
3.6 Amended Certificate of Designations of Series H Preferred
Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.6
to the Company's Report on Form 10-Q filed on August 14,
1998).
3.7 By-laws, as amended.
4.1 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).
4.2 Amendment to Stockholders' Rights Agreement dated as of April
24, 1997 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).
4.3 Amendment to Stockholders' Rights Agreement dated as of
December 1, 1997 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).
23
<PAGE> 24
10.1 Letter Agreement dated February 11, 1999 between Alteon Inc.
and Genentech, Inc. (Incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K filed on February
19, 1999).
10.2 Amended 1995 Stock Option Plan.
27 Financial Data Schedule.
24
<PAGE> 1
EXHIBIT 3.7
BY-LAWS
OF
ALTEON INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation within the State of Delaware shall be located at the Corporation
Trust Center, 1209 Orange Street in the City of Wilmington, County of New
Castle, State of Delaware 19801, and the name of the registered agent in charge
thereof is The Corporation Trust Company.
SECTION 2. OTHER OFFICES. The Corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE. All meetings of the stockholders shall be held at
such place, either within or without the State of Delaware, as shall be
designated by the Board of Directors, or in the case of special meetings, at
the place specified in the notice of the meeting.
SECTION 2. ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and for such other business as may properly come before
the meeting shall be held at such date and time as may be designated by the
Board of Directors.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, may be called only by the Chairman of the Board,
President or Secretary, or by resolution of the Board of Directors.
SECTION 4. NOTICE. Written notice of the place, date and hour of any
annual or special meeting of the stockholders shall be given by the Secretary
or any Assistant Secretary not less than ten (10) nor more than sixty (60) days
prior to the meeting, to each stockholder of record entitled to vote thereat at
his/her post office address as the same appears on the books of the Corporation
at the time of such mailing. The notice of any special meeting shall state, in
addition, the purpose or purposes for which the meeting is called. Notice of
any meeting of stockholders need not be given to any stockholder who shall
sign a waiver of such notice in writing, whether before or after the time of
such meeting, or to any stockholder who shall attend such meeting in person or
by proxy. Notice of any adjourned meeting of the stockholders of the
Corporation need not be given, except as otherwise required by statute.
<PAGE> 2
2
SECTION 5. RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action affecting the interests of stockholders, the Board
of Directors may fix, in advance, a record date. Such date shall not be more
than sixty (60) nor less than ten (10) days before the date of any such
meeting, nor more than sixty (60) days prior to any other action.
In each such case, except as otherwise provided by law, only such
persons as shall be stockholders of record on the date so fixed shall be
entitled to notice of, and to vote at, such meeting and any adjournment
thereof, or to express such consent or dissent, or to receive payment of such
dividend, or such allotment of rights, or otherwise to be recognized as
stockholders for the related purpose, notwithstanding any registration or
transfer of stock on the books of the Corporation after any such record date so
fixed.
SECTION 6. QUORUM. Except as otherwise provided by statute or the
Certificate of Incorporation of the Corporation, the presence, in person or by
proxy, of stockholders holding a majority of the shares of the stock of the
Corporation generally entitled to vote shall constitute a quorum at all
meetings of the stockholders for the transaction of business. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any stockholders. In the absence of a quorum at any meeting or
any adjournment thereof, a majority in interest of the stockholders entitled to
vote thereat, present in person or by proxy, shall have the power to adjourn
the meeting from time to time, without any notice other than announcement at
the meeting of the time and place of the adjourned meeting, until the requisite
amount of shares entitled to vote thereat shall be present. At any such
adjourned meeting at which the requisite amount of shares entitled to vote
thereat shall be represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 7. VOTING. Unless otherwise provided by any provision of the
laws of the State of Delaware or of the Certificate of Incorporation or these
By-Laws, each stockholder entitled to vote shall be entitled to one vote, in
person or by proxy, for each share of stock held by such stockholder. All
elections for directors shall be decided by plurality vote, and all other
questions shall be decided by majority vote, except as otherwise provided by
the laws of the State of Delaware or the Certificate of Incorporation or these
By-Laws.
SECTION 8. PROXIES. Every proxy must be executed in writing by the
stockholder or by his/her attorney-in-fact. No proxy shall be valid after the
expiration of three (3) years from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases where an irrevocable proxy is
permitted by law.
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3
SECTION 9. ACTION WITHOUT MEETING. To the fullest extent permitted
by law, whenever a vote of stockholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action by any provision
of the laws of the State of Delaware or of the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and the vote of stockholders
may be dispensed with if the holders of shares of stock of the Corporation
having not less than the minimum number of votes that would have been necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted shall consent in writing to the taking of
such action. Where corporate action is taken in such manner by less than
unanimous written consent, prompt written notice of the taking of such action
shall be given to all stockholders who have not consented in writing thereto.
SECTION 10. STOCKHOLDERS' PROPOSALS. A stockholder may bring
business before a meeting of stockholders only if (a) such business may
otherwise properly be brought before the meeting, (b) such stockholder shall
have given, and the Corporation shall have received at its principal executive
offices addressed to the Secretary, notice of such business not less than
twenty (20) days prior to such meeting, and (c) in the case of a special
meeting of stockholders, such business is within the purpose or purposes
specified in the notice of the meeting.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors that shall
constitute the whole Board of Directors shall be no less than four (4) and no
more than ten (10). The number of directors may be increased within the range
of four (4) to ten (10) by a vote of the Board without stockholder approval.
The Board of Directors shall be divided into three (3) classes, which are
designated Class A, Class B and Class C, respectively. The directors in each
class shall be as equal in number as possible. At each annual meeting of
stockholders, directors to replace those whose terms expired at such meeting
shall be elected to hold office until the third succeeding annual meeting and
until their successors have been elected and shall have qualified.
SECTION 2. RESIGNATIONS. Any director or member of a committee of the
Board of Directors may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by any officer of the Corporation. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If any vacancy shall occur on the Board of
Directors or on a committee of the Board of Directors, for any reason, the
remaining directors in office, though less than a quorum, by a majority vote
may appoint any qualified person to fill such
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vacancy. Such person shall hold office for the unexpired term and until
his/her successor shall be elected and qualified.
SECTION 4. INCREASE OF NUMBER OF DIRECTORS. Newly created
directorships resulting from any increase in the authorized number of directors
may be filled only by a majority of the directors then in office, although less
than a quorum, or by a sole remaining director.
SECTION 5. POWERS. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute, by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
ARTICLE IV
MEETINGS OF THE BOARD
SECTION 1. PLACE. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
SECTION 2. PARTICIPATION IN MEETINGS BY TELEPHONE. Members of the
Board of Directors, or any committee thereof, may participate in a meeting of
such Board or committee by means of conference telephone or similar
communications equipment that enables all persons participating in the meeting
to hear each other. Such participation shall constitute presence in person at
such meeting.
SECTION 3. ANNUAL MEETING. The annual meeting of the Board of
Directors shall be held immediately after the annual meeting of stockholders,
and no notice of such meeting shall be necessary in order to constitute the
meeting, provided a quorum shall be present. In the event such annual meeting
is not held at such time and place, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a duly
executed waiver of notice thereof.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
<PAGE> 5
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SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if any, or by the
President not less than one (1) day before the meeting; special meetings shall
be called by the Chairman of the Board, President or Secretary on like notice
on the written request of two (2) directors.
SECTION 6. QUORUM; ACT OF THE BOARD OF DIRECTORS. At all meetings of
the Board of Directors, a majority of the total number of directors shall be
necessary to be and constitute a quorum for the transaction of business. The
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time until a quorum shall be present.
Notice of any such adjournment shall be given to any directors who were not
present and, unless announced at the meeting, to the other directors. For
purposes of the foregoing, any director who participates in any meeting of the
Board of Directors by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other shall be deemed to be present in person at such meeting.
SECTION 7. COMPENSATION. Directors, as such, shall not receive any
stated salary for their services. By resolution of the Board of Directors,
however, a fixed fee together with expenses of attendance, if any, may be
allowed for attendance at each regular or special meeting of the Board of
Directors or of any committee of the Board of Directors, provided that nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Further, by resolution of the Board of Directors, the Chairman of the Board may
receive a stipend in connection with his or her services rendered as Chairman.
SECTION 8. ACTION WITHOUT MEETING. Whenever any action is required
or permitted to be taken at a meeting of the Board of Directors, such action
may be taken without a meeting if, prior or subsequent to the taking of such
action, all members of the Board of Directors consent thereto in writing and
such written consent or consents are filed with the minutes of the proceedings
of the Board; and such written consent or consents shall have the same effect
as a unanimous vote at a meeting of the Board of Directors at which all members
thereof were present and voting.
SECTION 9. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the whole Board, may from time to time designate from among
its members an executive committee, an audit committee, a compensation
committee and such other committees, and alternate members thereof, as they may
deem desirable, each such committee consisting of one or more members, with
such power and authority (to the extent permitted by law) as may be provided in
such resolution. Each such committee shall serve at the pleasure of the Board.
<PAGE> 6
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ARTICLE V
NOTICES
SECTION 1. FORM; DELIVERY. Notices to directors and stockholders
shall be in writing and may be delivered personally or by mail or telegram.
Notice by mail shall be deemed to be given at the time when deposited in any
post office or letter box, in a post-paid sealed wrapper, and addressed to
directors or stockholders at their addresses appearing on the records of the
Corporation, unless any such director or stockholder shall have filed with the
Secretary of the Corporation a written request that notices intended for
him/her be mailed or delivered to some other address, in which case the notice
shall be mailed to or delivered at the address designated in such request.
Notice to directors may also be given by leaving the notice at the residence or
usual place of business of a director.
SECTION 2. WAIVER. Whenever a notice is required to be given by any
statute or these By-Laws, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to such notice. Attendance of a person at
a meeting of stockholders, directors or any committee of directors, as the case
may be, shall constitute a waiver of notice of such meeting, except when the
person is attending for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of stockholders, directors or
committee of directors need be specified in any written waiver of notice.
ARTICLE VI
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
Chairman of the Board, a President, a Treasurer, and a Secretary, all of whom
shall be elected by the Board of Directors and who shall hold office until
their successors are elected and qualified or until their earlier resignation
or removal. In addition, the Board of Directors may elect a Chief Operating
Officer, one or more Vice Presidents, and such Assistant Secretaries and
Assistant Treasurers as the Board of Directors may deem proper. None of the
officers of the Corporation need be directors. The officers shall be elected
at the first meeting of the Board of Directors after each annual meeting of
stockholders. Any officer elected by the Board of Directors may be removed
with or without cause at any time by the Board of Directors. Any number of
offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may
elect such other officers and agents as it may deem advisable, who shall hold
their offices for such
<PAGE> 7
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terms, shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
SECTION 3. COMPENSATION. Except as otherwise provided in any
employment agreement to which the Corporation is a party, the compensation of
all officers of the Corporation shall be fixed by the Board of Directors, and
the compensation of agents shall either be so fixed or shall be fixed by
officers thereunto duly authorized.
SECTION 4. VACANCIES. If an office becomes vacant for any reason,
the Board of Directors may fill such vacancy. Any officer so elected by the
Board of Directors shall serve only until such time as the unexpired term of
his/her predecessor shall have expired, unless reelected by the Board of
Directors or unless he/she shall resign or be removed in accordance with these
By-Laws.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors.
He/she shall see that all orders and resolutions of the Board are carried into
effect, subject, however, to the right of the directors to delegate any
specific powers to any other officer or officers of the Corporation. He/she
shall have the authority to execute bonds, mortgages and other contracts under
the seal of the Corporation except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation. He/she shall perform such other duties as may from
time to time be requested by the Board of Directors.
SECTION 6. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation. He/she shall have general and active management of
the business of the Corporation, shall see that all orders and resolutions of
the Board are carried into effect, subject, however, to the right of the
Chairman of the Board and the directors to delegate any specific powers, except
such as may be by statute exclusively conferred on the Chief Executive Officer,
to any other officer or officers of the Corporation. He/she shall have the
authority to execute bonds, mortgages and other contracts under the seal of the
Corporation except where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation. He/she shall have the general powers and duties of supervision
and management usually vested in the Chief Executive Officer of a corporation.
He/she shall present a report of the condition of the business of the
Corporation at each annual meeting of the stockholders and the Board of
Directors. In the absence of the Chairman of the Board, he/she shall preside
at all meetings of the stockholders and of the Board of Directors. He/she
shall perform such other duties as may from time to time be requested by the
Board of Directors.
SECTION 7. CHIEF OPERATING OFFICER. A Chief Operating Officer, if
one has been appointed, shall be vested with all the powers, and shall be
required to perform all the duties, as may be properly assigned by the Board of
Directors, the Chairman of the Board or the President.
<PAGE> 8
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SECTION 8. VICE PRESIDENT(S). The Vice President or Vice Presidents,
acting under the direction of the President, shall manage the business and
affairs of the Corporation and shall have such other powers and duties as may
from time to time be assigned by the Board of Directors, the Chairman of the
Board or the President. Subject to any limitations imposed by the Board of
Directors, the Vice President or Vice Presidents in the order of their election
shall have all the powers and duties of the President in the event of the
President's absence or inability to act.
SECTION 9. SECRETARY AND ASSISTANT SECRETARY(IES). The Secretary
shall attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the stockholders
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees if required. He/she shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors, the Chairman of the Board or
the President, under whose supervision he/she shall be. He/she shall have
custody of the seal of the Corporation and he/she or an Assistant Secretary
shall have authority to affix the same to any instrument requiring it, and,
when so affixed, it may be attested by his/her signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his/her signature. He/she shall keep in safe custody the
certificate books and stockholder records and such other books and records as
the Board of Directors may direct and shall perform all other duties incident
to the office of Secretary.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there be
no such determination, then in the order of their election) shall, in the
absence of the Secretary or in the event of his/her inability to act, perform
the duties and exercise the powers of the Secretary and shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe.
SECTION 10. TREASURER AND ASSISTANT TREASURER(S). The Treasurer shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. He/she shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, the Chairman of the
Board and the President at its regular meetings, or when the Board of Directors
so requires, an account of all of his/her transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
he/she shall give the Corporation a bond (which shall be renewed from time to
time) in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his/her
office and for the restoration to the Corporation, in case of his/her death,
resignation, retirement or removal from office, of all
<PAGE> 9
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books, papers, vouchers, money and other property of whatever kind in his/her
possession or under his/her control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Treasurer or in the event of his/her inability to act,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 11. RESIGNATIONS. Any officer may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein or, if no time shall be specified, at the time of its receipt
by any officer of the Corporation. The acceptance of a resignation shall not
be necessary to make it effective.
ARTICLE VII
STOCK CERTIFICATES
SECTION 1. FORM; SIGNATURE. The certificates for shares of stock of
the Corporation shall be in such form as shall be determined by the Board of
Directors and shall be numbered consecutively and entered in the books of the
Corporation as they are issued. Each certificate shall exhibit the registered
holder's name, the number and class of shares and the date of issuance thereof
and shall be signed by, or in the name of, the Corporation by (i) the Chairman
of the Board of Directors, the President or any Vice President and (ii) the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by such holder in the
Corporation. In case any officer who has signed a certificate shall cease to
be an officer before such certificate is issued, it may be issued with the same
effect as if he/she were such officer at the date of issue. Each certificate
exchanged or returned to the Corporation shall be marked "Canceled", with the
date of cancellation.
SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or certificates, or
his/her legal representative, to advertise the same in such manner as it shall
require and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been lost, stolen or
destroyed or the issuance of such new certificate or certificates.
<PAGE> 10
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SECTION 3. REGISTRATION OR TRANSFER. Upon surrender to the
Corporation or any transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the Corporation or
such transfer agent to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
SECTION 4. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as such owner, and shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the shares of the Corporation
may be declared by the Board of Directors, from time to time, at any regular or
special meeting. Dividends may be paid in cash, in property, or in shares of
stock, subject to the provisions of the Certificate of Incorporation and the
provisions of the Delaware General Corporation Law or any successor statute.
SECTION 2. RESERVES. The directors may set apart out of any funds of
the Corporation legally available for dividends such sum or sums as the Board
of Directors, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation, or for such other purpose as
the directors shall determine to be in the best interests of the Corporation,
and the directors may modify or abolish any such reserve.
SECTION 3. ANNUAL STATEMENT. The Board of Directors shall present at
each annual meeting of stockholders a full and clear statement of the business
and condition of the Corporation.
SECTION 4. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 5. FISCAL YEAR. The fiscal year of the Corporation shall
commence on January 1 and end on December 31.
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SECTION 6. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION AND INSURANCE. Every person who was or is
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he/she or a person of whom he/she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation or for its benefit as a director or
officer of another corporation, or as its representative in another enterprise,
shall be indemnified and held harmless to the fullest extent legally
permissible under and pursuant to any procedure specified in the General
Corporation Law of the State of Delaware, as amended from time to time, against
all expenses, liabilities and losses (including attorneys' fees, judgments,
fines and amounts paid or to be paid in settlement) reasonably incurred or
suffered by him/her in connection therewith. Such right of indemnification
shall be a contract right that may be enforced in any manner desired by such
person. Such right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter
acquire and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any agreement,
vote of stockholders, provision of law or otherwise, as well as their rights
under this Article.
The Board of Directors may cause the Corporation to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out
of such status, whether or not the Corporation would have the power to
indemnify such person.
ARTICLE X
AMENDMENTS
SECTION 1. AMENDMENT BY STOCKHOLDERS. These By-Laws may be amended
by the stockholders, not inconsistent with the Corporation's Articles of
Incorporation or the laws of the State of Delaware, at any annual or special
meeting of the stockholders, by a two-thirds vote of all outstanding shares of
the Corporation.
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SECTION 2. AMENDMENT BY BOARD OF DIRECTORS. The Board of Directors
by a majority vote of the whole Board at any meeting may amend these By-Laws,
including By-Laws adopted by the stockholders, provided the stockholders may
from time to time specify particular provisions of these By-Laws that may not
be amended by the Board of Directors.
As amended through April 20, 1999.
<PAGE> 1
EXHIBIT 10.2
ALTEON INC.
AMENDED 1995 STOCK OPTION PLAN
1. Purposes of Plan. The purposes of this Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Non-Qualified Stock Options, as determined by the Administrator at the time of
grant of an Option.
2. Certain Definitions. As used herein, the following
definitions shall apply:
2.1. "Administrator" means the Board or a Committee.
2.2. "Board" means the Board of Directors of the
Company.
2.3. "Code" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
2.4. "Committee" means a Committee appointed by the
Board in accordance with Section 4.1 of the Plan.
2.5. "Common Stock" means the Common Stock of the
Company.
2.6. "Company" means Alteon Inc., a Delaware
corporation.
2.7. "Consultant" means any person, including an
advisor, who is engaged by the Company or any Subsidiary to render services and
is compensated for such services. The payment of a director's fee by the
Company shall not render a director a Consultant within the meaning of this
section.
2.8. "Date of Grant" means the date on which an Option
is granted under the Plan pursuant to Section 12 of the Plan.
2.9. "Employee" means any person, including officers and
directors, employed by the Company or any Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute employment by the Company.
2.10. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
2.11. "Fair Market Value" means, as of any date, the
value of the Common Stock determined as follows:
<PAGE> 2
(a) If the Common Stock is listed on any
established stock exchange or a national market system including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange for the last market
trading day prior to such date as reported in the Wall Street Journal or such
other source as the Administrator deems reliable;
(b) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock as quoted on such System or by such dealer for the last market
trading day prior to such date; or
(c) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
2.12. "Incentive Stock Option" means an Option which
qualifies as an incentive stock option within the meaning of Section 422 of the
Code.
2.13. "Non-Compensated Directors" means directors of the
Company who are not Consultants who render services more than one (1) day per
week or full-time Employees.
2.14. "Non-Qualified Stock Option" means an Option which
does not qualify as an Incentive Stock Option.
2.15. "Option" means a stock option granted pursuant to
the Plan.
2.16. "Option Agreement" means the agreement which must
be entered into between the Optionee and the Company upon the grant of an
Option by the Company to the Optionee as approved by the Administrator pursuant
to Section 15 of the Plan.
2.17. "Optionee" means a person who receives an Option.
2.18. "Parent" means a "parent corporation", whether now
or hereafter existing, as defined in Section 424(e) of the Code.
2.19. "Plan" means this 1995 Stock Option Plan.
2.20. "Share" means a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
2.21. "Subsidiary" means a "subsidiary corporation",
-2-
<PAGE> 3
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 2,000,000 Shares and the maximum number of
Shares which may be covered by Options granted to any employee in any calendar
year may not exceed 500,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock. If an Option should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
4.1. Procedure.
(a) Administration With Respect to Directors
and Officers. With respect to grants of Options to Employees and Consultants
who are also officers or directors of the Company, the Plan shall be
administered, and grants of Options shall be approved, by (i) the Board or (ii)
a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as (A) to permit transactions under the
Plan to qualify for exemption from the provisions of Section 16(b) of the
Exchange Act pursuant to Rule 16b-3 promulgated thereunder ("Rule 16b-3") and
(B) to satisfy all legal requirements relating to administration of stock
option plans and the Code (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of
the Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan.
(b) Administration With Respect to Consultants
and Employees Who Are Not Directors or Officers. With respect to grants of
Options to Employees or Consultants who are neither directors nor officers of
the Company, the Plan shall be administered by (i) the Board or (ii) a
Committee designated by the Board, which Committee shall be constituted in such
a manner as to satisfy the Applicable Laws. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
-3-
<PAGE> 4
(c) Formula Awards to Non-Compensated
Directors.
(i) On the date of a Non-Compensated
Director's election or reelection to the Board at an annual meeting of
shareholders of the Company and on each of the dates of the Company's two
annual meetings of shareholders following the date of such election, (provided
that on such date the Non-Compensated Director is serving as a director of the
Company), such Non-Compensated Director shall be granted a Non-Qualified Stock
Option to purchase 20,000 Shares. Each such Option shall vest and become
exercisable on the date of the Company's first annual meeting of shareholders
following the date of its grant, provided that on such date the Non-Compensated
Director is serving as a director of the Company.
(ii) If a Non-Compensated Director is
elected or appointed to the Board other than at an annual meeting of
shareholders, on the date of his election he shall be granted a Non-Qualified
Stock Option to purchase the number of Shares determined by multiplying 1,667
by the number of whole or partial months from the date of his election or
appointment to the Company's next annual meeting of shareholders. For purposes
of the preceding sentence, a month shall mean a period of 30 consecutive days.
In addition, on the dates of each of the Company's annual meetings of
shareholders which occur during the term to which he was so elected or
appointed (provided that on such date he is serving as a director of the
Company), such Non-Compensated Director shall be granted a Non-Qualified Stock
Option to purchase 20,000 Shares. Each Option granted pursuant to this
subsection 4.1(c)(ii) shall vest and become exercisable on the date of the
Company's first annual meeting of shareholders following the date of its grant,
provided that on such date the Non-Compensated Director is serving as a
director of the Company.
(iii) Each Non-Compensated Director who
held such office on January 1, 1999 shall be granted a Non-Qualified Stock
Option to purchase 3,667 Shares. Each Non-Compensated Director who held such
office on January 1, 1999 and whose term continues beyond the date of the
Company's first annual meeting of shareholders following January 1, 1999 shall
be granted a Non-Qualified Stock Option to purchase 8,800 Shares on the date of
the Company's first annual meeting of shareholders following January 1, 1999
(provided that on such date the Non-Compensated Director is serving as a
director of the Company). Each Non-Compensated Director who held such office on
January 1, 1999 and whose term continues beyond the date of the Company's
second annual meeting of shareholders following January 1, 1999 shall be
granted a Non-Qualified Stock Option to purchase 8,800 Shares on the date of
the Company's second annual meeting of shareholders following January 1, 1999
(provided that on such date the Non-Compensated Director is serving as a
director of the Company). Each Option granted pursuant to this subsection
4.1(c)(iii) shall vest and become
-4-
<PAGE> 5
exercisable on the date of the Company's first annual meeting of shareholders
following the date of its grant, provided that on such date the Non-Compensated
Director is serving as a director of the Company.
(iv) Options granted pursuant to this
Section 4.1(c) shall have a per share exercise price equal to the Fair Market
Value per share on the Date of Grant and shall expire ten years from the Date
of Grant. Once an Option granted pursuant to this Section, or any portion
thereof, has become exercisable, it shall remain exercisable regardless of
whether or not the Non-Compensated Director holding the Option later ceases to
be a director of the Company.
(v) If the granting of any option on the
dates provided in this Section 4.1(c) would cause the number of Shares as to
which options have been granted pursuant to the Plan to exceed the number set
forth in Section 3 of the Plan, the grant of such option shall be deferred to
the first date on which an option may be granted without exceeding the
limitation set forth in Section 3 and such date shall be the Date of Grant of
the option.
(d) Multiple Administrative Bodies. The Plan may
be administered by different bodies with respect to directors, non-director
officers, and Employees and Consultants who are neither directors nor officers.
4.2. Powers of the Administrator. Subject to the
provisions of the Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, the Administrator, acting in its sole
discretion, shall have the power and authority to supervise the administration
of the Plan and to take all action necessary or desirable in order to carry out
the provisions of the Plan including, without limitation, the power and
authority:
(a) to select the Consultants and Employees to
whom Options may from time to time be granted hereunder;
(b) to determine whether and to what extent
Options are granted hereunder;
(c) to determine the number of shares of Common
Stock to be covered by each such Option granted hereunder;
(d) to approve forms of agreement for use under
the Plan;
(e) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder
(including, but not limited to, the exercise price, the vesting schedule, and
any restrictions or limitations regarding any Option and/or the Shares relating
thereto) based in each case on
-5-
<PAGE> 6
such factors as the Administrator shall determine, in its sole discretion;
(f) to make changes to any outstanding Option,
including, without limitation, to reduce the exercise price, to accelerate the
vesting schedule, or to extend the expiration date, provided that no such
change shall impair the rights of any Optionee under any grant previously made
without such Optionee's consent;
(g) to determine whether and when an Optionee has
ceased to have an employment or consulting relationship with the Company;
(h) to buy out for a payment in cash or Shares,
an Option previously granted, based on such terms and conditions as the
Administrator shall establish and the Optionee shall accept.
4.3. Effect of Committee's Decision. The Administrator
shall have the power and authority to establish, amend, and revoke rules and
regulations for administration of the Plan. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all holders
of Options.
5. Eligibility. Non-Qualified Stock Options may be granted to
Non-Compensated Directors (but only pursuant to Section 4.1(c)), Employees, and
Consultants. Incentive Stock Options may be granted only to Employees. An
individual who has been granted an Option may, if otherwise eligible, be
granted an additional Option or Options.
6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company as described in Section 18 of the Plan. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. Exercise Period of Option.
7.1. Term. Each Option shall vest and become exercisable
as provided in the Option Agreement. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that in no case shall the
term shall be more than ten (10) years from the Date of Grant. However, in the
case of an Incentive Stock Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be no more than five (5) years from
the Date of Grant.
7.2. Termination of Employment. If an Optionee ceases to
be an Employee of the Company for any reason, except death or
-6-
<PAGE> 7
disability within the meaning of Section 422(c) of the Code, an Incentive Stock
Option, to the extent unexercised and exercisable by the Optionee on the date
on which the Optionee ceased to be an Employee, may be exercised by the
Optionee within three (3) months after the date on which the Optionee's
employment terminated, but in any event no later than the date of expiration of
the Option term. If the Optionee's employment is terminated because of the
death or disability of the Optionee within the meaning of Section 422(c) of the
Code, an Incentive Stock Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee ceased to be an Employee, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date the Optionee's
employment terminated, but in any event no later than the date of expiration of
the Option term. An Optionee's employment shall be deemed to have terminated
on account of death if the Optionee dies within three (3) months after the
Optionee's termination of employment.
8. Option Exercise Price and Consideration.
8.1. Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option (other than Options
granted pursuant to Section 4.1(c)) shall be such price as is determined by the
Administrator, provided that in the case of an Incentive Stock Option (a)
granted to an Employee who, at the time of the grant of such Incentive Stock
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the Date of Grant and (b) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the Date of Grant.
8.2. Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator and may consist entirely of
(i) cash, (ii) check, (iii) promissory note, (iv) other Shares which have a
Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (v)
authorization from the Company to retain from the total number of Shares as to
which the Option is exercised that number of Shares having a Fair Market Value
on the date of exercise equal to the exercise price for the total number of
Shares as to which the Option is exercised, (vi) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds required to
pay the exercise price, (vii) any combination of the foregoing methods of
payment, or (viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted under the Applicable Laws.
-7-
<PAGE> 8
9. Exercise of Option.
9.1. Procedure for Exercise. An Option shall be deemed to
be exercised when written notice of such exercise has been given to the Company
in accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full consideration for the Shares with respect to which
the Option is exercised has been received by the Company. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued. An Option may not be exercised for a
fraction of a Share.
9.2. Limitations on Exercise.
(a) Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of the National Association of Securities Dealers or any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
(b) The Administrator may specify a reasonable
minimum number of shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent the Optionee from exercising
that full number of Shares as to which the Option is then exercisable.
9.3. Withholding Obligations. Prior to issuance of the
Shares upon exercise of an Option, the Optionee shall pay or make adequate
provision for any federal or state withholding obligations of the Company, if
applicable, in a form and manner satisfactory to the Administrator.
10. Transferability of Options. Except as otherwise provided in
this Section 10, Options may not be sold, pledged, assigned,
-8-
<PAGE> 9
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution and during the lifetime of the Optionee
shall be exercisable only by the Optionee. If the Administrator so determines,
Non-Qualified Stock Options may be transferable to (a) the Optionee's spouse,
parents, siblings, children or grandchildren (including stepparents,
stepsiblings, stepchildren, and stepgrandchildren), (b) trusts for the benefit
of the Optionee and/or such family members, and (c) partnerships whose only
partners are the Optionee and/or such family members, provided that (i) no
consideration is paid for such transfer, (ii) the terms and conditions of the
Option which are applicable to the Optionee prior to the transfer of the Option
shall continue to apply to the transferee; and (iii) the Option Agreement
pertaining to each transferable option shall set forth the applicable transfer
restrictions.
11. Adjustments. Unless the terms of an Option Agreement provide
otherwise:
11.1. Change in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
11.2. Merger without Change of Control. After a merger of
one or more corporations or other entities with or into the Company or after a
consolidation of the Company and one or more corporations or other entities in
which the shareholders of the Company immediately prior to such merger or
consolidation own after such merger or consolidation shares representing at
least fifty percent (50%) of the voting power of the Company or the surviving
or resulting corporation or other entity, as the case may be, each
-9-
<PAGE> 10
holder of an outstanding Option shall, at no additional cost, be entitled upon
exercise of such Option to receive in lieu of the shares of Common Stock as to
which such Option was exercisable immediately prior to such event, the number
and class of shares of stock or other securities, cash or property (including,
without limitation, shares of stock or other securities of another corporation
or Common Stock) to which such holder would have been entitled pursuant to the
terms of the agreement of merger or consolidation if, immediately prior to such
merger or consolidation, such holder had been the holder of record of a number
of shares of Common Stock equal to the number of shares for which such Option
shall be so exercised.
11.3. Sale or Merger with Change of Control. If the
Company is merged with or into or consolidated with another corporation or
other entity under circumstances where the shareholders of the Company
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent of the voting power
of the Company or the surviving or resulting corporation or other entity, as
the case may be, or if one hundred percent of the then outstanding voting
shares of the Company are sold or otherwise transferred, or if the Company is
liquidated, or sells or otherwise disposes of substantially all of its assets
to another corporation or other entity while unexercised Options remain
outstanding under the Plan, (a) subject to the provisions of clause (c) below,
after the effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, each holder of an outstanding Option shall be
entitled, upon exercise of such Option, to receive, in lieu of the shares of
Common Stock as to which Option was exercisable immediately prior to such
event, the number and class of shares of stock or other securities, cash or
property (including, without limitation, shares of stock or other securities of
another corporation or common stock) to which such holder would have been
entitled pursuant to the terms of the merger, consolidation, liquidation, sale
or disposition if, immediately prior to such event, such holder had been the
holder of a number of shares of Common Stock equal to the number of shares as
to which such Option shall be so exercised; (b) the Administrator may
accelerate the time for exercise of some or all unexercised and unexpired
options so that from and after a date prior to the effective date of such
merger, consolidation, liquidation, sale or disposition, as the case may be,
specified by the Administrator such accelerated options shall be exercisable in
full; or (c) all outstanding Options may be cancelled by the Administrator as
of the effective date of any such merger, consolidation, liquidation, sale or
disposition provided that (i) notice of such cancellation shall be given to
each holder of an Option and (ii) each holder of an Option shall have the right
to exercise such Option to the extent that the same is then exercisable or, if
the Administrator shall have accelerated the time for exercise of all
unexercised and unexpired Options, in full during the 10-day period preceding
the
-10-
<PAGE> 11
effective date of such merger, consolidation, liquidation, sale or disposition.
11.4. Miscellaneous. Adjustments under this Section 11
shall be determined by the Administrator, and such determinations shall be
conclusive. No fractional shares of Common Stock shall be issued under the
Plan on account of any adjustment specified above.
12. Time of Granting Options. The Date of Grant of an Option
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is granted within a reasonable time after the date
of such grant.
13. Amendment and Termination of the Plan.
13.1. Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made without the Optionee's consent.
In addition, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or with Section 422 of the Code (or any other applicable
law or regulation, including the requirements of the National Association of
Securities Dealers or an established stock exchange), the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a
degree as required.
13.2. Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if the Plan had not
been amended or terminated unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
14. Reservation of Shares. The Company, during the term of the
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
15. Agreements. Options shall be evidenced by written agreements
in such form as the Administrator shall approve from time to time. Each Option
shall be designated in the Option Agreement as either an Incentive Stock Option
or a Non-Qualified
-11-
<PAGE> 12
Stock Option as the Administrator shall determine. However, notwithstanding
such designations, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options shall be treated as Non-Qualified Stock Options. For purposes
of the preceding sentence, Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of the
Shares shall be determined as of the time the Option with respect to such
Shares is granted.
16. No Additional Rights. The Plan shall not confer upon any
Optionee any right with respect to continuation of an employment or consulting
relationship with the Company, nor shall it interfere in any way with his right
or the Company's right to terminate his employment or consulting relationship
at any time, with or without cause.
17. Rule 16b-3. Grants of Options to persons subject to Section
16(b) of the Exchange Act must qualify for exemption from Section 16(b) of the
Exchange Act pursuant to Rule 16b-3. Options granted to such persons shall
contain such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
18. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within twelve (12)
months after the date the Plan is adopted. Such shareholder approval shall be
obtained in the degree and manner required under applicable state and federal
law.
* * * * *
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS, STATEMENT OF OPERATIONS, AND STATEMENT OF CASH FLOW, FILED AS PART OF
ALTEON'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDING MARCH 31, 1999.
</LEGEND>
<CIK> 0000878903
<NAME> ALTEON INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 7,327,983
<SECURITIES> 11,972,063
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,607,058
<PP&E> 2,828,919
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,701,004
<CURRENT-LIABILITIES> 4,615,451
<BONDS> 0
0
32
<COMMON> 188,887
<OTHER-SE> 17,896,634
<TOTAL-LIABILITY-AND-EQUITY> 22,701,004
<SALES> 0
<TOTAL-REVENUES> 278,310
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,269,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,991,595)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,991,595)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,991,595)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
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