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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Alteon Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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ALTEON INC.
170 WILLIAMS DRIVE
RAMSEY, NEW JERSEY 07446
To Our Stockholders:
You are most cordially invited to attend the 1997 Annual Meeting of
Stockholders of Alteon Inc. at 9:00 AM, local time, on Tuesday, June 10, 1997,
at the Grand Hyatt, Park Avenue at Grand Central, New York, New York.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented to the meeting.
It is important that your shares be represented at this meeting to assure
the presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your stock represented by signing, dating and returning your
proxy in the enclosed envelope, which requires no postage if mailed in the
United States, as soon as possible. Your stock will be voted in accordance with
the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
JAMES J. MAUZEY
Chief Executive Officer
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
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ALTEON INC.
170 WILLIAMS DRIVE
RAMSEY, NEW JERSEY 07446
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 10, 1997
The Annual Meeting of Stockholders (the "Meeting") of Alteon Inc., a
Delaware corporation (the "Company"), will be held at the Grand Hyatt, Park
Avenue at Grand Central, New York, New York, on Tuesday, June 10, 1997, at 9:00
AM, local time, for the following purposes:
(1) To elect two directors to serve until the Annual Meeting of
Stockholders to be held in 2000 and until their successors shall have
been duly elected and qualified;
(2) To ratify the appointment of Arthur Andersen LLP as the independent
public accountants of the Company for the fiscal year ending December
31, 1997;
(3) To consider and vote upon a proposal to ratify the amendment of the
Alteon Inc. Amended 1995 Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance upon the exercise of
options granted under the plan from 1,000,000 shares to 2,000,000
shares;
(4) To consider and vote upon a proposal to remove the limitation on the
number of shares of Common Stock issuable upon conversion of the 6%
Cumulative Convertible Preferred Stock;
(5) To consider and vote upon a proposal to authorize the issuance and sale
of additional shares of Preferred Stock; and
(6) To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
Holders of Common Stock of record at the close of business on April 18, 1997,
are entitled to notice of and to vote at the Meeting, or any adjournment or
adjournments thereof. A complete list of such stockholders will be open to the
examination of any stockholder at the Company's principal executive offices at
170 Williams Drive, Ramsey, New Jersey 07446 and at the Grand Hyatt, Park Avenue
at Grand Central, New York, New York, for a period of 10 days prior to the
Meeting. The Meeting may be adjourned from time to time without notice other
than by announcement at the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL INSURE A QUORUM
AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY
BE REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS
VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
ELIZABETH A. O'DELL
Secretary
Ramsey, New Jersey
May 12, 1997
THE COMPANY'S 1996 ANNUAL REPORT ACCOMPANIES THE PROXY STATEMENT.
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ALTEON INC.
170 WILLIAMS DRIVE
RAMSEY, NEW JERSEY 07446
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Alteon Inc. (the "Company") of proxies to be voted at
the Annual Meeting of Stockholders of the Company to be held on June 10, 1997,
(the "Meeting") at the Grand Hyatt, Park Avenue at Grand Central, New York, New
York, at 9:00 AM, local time, and at any adjournment or adjournments thereof.
Holders of record of Common Stock, $.01 par value ("Common Stock"), as of the
close of business on April 18, 1997, will be entitled to notice of and to vote
at the Meeting and any adjournment or adjournments thereof. As of that date,
there were 15,710,825 shares of Common Stock issued and outstanding and entitled
to vote. Each share of Common Stock is entitled to one vote on any matter
presented at the Meeting.
If proxies in the accompanying form are properly executed and returned, the
Common Stock represented thereby will be voted in the manner specified therein.
If not otherwise specified, the Common Stock represented by the proxies will be
voted (i) FOR the election of the nominees below as directors, (ii) FOR the
ratification of the appointment of Arthur Andersen LLP as independent public
accountants for the year ending December 31, 1997, (iii) FOR the proposal to
remove the limitation on the number of shares of Common Stock issuable upon
conversion of the Company's 6% Cumulative Convertible Preferred Stock, (iv) FOR
the proposal to authorize the issuance and sale of additional shares of
Preferred Stock, (v) FOR the proposal to ratify the amendment of the Alteon Inc.
Amended 1995 Stock Option Plan, and (vi) in the discretion of the persons named
in the enclosed form of proxy, on any other proposals which may properly come
before the Meeting or any adjournment or adjournments thereof. Any Stockholder
who has submitted a proxy may revoke it any time before it is voted by written
notice addressed to and received by the Secretary of the Company, by submitting
a duly executed proxy bearing a later date or by electing to vote in person at
the Meeting. The mere presence at the Meeting of the person appointing a proxy
does not, however, revoke the appointment.
The presence, in person or by proxy, of holders of Common Stock having a
majority of the votes entitled to be cast at the Meeting shall constitute a
quorum. Directors are elected by a plurality vote. All other actions proposed
herein may be taken upon the affirmative vote of Stockholders possessing a
majority of the voting power represented at the Meeting, provided a quorum is
present in person or by proxy.
At the Meeting, only votes cast "FOR" a matter will constitute affirmative
votes. Votes "Withheld" or abstaining from voting on a particular matter and
broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Votes "Withheld" or
abstaining from voting on a particular matter because they are not cast "FOR"
the particular proposal will have the same effect as negative votes or votes
cast "Against" a particular proposal, but broker non-votes will have no effect
on any of the proposals.
This Proxy Statement, together with the related proxy card, is being mailed
to the Stockholders of the Company on or about May 12, 1997. The Annual Report
to Stockholders of the Company for the year ended December 31, 1996, including
financial statements (the "Annual Report"), is being mailed concurrently with
this Proxy Statement to all Stockholders of record as of April 18, 1997. In
addition, the Company has provided brokers, dealers, banks, voting trustees and
their nominees, at the Company's expense, with additional copies of the Annual
Report so that such record holders may supply such material to beneficial owners
as of April 18, 1997.
ELECTION OF DIRECTORS
At the Meeting two directors are to be elected to hold office until the
Annual Meeting of Stockholders to be held in 2000 and until their successors
shall have been elected and qualified. The nominees for election to the Board of
Directors are Robert N. Butler, M.D. and Mark Novitch, M.D.
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Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors is divided into three classes, each of which serves a term of three
years. Class A consists of Ms. Breslow and Mr. Dalby, whose terms will expire at
the Annual Meeting of Stockholders in 1998. Class B consists of Mr. Mauzey, Dr.
Goyan and Dr. Cerami, whose terms will expire at the Annual Meeting of
Stockholders in 1999. Class C consists of Drs. Butler, Fernandez and Novitch,
whose terms will expire at the Meeting.
It is the intention of the persons named in the enclosed form of proxy to
vote the stock represented thereby, unless otherwise specified in the proxy, for
the election as director of each of Dr. Butler and Dr. Novitch, whose names and
biographies appear below. There are currently eight members of the Board.
Pursuant to action of the Board, the number of members of the Board of Directors
will be reduced to seven members immediately prior to the Meeting due to Dr.
Fernandez's retirement. All of the persons whose names and biographies appear
below are at present directors of the Company. In the event any nominee should
become unavailable or unable to serve as a director, it is intended that votes
will be cast for a substitute nominee designated by the Board of Directors. The
Board of Directors has no reason to believe that the nominees named will be
unable to serve if elected. The nominees have consented to being named in this
Proxy Statement and to serve if elected.
The current Board of Directors, including the nominees, is comprised of the
following persons:
SERVED AS A
NAME AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY
- ------------------------ --- -------------- --------------------------
James J. Mauzey......... 48 1994 Chairman of the Board and
Chief Executive Officer
Jere E. Goyan........... 66 1993 President, Chief Operating
Officer and Director
Anthony Cerami.......... 56 1993 Director
Marilyn G. Breslow...... 53 1988 Director
Robert N. Butler(1)..... 70 1996 Director
Louis Fernandez......... 73 1991 Director
Mark Novitch(1)......... 65 1994 Director
Alan J. Dalby........... 60 1994 Director
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(1) The nominees for election to the Board of Directors.
The principal occupations and business experience, for at least the past
five years, of each director are as follows:
James J. Mauzey, Chairman and Chief Executive Officer, joined the Company
in March 1994. From November 1992 until he joined the Company, Mr. Mauzey was a
Corporate Division President of Bristol-Myers Squibb Company. Mr. Mauzey has
over 20 years of experience in the pharmaceutical industry. He began his career
at American Cyanamid Company's Lederle Laboratories Division, where he held
numerous sales, marketing and executive positions during his 17 years with the
company, serving as both Vice President of the Lederle Laboratories U.S.
Pharmaceutical Division and Vice President of the Lederle International
Division. Mr. Mauzey joined The Squibb Corporation as President of its U.S.
Pharmaceutical Group in 1989. Following the merger of Bristol-Myers Company and
Squibb Corporation, Mr. Mauzey was named President of Bristol-Myers Squibb
Company's newly integrated U.S. Pharmaceutical Division, where he was
responsible for Squibb Pharmaceuticals, Bristol Laboratories and Mead Johnson
Pharmaceuticals. In April 1992, Mr. Mauzey was named Senior Vice President,
Industry and Public Affairs, for the Bristol-Myers Squibb Worldwide
Pharmaceutical Group, an approximately $7 billion business unit.
Jere E. Goyan, Ph.D., has been the Company's President and Chief Operating
Officer since May 1993. He also served as the Company's Acting Chief Executive
Officer from June 1993 to February 1994 and as Senior Vice President, Research
and Development from January 1993 through May 1993. Dr. Goyan is Professor
Emeritus of Pharmacy and Pharmaceutical Chemistry and Dean Emeritus of the
School of Pharmacy, University of California, San Francisco ("UCSF"). He has
been on the faculty of the School of Pharmacy at UCSF since 1963. He took a
leave of absence from 1979 to 1981 to serve as Commissioner of
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Food and Drugs of the U.S. Food and Drug Administration. Dr. Goyan is Past
President of the American Association of Pharmaceutical Scientists and the
American Association of Colleges of Pharmacy. He is a member of the Institute of
Medicine of the National Academy of Sciences and a Fellow of the American
Association for the Advancement of Science. Dr. Goyan is a director of ATRIX
Laboratories, Inc., Emisphere Technologies, Inc., and SciClone Pharmaceuticals,
Inc., each a biopharmaceutical firm, and Boehringer Ingelheim Corporation, a
pharmaceutical company. He received his Ph.D. in pharmaceutical chemistry from
the University of California, Berkeley.
Anthony Cerami, Ph.D., is a founder of the Company and has been Chairman of
the Scientific Advisory Board of the Company since December 1987 and a member of
the Company's Board of Directors since October 1993. In October 1996, he joined
Cerami Consulting Corp., a biotechnology consulting corporation. Dr. Cerami was
the President of The Picower Institute for Medical Research, which he helped
established in October 1991, prior to his retirement from such entity in
September 1996. Prior to joining The Picower Institute for Medical Research, he
was Dean of Graduate and Postgraduate Studies at The Rockefeller University
since 1986, a Professor at The Rockefeller University since 1978 and the Head of
the Laboratory of Medical Biochemistry at The Rockefeller University since 1972.
Dr. Cerami has been elected to membership in the National Academy of Sciences
and the Institute of Medicine. He received his Ph.D. from The Rockefeller
University. Dr. Cerami has recently retired as a director of Advanced Medical,
Inc., a developer and manufacturer of infusion systems and related technologies
for the health care industry.
Marilyn G. Breslow has been a director of the Company since June 1988. She
has been a Portfolio Manager/Analyst for W.P. Stewart & Co., Inc., an investment
advisory firm in New York City, since 1990, and is a Principal and Director of
that firm. She was a General Partner of Concord Partners and a Vice President of
Dillon, Read & Co. Inc. from 1984 to 1990.
Robert N. Butler, M.D. was elected as a director of the Company in June
1996. He is the Director of the International Longevity Center (ILC-US), which
he co-founded in 1990, and Professor of Geriatrics at the Henry L. Schwartz
Department of Geriatrics and Adult Development at the Mount Sinai Medical
Center. From 1975 to 1982, he was the first and founding director of the
National Institute of Aging of the National Institutes of Health. In 1976, Dr.
Butler won the Pulitzer Prize for his book "Why Survive? Being Old in America."
He held the Brookdale Professorship of Geriatrics from 1982 to 1995 at the Mount
Sinai Medical Center. Dr. Butler serves on the board of Neurogen Corporation, a
development-stage biotechnology company working on anxiolytics; Geron
Corporation, a development-stage biotechnology company working on aging
(Telomeres); and Genesis Health Ventures, a leading eldercare company.
Louis Fernandez, Ph.D., was elected as a director of the Company in August
1991. Dr. Fernandez has advised the Company that he will not stand for
re-election to the Board of Directors at the Meeting due to his retirement. He
was the Chairman of Celgene Corp., a company engaged in the development of
industrial products and processes using microbiology and enzyme technologies,
from June 1990 until May 1992. From August 1986 until June 1990, he also served
as the President and Chief Executive Officer of Celgene Corp. He was a member of
the Board of Directors of Monsanto Company from 1971 through 1986 and he served
as its chairman from 1983 through 1986. Dr. Fernandez currently is a director of
A.G. Edwards, Inc., a financial services company, Petrolite Corp., a chemical
company, and Boehringer Ingelheim Corporation, a pharmaceutical company.
Mark Novitch, M.D., was elected as a director of the Company in June 1994.
Dr. Novitch is a Professor of Health Care Sciences at The George Washington
University. He retired as Vice Chairman and Chief Compliance Officer of the
Upjohn Company in December 1993. Prior to joining Upjohn in 1985, he was Deputy
Commissioner of the U.S. Food and Drug Administration. Dr. Novitch is a director
of Guidant Corporation, a supplier of cardiology and minimally invasive surgery
products; Neurogen Corporation, a biopharmaceutical firm focused on central
nervous system disorders; Calypte Biomedical, a developer of urine-based
diagnostics; and Kos Pharmaceuticals, Inc., a developer of pharmaceutical
products for cardiovascular and respiratory conditions.
Alan J. Dalby was elected a director of the Company in December in 1994.
Mr. Dalby is Chairman of Reckitt & Colman plc, a household products company. Mr.
Dalby is the former Chairman and Chief
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Executive Officer and a founder of Cambridge NeuroScience, Inc., an emerging
pharmaceutical company focused on neurobiology. Prior to joining Cambridge
NeuroScience, Inc., he was Executive Vice President and a member of the Board of
Directors of SmithKline Beckman Corporation, retiring in 1987. Mr. Dalby is a
director of Medeva plc.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES FOR
THE BOARD OF DIRECTORS.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors has a Compensation Committee, which reviews salaries
and incentive compensation for employees of and consultants to the Company, and
an Audit Committee, which reviews the results and scope of the audit and other
services provided by the Company's independent auditors. The Compensation
Committee is comprised of Marilyn G. Breslow, Robert N. Butler, M.D., Louis
Fernandez, Ph.D. and Mark Novitch, M.D. The Compensation Committee held four
meetings during the year ended December 31, 1996. The Audit Committee is
comprised of Louis Fernandez, Ph.D., Alan J. Dalby and Robert N. Butler, M.D.
The Audit Committee held one meeting during the year ended December 31, 1996.
There were eight meetings of the Board of Directors in 1996. With the exception
of Marilyn G. Breslow and Robert N. Butler, M.D., each director and each
committee member attended at least 75% of all meetings of the Board of Directors
and the committee(s) on which he or she served, respectively, during the period
in which he or she served as a director or committee member.
COMPENSATION OF DIRECTORS
Directors of the Company not compensated as employees receive $1,500 per
meeting for their service to the Board. Furthermore, directors of the Company
not compensated as employees or consultants receive, upon election to the Board,
a stock option for 33,600 shares of Common Stock (subject to adjustment if they
received stock options upon appointment to the Board between Annual Meetings of
Stockholders to fill a vacancy or newly-created directorship) at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
The stock options vest in three equal annual installments over the director's
term of service. All of the directors are reimbursed for their expenses for each
Board and committee meeting attended.
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
NAME AGE CAPACITIES IN WHICH SERVED IN CURRENT POSITIONS SINCE
- -------------------------------- --- -------------------------------- --------------------------
James J. Mauzey................. 48 Chairman of the Board and Chief March 1994
Executive Officer
Jere E. Goyan................... 66 President, Chief Operating May 1993
Officer and Director
Kenneth I. Moch(1).............. 42 Senior Vice President, Finance February 1995
and Business Development and
Chief Financial Officer
Kenneth Cartwright(2)........... 61 Senior Vice President, January 1994
Development and Regulatory
Affairs
Elizabeth A. O'Dell(3).......... 37 Vice President, Finance and October 1993
Administration, Secretary and
Treasurer
Veronica Mallon(4).............. 46 Vice President, Scientific January 1995
Communications and
Intellectual Property
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- ---------------
(1) Kenneth I. Moch, Senior Vice President, Finance and Business Development and
Chief Financial Officer, joined Alteon in February 1995. From 1990 to 1995,
he was President and Chief Executive Officer of Biocyte Corporation, a cord
blood stem cell-based cellular therapy company. He was a co-founder and
Managing General Partner of Catalyst Ventures, a seed-stage venture capital
partnership, from 1988 through 1989. He served as Vice President of The
Liposome Company, Inc. from 1982 to 1988, and was involved in all aspects of
that company's growth from a start-up research laboratory into a
publicly-held biopharmaceutical firm. From 1980 until 1982, Mr. Moch was a
management consultant with McKinsey & Company, Inc.
(2) Kenneth Cartwright, MB, ChB, MFCM, MRCPsych., has been Senior Vice
President, Development and Regulatory Affairs since January 1994. He joined
Alteon in May 1989 as Vice President, Clinical and Regulatory Affairs. Prior
to joining Alteon, Dr. Cartwright was Vice President, Clinical Research of
American Cyanamid Company, Lederle Laboratories from 1984 to 1989, where he
was responsible for worldwide development and implementation of strategical
clinical plans. From 1982 to 1984, he also served as Director of Clinical
Research U.S.A. From 1980 to 1982, Dr. Cartwright was Deputy Vice President
and Marketing Director, Pharmaceutical Division, Ciba-Geigy, Canada, Ltd.,
responsible for product launch. From 1974 to 1980, he served as Medical
Director where he was responsible for clinical development and regulatory
affairs. Dr. Cartwright received his MB, ChB, from Liverpool University
Medical School. He received his Membership of the Faculty of Community
Medicine (MFCM) and his Membership of the Royal College of Psychiatrists
(MRCPsych.) from Royal College of Physicians, London.
(3) Elizabeth A. O'Dell has been Vice President, Finance and Administration,
Secretary and Treasurer since October 1993. She served as the Company's
Director of Finance from February 1993 to September 1993 and as the
Controller of the Company from February 1992 to February 1993. From November
1991 to January 1992 she was the Controller of Radiodetection Corp. She was
the Director of Internal Operations of Kratos Analytical, Inc. from May 1990
to November 1991 and Controller from March 1987 to April 1990. Prior to that
she served for five years in public accounting in various positions at
Coopers & Lybrand and Deloitte & Touche.
(4) Veronica Mallon, Ph.D., has been Vice President, Scientific Communication
and Intellectual Property since January 1995. She served as the Company's
Senior Director of Immunology from July 1994 to January 1995 and its
Director of Immunology from February 1990 to June 1994. From 1982 to 1990
she worked as a Research Immunologist and Senior Scientist in the Oncology
and Immunology Discovery Group in the Medical Research Division of American
Cyanamid Company, Lederle Laboratories. She received her Ph.D. in
Microbiology from the University of Medicine and Dentistry of New
Jersey/Rutgers Medical School. Dr. Mallon's work has resulted in numerous
publications in several scientific areas.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for the fiscal years ended December 31, 1996, 1995
and 1994 of the Company's chief executive officer, and the other four most
highly compensated executive officers of the Company who were serving as
executive officers at December 31, 1996 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION STOCK
------------------------------ OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (NUMBER OF SHARES) COMPENSATION
- -------------------------------------- ---- ----- -------- ------------------ ------------
James J. Mauzey....................... 1996 $ 300,000 $150,000(1) 150,000 $ --
Chairman of the Board and 1995 300,000 110,000(2) 20,000 45,823(4)
Chief Executive Officer 1994 245,577 200,000(3) 515,000 248,186(4)
Jere E. Goyan......................... 1996 $ 262,500 $ 50,000(5) 33,004 $ 54,000(6)
President and Chief Operating 1995 262,500 35,000 15,000 54,000(6)
Officer
1994 262,500 38,000 75,000 63,765(7)
Kenneth Cartwright.................... 1996 $ 194,922 -- 16,000 --
Senior Vice President, Development 1995 191,100 -- -- --
and Regulatory Affairs 1994 182,000 -- 4,000 --
Kenneth I. Moch....................... 1996 $ 178,460 $ 30,000(8) 10,000 --
Senior Vice President, Finance and 1995 141,964 55,000(9) 170,000 --
Business Development and Chief 1994 -- -- -- --
Financial Officer
Elizabeth A. O'Dell................... 1996 $ 109,307 -- 9,000 --
Vice President, Finance and 1995 112,815 -- 7,500 --
Administration, Secretary and 1994 109,148 -- 3,000 --
Treasurer
- ---------------
(1) Represents a deferred performance bonus for the year ending December 31,
1996.
(2) Represents a deferred performance bonus for the year ending December 31,
1995.
(3) Includes a signing bonus of $100,000 and a deferred performance bonus of
$100,000 for the year ending December 31, 1994.
(4) Represents reimbursement for certain moving expenses and relocation
expenses.
(5) Represents a deferred performance bonus for the year ending December 31,
1996.
(6) Represents a housing allowance.
(7) Represents a housing allowance and reimbursement for certain moving expenses
and relocation expenses.
(8) Represents a deferred performance bonus for the year ending December 31,
1996.
(9) Includes a signing bonus of $25,000 and a deferred performance bonus of
$30,000 for the year ending December 31, 1995.
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The following table sets forth certain information concerning grants of
stock options during the fiscal year ended December 31, 1996, to the Named
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENTAGE STOCK PRICE
OF TOTAL OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL 1996 PER SHARE DATE 5% 10%
- --------------------------- ------- ---------------- ------------ ---------- -------- ----------
James J. Mauzey(2)......... 150,000 35.9% $5.375 12/17/06 $507,046 $1,284,955
Jere E. Goyan(3)........... 33,004 7.9% $9.250 07/10/06 $191,993 $ 486,549
Kenneth Cartwright(4)...... 10,000 2.4% $5.375 12/17/06 $ 33,803 $ 85,664
6,000 1.4% $5.375 12/17/06 $ 20,282 $ 51,398
Kenneth I. Moch(5)......... 10,000 2.4% $5.375 12/17/06 $ 33,803 $ 85,664
Elizabeth A. O'Dell(6)..... 5,000 1.2% $5.375 12/17/06 $ 16,902 $ 42,832
4,000 1.0% $5.375 12/17/06 $ 13,521 $ 34,265
- ---------------
(1) The dollar amounts under these columns are the result of calculations
assuming that the price of Common Stock on the date of the grant of the
option increases at the hypothetical 5% and 10% rates set by the Securities
and Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, of the Company's stock price over the option
term of ten years.
(2) Includes 60,000 shares which shall become exercisable in equal monthly
installments of 5,000 shares commencing on March 1, 1999 and continuing to
vest on the first day of each month thereafter and 90,000 shares which shall
become exercisable upon the accomplishment of certain performance related
milestones.
(3) The shares shall become exercisable upon the accomplishment of certain
performance related milestones.
(4) Includes an option for 10,000 shares of which 2,500 shares became
exercisable on December 17, 1996 and 7,500 shares shall become exercisable
on December 17, 1998. Includes an option for 6,000 shares which shall become
exercisable on June 30, 1997.
(5) Includes 2,500 shares which became exercisable on December 17, 1996 and
7,500 shares which shall become exercisable on December 17, 1998.
(6) Includes an option for 5,000 shares of which 1,250 shares became exercisable
on December 17, 1996 and 3,750 shares shall become exercisable on December
17, 1998. Includes an option for 4,000 shares which shall become exercisable
on June 30, 1997.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
exercises of options to purchase the Common Stock during the fiscal year 1996 by
the Named Officers and unexercised options to purchase the Common Stock held by
the Named Officers at December 31, 1996.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1996 AT DECEMBER 31, 1996(1)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------ -------- ----------- ------------- ----------- -------------
James J. Mauzey............. -- -- 240,032 444,968 $ 0 $ 0
Jere E. Goyan............... -- -- 199,961 256,643 $ 166,320 $ 0
Kenneth Cartwright.......... -- -- 178,934 15,667 $ 743,273 $ 125
Kenneth I. Moch............. -- -- 109,529 70,471 $ 0 $ 0
Elizabeth A. O'Dell......... -- -- 35,332 19,668 $ 281 $ 94
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(1) Based on a price of $5.25, the closing price on the Nasdaq National Market
on December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons who served as members of the Compensation Committee of the
Board of Directors during 1996 were Marilyn G. Breslow, Louis Fernandez, Ph.D.,
Frank H. Spiegel, Jr. (until his death on May 27, 1996), Mark Novitch, M.D. and
Robert N. Butler, M.D. None of the members of the Compensation Committee was an
officer, former officer or employee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General Policies
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing and monitoring the general compensation policies
and compensation plans of the Company, as well as the specific compensation
levels for executive officers. It also makes recommendations to the Board of
Directors concerning the granting of options under the Company's Amended and
Restated 1987 Stock Option Plan and Amended 1995 Stock Option Plan. The
Committee currently consists of Mark Novitch, M.D., Marilyn G. Breslow, Robert
N. Butler, M.D., and Louis Fernandez, Ph.D., four non-employee directors of the
Company.
Under the supervision of the Committee, the Company has developed and
implemented compensation policies, plans and programs which (1) provide a total
compensation package which is intended to be competitive within the industry so
as to enable the Company to attract and retain high caliber executive personnel,
and (2) seek to align the financial interests of the Company's employees with
those of its stockholders by relying heavily on long-term incentive compensation
which is tied to performance.
The primary components of executive compensation include base salary and
long-term equity incentives in the form of stock options. As the Company has not
yet generated any revenue from the sale of pharmaceutical products, the Company
relies on long-term incentive compensation to motivate employees and retain cash
for research projects. In determining the size of such stock options to
individual executives, the Committee considers a number of factors, including
the following: the level of an executive's job responsibilities; the executive's
past performance; the size and frequency of grants by comparable companies; the
executive's salary level; performance of the Company, as measured by the
accomplishment of key business development and clinical milestones; the size of
any prior grants; and achievement of designated milestones by the executive. The
Committee assigns no specific weight to any of the foregoing, other than
achievement of designated milestones by the executive, when making
determinations as to the size of stock option grants.
The Chief Executive Officer and the Chief Operating Officer are responsible
for the development of the annual salary plan for executive officers other than
themselves. The plan is based on industry and peer group
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comparisons and national surveys and on performance judgments as to the past and
expected future contributions of the individuals. To maintain a competitive
level of compensation, the Company targets base salary at the mid to upper
percentiles of a comparative group composed of other biotechnology companies.
Base salary may exceed this level as a result of individual performance. The
Committee reviews the annual plan and makes recommendations for the Board of
Directors, with any modifications it deems appropriate. The Committee believes
it has established executive compensation levels which are competitive with
companies in the industry taking into account individual experience, performance
of both the Company and the individual, company size, location and stage of
development.
Compensation of the Chief Executive Officer
Mr. Mauzey's compensation was determined on the basis of his expertise and
experience which include over 20 years of experience in the pharmaceutical
industry. Compensation awarded to Mr. Mauzey in 1996 included base salary, a
performance bonus based on the achievement of milestones (including, inter alia,
maintaining the Company's cash burn rate from operations at budget, completion
of a strategic plan, and filing a new investigational drug application with the
U.S. Food and Drug Administration) and stock options. Mr. Mauzey (and the
Company's Chief Operating Officer, Dr. Jere Goyan) has waived any increases in
base cash compensation for 1996 (and 1995) and instead has elected to receive
vested stock options.
Effective January 1, 1994, the Internal Revenue Code does not permit
corporations to deduct payment of certain compensation in excess of $1,000,000
to the chief executive officer and the four other most highly paid executive
officers. All compensation paid to the Company's executive officers for 1996
will be fully deductible and the Committee anticipates that amounts paid as cash
compensation will continue to be fully deductible because the amounts are
expected to be less than the $1,000,000 threshold. Under certain circumstances,
the executive officers may realize compensation upon the exercise of stock
options granted under the Company's stock option plans which would not be
deductible by the Company. The Company expects to take such action as is
necessary to qualify its stock option plans as "performance-based compensation,"
which is not subject to the limitation, if and when the Committee determines
that the effect of the limitation on deductibility warrants such action.
Mark Novitch, M.D.
Marilyn Breslow
Robert N. Butler, M.D.
Louis Fernandez, Ph.D.
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SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareowner return on the Company's Common Stock to the
cumulative total return of the NASDAQ CRSP Total Return Index for the NASDAQ
Stock Market (U.S. Companies) (the "NASDAQ-US") and the NASDAQ Pharmaceutical
Stocks Index (the "NASDAQ-Pharm") for the period commencing December 31, 1991
and ended December 31, 1996.
ALTEON INC. RELATIVE STOCK PERFORMANCE
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ALTEON INC. NASDAQ US NASDAQ PHARM
31-DEC-91 100.00 100.00 100.00
31-DEC-92 51.67 116.38 83.22
31-DEC-93 28.33 133.59 74.17
31-DEC-94 18.75 130.59 55.83
31-DEC-95 53.75 184.67 102.13
31-DEC-96 17.50 227.16 102.24
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
James J. Mauzey entered into a three year employment agreement with the
Company on February 28, 1994 which was amended on January 30, 1997 to extend the
term of employment through January 30, 2000. Under the terms of the agreement,
Mr. Mauzey serves as Chief Executive Officer and is currently entitled to an
annual salary of $300,000, which is subject to annual review by the Board of
Directors. Mr. Mauzey is also eligible, at the discretion of the Compensation
Committee to receive a bonus of up to $50,000 and stock options for each year
during the term of the agreement.
Jere E. Goyan entered into a three year employment agreement with the
Company on July 13, 1993, which was renewed on July 10, 1996 to extend the term
of employment through July 13, 1998. Under the agreement, he is currently
entitled to a salary of $262,500, which is subject to annual review by the Board
of Directors. Dr. Goyan is also eligible, at the discretion of the Board of
Directors, to receive a bonus of up to $50,000 for each of the years ending
December 31, 1996 and 1997.
Kenneth I. Moch entered into a three year employment agreement with the
Company on February 27, 1995. Under the terms of the agreement, Mr. Moch is
currently entitled to an annual salary of $165,000, which is subject to annual
review by the Board of Directors.
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Kenneth Cartwright entered into an employment agreement with the Company on
March 27, 1995, which was renewed on March 27, 1997 to extend the term of
employment through March 27, 2000. Under the agreement, he is currently entitled
to an annual salary of $194,922, which is subject to annual review by the Board
of Directors. Dr. Cartwright is also eligible, at the discretion of the Board of
Directors, to receive a bonus of up to $7,500 and a stock option for up to
15,000 shares of Common Stock for the year ending December 31, 1997.
Elizabeth A. O'Dell entered into a two year employment agreement with the
Company as of October 21, 1995. Under the agreement she is currently entitled to
an annual salary of $112,815, which is subject to annual review by the Board of
Directors.
Veronica Mallon entered into a two year employment agreement with the
Company as of January 17, 1995, which was amended on January 17, 1997 to extend
the term of employment through January 17, 2000. Under the amended agreement she
is currently entitled to an annual salary of $102,000, which is subject to
annual review by the Board of Directors. Ms. Mallon is also eligible, at the
discretion of the Board of Directors, to receive a bonus of up to $5,000 and a
stock option for up to 10,000 shares of Common Stock for the year ending
December 31, 1997.
In addition to provisions in the above-described agreements requiring each
individual to maintain the confidentiality of Company information and assign
inventions to the Company, each of such executive officers has agreed that
during the terms of their respective agreements and for one year thereafter,
such person will not compete with the Company by engaging in any capacity in any
business which is competitive with the business of the Company. Each of the
above employment agreements provides that either party may terminate the
agreement upon 30 days prior written notice, subject to certain salary
continuation obligations of the Company if it terminates the agreements without
cause (As to Mr. Mauzey, 18 months if terminated within the first 18 months of
his employment and 12 months thereafter. As to Dr. Goyan, Mr. Moch, Dr.
Cartwright, Ms. O'Dell and Dr. Mallon, 6 months).
All employment agreements between the Company and its Vice Presidents
provide that all unvested stock options held by such Vice Presidents will vest
and become exercisable immediately in the event of a change in control of the
Company.
CHANGE IN CONTROL SEVERANCE BENEFITS PLAN
In February 1996, the Company adopted the Alteon Inc. Change in Control
Severance Benefits Plan (the "Severance Plan"). The Severance Plan was adopted
to protect and retain qualified employees and to encourage their full attention,
free from distractions caused by personal uncertainties and risks in the event
of a pending or threatened change in control of the Company. The Severance Plan
provides for severance benefits to employees upon certain terminations of
employment after or in connection with a change in control of the Company as
defined in the Severance Plan. Following a qualifying termination which occurs
as a result of a change in control, officers of the Company will be entitled to
continuation of (i) their base salary for a period of twenty-four months, and
(ii) all benefit programs and plans providing for health and insurance benefits
for a period of up to eighteen months. In addition, upon a change in control of
the Company all outstanding unexercisable stock options held by employees will
become exercisable.
401(K) PLAN
In 1990, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit ($9,500 in 1996)
and have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan does not require additional matching contributions to the Plan by the
Company on behalf of participants in the Plan. Contributions by employees to the
Plan and income earned on such contributions are not taxable to employees until
withdrawn from the 401(k) Plan. The Trustees under the 401(k) Plan, at the
direction of each participant, invest the assets of the 401(k) Plan in any of
five investment options.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were, as of February 28, 1997, approximately 293 holders of record of
the Company's Common Stock. The following table sets forth certain information
regarding the beneficial ownership of the Company's Common Stock as of February
28, 1997 (i) by each person who is known to the Company to own beneficially more
than 5% of the Common Stock, and (ii) by each current director and Named
Officer, including the nominees, and by all current directors and officers as a
group.
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(1) CLASS(2)
- ---------------------------------------------------- ----------------------- ----------
(i) Certain Beneficial Owners:
Amerindo Investment Advisors Inc.
388 Market Street, Suite 950
San Francisco, CA 94111........................... 1,501,200 9.6%
Hoechst Marion Roussel, Inc.
9300 Ward Parkway
Kansas City, Missouri 64114....................... 882,115 5.6%
Yamanouchi Pharmaceutical Co., Ltd.
3-11, Nihonbashi-honcho 2-chrome
Chuo-Ku, Tokyo 103 Japan.......................... 784,665 5.0%
(ii) Current Directors, including Nominees and Named
Officers:
James J. Mauzey..................................... 260,036(3) 1.6%
Jere E. Goyan....................................... 213,897(4) 1.3%
Marilyn G. Breslow.................................. 44,802(5) *
Robert N. Butler**.................................. 0(6) *
Kenneth Cartwright.................................. 210,934(7) 1.3%
Anthony Cerami...................................... 602,308(8) 3.8%
Alan J. Dalby....................................... 24,581(9) *
Louis Fernandez..................................... 56,004(10) *
Mark Novitch**...................................... 27,404(11) *
Kenneth I. Moch..................................... 115,820(12) *
Elizabeth A. O'Dell................................. 72,542(13) *
All current directors and officers as a group (12
persons).......................................... 1,694,934(14) 9.9%
- ---------------
* Less than one percent.
** Nominee for election to the Board of Directors.
(1) Except as discussed below, none of these shares are subject to rights to
acquire beneficial ownership, as specified in Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended, and the beneficial owner has
sole voting and investment power, subject to community property law, where
applicable.
(2) Applicable percentage of ownership is based on 15,709,825 shares of Common
Stock outstanding.
(3) Includes 260,036 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
424,964 shares of Common Stock granted to Mr. Mauzey.
(4) Includes 213,297 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
243,307 shares of Common Stock granted to Dr. Goyan.
(5) Includes 44,802 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
22,398 shares of Common Stock granted to Ms. Breslow.
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16
(6) Does not include an option to purchase 11,200 shares of Common Stock
granted to Dr. Butler.
(7) Includes 180,934 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
49,667 shares of Common Stock granted to Dr. Cartwright.
(8) Includes 268,366 Shares of Common Stock and 333,942 Shares of Common Stock
issuable to Dr. Cerami upon the exercise of options which were exercisable
as of February 28, 1997 or which will become exercisable within 60 days
after February 28, 1997. Does not include options to purchase 83,118 Shares
of Common Stock granted to Dr. Cerami. Dr. Cerami and Dr. Helen Vlassara
are husband and wife, but no longer live together and an action for divorce
has been commenced. Does not include 33,600 Shares of Common Stock held by
Dr. Vlassara, 67,200 Shares of Common Stock issuable to Dr. Vlassara upon
the exercise of options which were exercisable as of February 28, 1997, and
236,500 Shares of Common Stock held by an irrevocable trust of which Dr.
Cerami is the settlor and Dr. Vlassara is a co-trustee and beneficiary.
(9) Includes 24,581 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or will become exercisable with 60 days
after February 28, 1997. Does not include options to purchase 15,550 shares
of Common Stock granted to Mr. Dalby.
(10) Includes 56,004 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
11,196 shares of Common Stock granted to Dr. Fernandez.
(11) Includes 22,404 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or will become exercisable within 60
days after February 28, 1997. Does not include options to purchase 11,196
shares of Common Stock granted to Dr. Novitch.
(12) Includes 115,820 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
64,180 shares of Common Stock granted to Mr. Moch.
(13) Includes 70,542 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997 and 2,000 shares of Common Stock held by
Ms. O'Dell's husband. Does not include options to purchase 34,458 shares of
Common Stock granted to Ms. O'Dell.
(14) Includes 1,388,968 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
1,039,388 shares of Common Stock granted to the officers and directors.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Equity Transactions and Strategic Alliances
In July 1989, Alteon and Yamanouchi Pharmaceutical Co. Ltd. ("Yamanouchi")
entered into a series of transactions pursuant to which the parties formed a
strategic alliance to develop and commercialize Alteon's diabetes-related
technology. Under this arrangement, the parties agreed to collaborate on further
research and development, Yamanouchi acquired an equity interest in Alteon and
Alteon granted to Yamanouchi an exclusive license to commercialize Alteon's
technology in Japan, South Korea, Taiwan and The People's Republic of China.
Under the strategic alliance with Yamanouchi, Yamanouchi paid on Alteon's behalf
$211,000 in 1996. See "Security Ownership of Certain Beneficial Owners and
Management."
In December 1990, Alteon and Marion Merrell Dow, Inc., which was
subsequently acquired by an affiliate of Hoechst AG and renamed Hoechst Marion
Roussel, Inc. ("HMRI"), formed a strategic alliance to develop and commercialize
certain Alteon technology for therapeutics in the areas of diabetic and aging
complications. The arrangements included HMRI's acquisition of an equity
interest in Alteon, a research and development collaboration to conduct clinical
trials jointly, including those on pimagedine, an agreement for the joint
promotion and sale in North America of drugs developed pursuant to the
collaboration and a manufacturing and supply arrangement. Under the alliance
with HMRI, Alteon was reimbursed $1,015,000 in 1996. In 1996, the parties ended
their collaboration as a result of HMRI's continuing prioritization of its new
product pipeline, and the Company regained all rights granted to HMRI. See
"Security Ownership of Certain Beneficial Owners and Management."
Consulting Agreements
The Company has entered into consulting arrangements with key consultants
and members of its Scientific Advisory Board who advise the Company about
present and long-term scientific planning, research and development. In
September 1991, the Company entered into a four-year consulting agreement with
Dr. Anthony Cerami. Under this consulting agreement and the consulting
arrangement which has continued following the agreement's expiration, Dr. Cerami
is paid $100,000 per year to serve as Chairman of the Scientific Advisory Board
and perform general advisory and consulting services.
The Company is currently negotiating the terms of a three-year research
agreement with Cerami Consulting Corporation, pursuant to which Cerami
Consulting Corporation will conduct, and supervise third parties' participation
in, research and development of the Company's A.G.E. breaker technology and may
provide consulting services to the Company. Dr. Carla Cerami, daughter of Dr.
Anthony Cerami, who is a director of the Company, is the sole shareholder of
Cerami Consulting Corporation. It is anticipated that Dr. Anthony Cerami will
provide services to the Company under such agreement as an employee of Cerami
Consulting Corporation. The financial terms of such agreement have not yet been
determined.
Academic Research Agreement
In September 1991, the Company entered into an agreement with The Picower
Institute for Medical Research ("The Picower Institute"), a not-for-profit
biomedical science institution of which Dr. Cerami was President, pursuant to
which the Company agreed to provide funding in support of new research. During
1994, 1995 and 1996, Alteon provided funding of $1,241,000, $1,109,000 and
$1,006,000 respectively. Effective November 30, 1996, the Company terminated its
funding of further research at The Picower Institute because of Dr. Cerami's
retirement from The Picower Institute.
Registration Rights
In December 1990, the Company, HMRI, Yamanouchi, the holders of each of the
common shares underlying certain Preferred Stock and certain holders of the
Common Stock, including Dr. Cerami, entered into an Amended and Restated
Registration and Right of First Offer Agreement (the "Rights Agreement")
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pursuant to which the Company granted certain registration rights and rights of
first offer to certain stockholders. The Rights Agreement terminated March 1,
1997.
Indebtedness of Management
In July 1993, the Company lent $200,000 to Jere E. Goyan at an interest
rate equal to the prime rate as published in the Wall Street Journal, adjusted
quarterly, for the purpose of purchasing a home. The loan is secured by a second
mortgage on the premises purchased by Dr. Goyan. In July 1996, the terms of the
loan were amended so that interest will stop accruing as of July 1998 and the
principal and interest shall be paid in equal installments in July, 1998, 1999
and 2000. 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 1,
1997, the entire loan amount of $265,451, including accrued interest, remained
outstanding.
RATIFICATION OF AMENDMENT TO INCREASE THE AUTHORIZED SHARES
FOR THE ALTEON INC. AMENDED 1995 STOCK OPTION PLAN
General
The Board of Directors of the Company has approved an amendment to the
Alteon Inc. Amended 1995 Stock Option Plan (the "Plan") to increase the number
of shares of Common Stock reserved for issuance upon the exercise of options
granted under the Plan from 1,000,000 to 2,000,000. At March 31, 1997, options
to purchase 701,240 shares were outstanding under the Plan, leaving 298,760
shares available for grant. In the event that any option under the Plan expires
or is terminated without having been exercised in full, the shares of Common
Stock allocable to the unexercised portion of such option may again be subjected
to an option under the Plan. At February 28, 1997, the market value of the
Common Stock underlying the options was $5.00.
The Plan was adopted by the Board of Directors in February 1995 and
ratified by the stockholders of the Company in June 1995. Directors, officers,
employees and consultants of the Company or any of its subsidiaries or
affiliates are eligible to receive options pursuant to the terms of the Plan.
The Company currently has eight directors (one of whom advised the Company that
he will not stand for re-election to the Board of Directors at the Meeting due
to his retirement), six officers (two of whom are also directors), approximately
49 employees (including the officers) and 12 consultants. The Board believes
that providing selected persons with an opportunity to invest in the Company
will give them additional incentive to increase their efforts on behalf of the
Company and will enable the Company to attract and retain the best available
employees, officers, directors and consultants. An increase in the number of
shares available under the Plan is necessary to provide sufficient shares to
achieve this goal.
Stockholder approval of the amendment to the Plan is being sought (i) to
satisfy Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") which requires stockholder approval of amendment of the Plan in order
that options granted under the Plan may qualify as incentive stock options
("ISOs") and thus be entitled to receive special tax treatment under the Code,
(ii) to satisfy Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934
Act") which requires that the amendment to the Plan be approved by the
stockholders of the Company in order that certain transactions pursuant to the
Plan be exempted from those provisions of Section 16(b) of the 1934 Act which
relate to "short-swing" profits, and (iii) to satisfy a Bylaw of the National
Association of Securities Dealers which requires companies whose shares are
reported on the NASDAQ National Market System to obtain stockholder approval of
stock option plans.
Options granted under the Plan may be either ISOs as defined in Section 422
of the Code, or non-qualified stock options ("NQSOs"). ISOs may be granted only
to employees of the Company and are subject to the following limitations, in
addition to restrictions applicable to all stock options under the Plan: (1) an
ISO may not be granted to an employee who at the time of grant owns in excess of
10% of the outstanding Common Stock of the Company, unless the exercise price
under the option is at least 110% of the fair market value of the stock subject
to the option as of the date of grant of the option and the option term is no
more
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than five years, (2) the aggregate fair market value (determined as of the time
the option is granted) of stock with respect to which ISOs are exercisable for
the first time by an optionee during any calendar year (under all option plans
of the Company) may not exceed $100,000, (3) the exercise price of an ISO must
be the fair market value of the stock at the time the option is granted, (4)
ISOs may not be sold, pledged or otherwise transferred other than by will or by
the laws of descent and distribution, and (5) in the event of termination of an
ISO holder's employment with the Company, any ISOs which are then exercisable
must be exercised within three months of such termination (or within twelve
months if the termination is the result of death or disability).
Options that do not meet the above qualifications will be treated as NQSOs.
Terms of the Plan
Administration of the Plan. With respect to grants of options to employees
or consultants who are also officers or directors of the Company, the Plan is
administered in compliance with Rule 16b-3 under the Securities Exchange Act of
1934 by (1) the Board of Directors of the Company, or (2) a committee comprised
of disinterested directors of the Company who are not compensated as employees
or consultants ("Disinterested Directors"), as designated by the Board. With
respect to grants of options to employees or consultants who are neither
directors nor officers of the Company, the Plan is administered by (1) the
Board, or (2) a committee designated by the Board.
The Plan may be administered by multiple administrative bodies. Presently,
the Plan is administered by a committee of Disinterested Directors. The Board or
a committee designated by the Board, as the case may be, shall, in its capacity
as administrator, be hereinafter referred to as the "Administrator."
Granting of Options. Except with respect to Disinterested Directors, the
granting of options to eligible participants is within the sole discretion of
the Administrator. Disinterested Directors receive grants of options in
accordance with a formula award structure pursuant to which they automatically
receive a stock option for 33,600 shares of common stock at the time of their
election or re-election to a three-year term on the Board (or a pro rated
portion of such shares in the event of their appointment to the Board of
Directors to fill a vacancy or newly-created directorship between Annual
Meetings of Stockholders). No consideration is received by the Company upon the
grant of an option under the Plan.
Option Agreement; Additional Functions of the Administrator. Options
granted pursuant to the Plan will be evidenced by agreements in such form as the
Administrator approves. In addition to the functions otherwise discussed in this
Proxy Statement, and excepting options granted to Disinterested Directors, the
Administrator shall determine, subject to the terms and conditions of the Plan,
(1) whether and to whom options are to be granted, (2) whether an option is to
be an ISO or a NQSO, (3) the number of shares covered by an option, (4) the
exercise price of an option, and (5) all other terms and conditions of an
option.
Exercise Price. The exercise price of a NQSO is determined by the
Administrator. As discussed above, the exercise price of an ISO is determined
with respect to the applicable provisions of the Code. With respect to
Disinterested Directors, the exercise price pursuant to the formula awards is
the fair market value of the shares at the time that the option is granted.
Vesting; Term of Option. Except with respect to Disinterested Directors,
the Administrator has the power to set the time or times during which each
option will vest and become exercisable, provided that no option may be
exercisable after the expiration of ten years from the date it is granted and no
ISO granted to a holder of ten percent of the total voting power of the Company
may be exercisable after the expiration of five years from the date it is
granted. Options granted to Disinterested Directors vest and become exercisable
in three equal annual installments over the director's term in office and expire
ten years from the date of grant.
Transferability. Unless the Administrator determines otherwise, options
may not be sold or otherwise transferred 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, subject to
compliance with certain provisions set forth in the Plan, NQSOs may be
transferable to certain family members and related trusts and partnerships.
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Duration of the Plan and Amendment. Options may be granted under the Plan
from time to time until February 28, 2005. The Administrator may at any time
terminate or amend the Plan, provided that (i) stockholder approval must be
obtained for any amendment for which such approval is required by applicable
laws or regulations, and (ii) no amendment can be made which would impair the
rights of any optionee under any grant theretofore made without the consent of
the optionee.
Adjustments. Appropriate adjustments will be made in the number of shares
of stock covered by the Plan or subject to options granted under the Plan, and
in the exercise price per share of such options, in the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration.
In the event of a merger or consolidation in which the stockholders of the
Company prior to the merger own at least fifty percent of the voting power of
the Company or the surviving entity after the merger or consolidation, each
optionee shall be entitled to receive upon exercise of the option, in lieu of
the shares for which the option was exercisable immediately before such
transaction, the number and class of securities to which such holder would have
been entitled if the option had been exercised immediately prior to the
transaction.
In the event of a dissolution or liquidation of the Company, a merger or
consolidation in which the stockholders of the Company prior to the merger do
not own at least fifty percent of the voting power of the Company or the
surviving entity after the merger or consolidation, a transaction in which 100%
of the voting shares of the Company is sold or otherwise transferred, or the
sale of substantially all of the assets of the Company, (a) on the effective
date of such transaction holders of options will be entitled to receive upon
exercise of the option, in lieu of the shares for which the option was
exercisable immediately before such transaction, the number and class of
securities to which such holder would have been entitled if the option had been
exercised immediately prior to the transaction, (b) the Administrator may
accelerate the time for exercise of some or all then unexercised and unexpired
options, or (c) the Administrator may cancel all outstanding options as of the
effective date of the transaction, provided that notice of such cancellation is
given to each optionee and each optionee has the opportunity to exercise the
option to the extent then exercisable.
Certain Federal Income Tax Consequences
The following summary discusses certain of the federal income tax
consequences associated with options granted under the Plan. This description of
tax consequences is based upon present federal tax laws and regulations and does
not purport to be a complete description of the federal income tax consequences
applicable to an optionee under the Plan. Accordingly, each optionee should
consult with his or her own tax advisor regarding the federal, state and local
tax consequences of the grant of an option and any subsequent exercise and
whether any action is appropriate.
Non-Qualified Stock Options. There are no federal income tax consequences
associated with the grant of a NQSO. Upon the exercise of a NQSO, the optionee
generally must recognize ordinary compensation income equal to the "spread"
between the exercise price and the fair market value of the Company's Common
Stock on the date of exercise. Any gain realized on disposition of shares
purchased upon exercise of the NQSO will be treated as capital gain for federal
income tax purposes.
Incentive Stock Options. There will be no regular federal income tax
liability upon the grant or exercise of an ISO. However, the "spread" between
the exercise price and the fair market value of the Company's Common Stock on
the date of exercise will be treated as a tax preference item for federal income
tax purposes and may subject the optionee to the alternative minimum tax in the
year of exercise.
Any gain realized on disposition of shares purchased upon exercise of an
ISO will be treated as long-term capital gain for federal income tax purposes if
such shares are held for at least twelve months after the date of the issuance
of the shares pursuant to the exercise of the ISO and are disposed of at least
two years after the date of grant of the ISO. If the shares are disposed of
within twelve months after the date of issuance of the shares or within two
years after the date of grant of the ISO, the optionee will recognize
compensation income
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(taxable at ordinary income rates) to the extent of the excess, if any, of the
fair market value of such shares on the date of exercise over the exercise price
of the ISO.
Compensation Deduction. To the extent compensation income is recognized by
an optionee in connection with the exercise of a NQSO or a "disqualifying
disposition" of stock obtained upon exercise of an ISO, the Company generally
would be entitled to a matching compensation deduction (assuming the requisite
withholding requirements are satisfied).
As of March 31, 1997, the Company had granted options to purchase an
aggregate of 701,240 shares of Common Stock (net of cancellations) under the
Plan at an average exercise price of $6.36 per share. As of March 31, 1997,
options to purchase 139,445 shares of Common Stock were exercisable and options
to purchase zero (0) shares of Common Stock had been exercised under the Plan.
Each of the two nominees for election to the Board of Directors will receive,
upon election to the Board of Directors, a stock option for 33,600 shares of
Common Stock. See "Election of Directors -- Compensation of Directors."
As of March 31, 1997, the following persons or groups had received options
to purchase shares of Common Stock under the Plan as follows: (i) the Chief
Executive Officer and the Named Officers: James J. Mauzey 170,000 shares, Jere
E. Goyan 15,000 shares, Kenneth I. Moch 15,000 shares, Kenneth Cartwright 46,000
shares, Elizabeth A. O'Dell 55,000 shares; (ii) all current executive officers
of the Company as a group: 406,000 shares; (iii) all current directors who are
not executive officers as a group: 44,800 shares; (iv) each nominee for
director: Robert N. Butler 11,200 shares, Mark Novitch 0 shares; (v) all
employees, including all current officers who are not executive officers, as a
group: 144,584 shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE AMENDMENT TO THE ALTEON INC. AMENDED 1995 STOCK OPTION PLAN.
APPROVAL OF REMOVAL OF CERTAIN LIMITATIONS ON CONVERSION
OF THE COMPANY'S 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK
Background
The Company has entered into a Preferred Stock Investment Agreement (the
"Agreement") dated as of April 24, 1997 with six investors, certain of whom were
advised by The Palladin Group, L.P. (the "Investors"), pursuant to which the
Investors purchased 5,000 shares of the Company's 6% Cumulative Convertible
Preferred Stock, par value $0.01, (the "Preferred Stock") for an aggregate
purchase price of $5,000,000. The Company expects to use the proceeds of the
sale of the Preferred Stock for general corporate purposes.
Rule 4460 of the National Association of Securities Dealers, Inc. ("NASD")
requires that stockholder approval be obtained prior to the issuance, in a
transaction other than a public offering, of securities which are convertible
into a number of shares of an issuer's common stock equal to 20% or more of the
common stock outstanding before the issuance for less than the greater of book
or market value of the common stock. The Preferred Stock is convertible into
Common Stock at any time at a discount from the market price of the Common Stock
at the time of conversion. See "Terms of the Preferred Stock." Based on the
market price of the Common Stock on the date of issuance of the Preferred Stock,
5,000 shares of Preferred Stock would be convertible into 1,383,508 shares of
Common Stock, which represents 8.8% of the Common Stock outstanding on the date
of issuance of the Preferred Stock. However, since the number of shares of
Common Stock into which the Preferred Stock is convertible depends on the market
price of the Common Stock at the time of conversion, it is mathematically
possible that the Preferred Stock could ultimately be convertible into a number
of shares of Common Stock which exceeds 20% of the Company's outstanding Common
Stock on the date of issuance of the Preferred Stock.
In light of Rule 4460 of the NASD, the number of shares issuable on
conversion of the Preferred Stock has been limited to 3,141,965 shares, which
represents 19.9% of the Common Stock outstanding on the date of issuance of the
Preferred Stock. The Company has agreed to redeem, at a premium, any Preferred
Stock which cannot be converted into Common Stock because of this limitation.
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This proposal seeks stockholder approval of the removal of the foregoing
limitation on the number of shares of Common Stock into which the Preferred
Stock is convertible.
If the stockholders do not approve this proposal, the number of shares of
Common Stock into which the outstanding 5,000 shares of Preferred Stock are
convertible will be limited to 3,141,965 shares, and the Company will be
required to redeem, at a premium, any Preferred Stock which cannot be converted
into Common Stock because of this limitation.
The Transaction
Pursuant to the Agreement the Company sold the Preferred Stock as described
above. In connection with the Agreement, the Company issued to the Investors
warrants to purchase an aggregate of 50,000 shares of Common Stock for $4.025
per share (the "Warrants"). This price is equal to 115% of the closing price of
the Common Stock on the day prior to the day of issuance of the Warrants. The
Company also entered into a Registration Rights Agreement with the Investors
pursuant to which the Company agreed to file with the Securities and Exchange
Commission a registration statement for the resale of the Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants and to keep
such registration statement in effect until all such Common Stock is sold or
eligible for resale pursuant to Rule 144(k) promulgated under the Securities Act
of 1933 (i.e., a period of two years for holders who are not affiliates of the
Company). The Registration Rights Agreement imposes monetary penalties on the
Company for failure to meet its obligations and in the event of certain defaults
may require the Company to redeem the Preferred Stock or the Common Stock issued
upon conversion, as the case may be, at a price equal to 130% of the Liquidation
Preference (as defined below) in the case of Preferred Stock and 130% of average
of the daily low trading prices of the Common Stock during the 10 trading days
immediately preceding the date of conversion in the case of Common Stock. In
connection with the Registration Rights Agreement, the Company issued to the
Investors warrants to purchase 1,000,000 shares of Common Stock at a price of
$.10 per share, which warrants will be exercisable only if the Company fails,
refuses or is unable to cause the securities registrable under the Registration
Rights Agreement to be listed on the Nasdaq National Market or if the Common
Stock is delisted from the Nasdaq National Market and the Company does not elect
to redeem the then outstanding Preferred Stock for the price set forth above
(the "Delisting Warrants").
Terms of the Preferred Stock
The Preferred Stock has a liquidation value of $1,000 per share plus
accrued dividends and certain default payments owed by the Company to the
holders of the Preferred Stock pursuant to the Registration Rights Agreement
(the "Liquidation Preference"). In the event of the liquidation of the Company,
holders of the Preferred Stock will be entitled to receive an amount per share
equal to the Liquidation Preference before any distribution of assets of the
Company to the holders of any class of stock ranking junior to the Preferred
Stock.
The holders of the Preferred Stock are entitled to receive cumulative
dividends at the per share rate of 6% of the Liquidation Preference per year.
The Certificate of Designations for the Preferred Stock contains no restriction
on the repurchase or redemption of shares by the Company while there is an
arrearage in the payment of dividends.
Each share of Preferred Stock is convertible at any time prior to the
Forced Conversion Date (as defined below) into a number of shares of Common
Stock determined by dividing the Liquidation Preference by the Conversion Price.
The Conversion Price is equal to the percentage set forth below of the average
of the daily low trading prices of the Common Stock during the 10 trading days
immediately preceding the date of conversion. The applicable percentages are as
follows: 96.5% during calendar days 1 through 89 following issuance of the
Preferred Stock; 92.5% during calendar days 90 through 179 following issuance of
the Preferred Stock; and 85.5% thereafter.
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Issuance of Common Stock upon conversion of the Preferred Stock will have a
dilutive effect on holders of the Common Stock.
In the event of a Change in Control (as defined below), for a period
commencing on the announcement of a transaction intended or likely to result in
a Change in Control and ending 10 trading days after a subsequent contrary
announcement or the consummation of the Change in Control, the Preferred Stock
will be convertible into Common Stock at a conversion price which is 83% of the
lowest of the daily low trading prices of the Common Stock during the 10 trading
days immediately preceding the date of conversion. A Change in Control will be
deemed to have occurred if at any time (x) there occurs any consolidation or
merger of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation), or any other
corporate reorganization or transaction or series of related transactions in
which in excess of 50% of the Company's voting power is transferred through a
merger, consolidation, tender offer or similar transaction, or there occurs any
event which causes the occurrence of a Distribution Date (as defined in Section
3(b) of the Stockholders' Rights Agreement, dated as of July 27, 1995, between
the Company and Registrar and Transfer Company, as rights agent, as amended) or
a substantially similar occurrence under any successor or similar plan, (y) in
excess of 50% of the Company's Board of Directors consists of directors not
nominated by the prior Board of Directors of the Company, or (z) any person (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), together with its affiliates and associates (as such terms are
defined in Rule 405 under the Securities Act of 1933), beneficially owns or is
deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise period) in excess of 50% of the Company's
voting power.
In the event certain conditions are met, the Company may require any
Preferred Stock held on the date which is (i) the fifth anniversary of the date
of issuance of the Preferred Stock or (ii) the first date following the third
anniversary of such date of issuance on which the aggregate Liquidation
Preference of the outstanding Preferred Stock is less than $250,000 (the "Forced
Conversion Date") to be converted at the Conversion Price.
The Company may redeem any Preferred Stock held on the Forced Conversion
Date for cash at a price equal to the Liquidation Preference for the shares to
be redeemed divided by the applicable percentage for determining the Conversion
Price. In addition, the Company may redeem for cash any Preferred Stock held on
a date when the aggregate Liquidation Preference of the outstanding Preferred
Stock is less than $250,000 for a price equal to 130% of the Liquidation
Preference of the shares.
To the extent required by NASD Rule 4460, the outstanding Preferred Stock
may not be converted into more than 3,141,965 shares of Common Stock (i.e.,
19.9% of the Common Stock outstanding on the date of issuance of the Preferred
Stock). If this proposal is approved, this limitation will not be required by
Rule 4460 and so will be inapplicable.
Holders of the Preferred Stock generally have no voting rights. However,
the affirmative vote of the holders of a majority of the outstanding Preferred
Stock is necessary for (i) any amendment of the Certificate of Designations of
the Preferred Stock, (ii) any amendment to the Certificate of Incorporation or
by-laws of the Company that may amend or change or adversely affect any of the
rights, preferences, or privileges of the Preferred Stock, (iii) any waiver of a
default in payment of dividends on the Preferred Stock, and (iv) any
reorganization or reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into any other corporation or
corporations, or any sale of all or substantially all of the assets of the
Company, that would have an adverse effect on any of the rights, preferences, or
privileges of the Preferred Stock.
The Certificate of Designations for the Preferred Stock provides that if,
during the period ending 6 months after the issuance of the Preferred Stock, the
Company sells Common Stock or securities convertible into Common Stock (other
than in a public offering, a private placement to an affiliate of The Palladin
Group, L.P., sales to underwriters, sales under the Company's stock option
plans, or sales in connection with a strategic alliance) for a price that is
less than the effective Conversion Price of the Preferred
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Stock at such time, the Conversion Price shall be adjusted so that it is no
greater than the price of the newly issued Common Stock.
The Company has agreed that as long as over 20% of the Preferred Stock is
outstanding, it will not (a) declare or pay any dividends or make any
distributions to any holders of Common Stock, (b) purchase or otherwise acquire
for value any Common Stock or other equity securities of the Company either
junior to or on parity with the Preferred Stock, or (c) authorize or issue any
equity security senior to the Preferred Stock.
The Company's Certificate of Incorporation includes a provision that
requires the approval of the holders of 80% of the Company's voting stock as a
condition to a merger or certain other business transactions with, or proposed
by, a holder of 10% or more of the Company's voting stock, except in cases where
certain directors approve the transaction or certain minimum price criteria and
other procedural requirements are met. For purposes of this provision, the
shares of Preferred Stock are not considered to be voting stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE REMOVAL OF THE LIMITATION ON THE NUMBER OF SHARES INTO WHICH THE
PREFERRED STOCK IS CONVERTIBLE.
APPROVAL OF ISSUANCE OF ADDITIONAL PREFERRED STOCK
This proposal seeks stockholder approval of the issuance and sale by the
Company at any time prior to the next annual meeting of stockholders, in one or
more private transactions on terms substantially similar to the transaction
described above in which the Preferred Stock was sold to the Investors (except
that the limitation on the number of shares into which the Preferred Stock would
be convertible will not apply), of up to 5,000 additional shares of Preferred
Stock (or a substantially similar security) to the Investors or other parties
who are affiliates of The Palladin Group, L.P. or individuals or entities whose
securities holdings are under the investment management of The Palladin Group,
L.P. or its affiliates. See "Approval of Removal of Certain Limitations On
Conversion of the Company's 6% Cumulative Convertible Preferred Stock -- The
Transaction" and "Approval of Removal of Certain Limitations On Conversion of
the Company's 6% Cumulative Convertible Preferred Stock -- Terms of Preferred
Stock." As of the date of this Proxy Statement, the Company has not entered into
any agreements for the sale of the additional shares. If such a transaction
occurs, the proceeds of the sale would be used for general corporate purposes.
If the stockholders do not approve this proposal, the Company will not sell
additional shares of Preferred Stock (or a substantially similar security)
unless the terms of the security are modified so that the number of shares of
Common Stock into which such security is convertible does not exceed 20 percent
of the Company's outstanding Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE ISSUANCE AND SALE OF ADDITIONAL SHARES OF PREFERRED STOCK (OR A
SUBSTANTIALLY SIMILAR SECURITY) AS DESCRIBED ABOVE.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has, subject to stockholder
ratification, retained Arthur Andersen LLP to serve as independent public
accountants of the Company for the fiscal year ended December 31, 1997 because
it is an internationally recognized accounting firm familiar with the unique
accounting, tax and financial issues that relate to and affect the
biopharmaceutical industry. Arthur Andersen LLP has a firm-wide effort and a
group of personnel that specialize in these industries and has assigned members
of this group to work with Alteon. Arthur Andersen LLP also served as
independent public accountants of the Company for the fiscal year ended December
31, 1996.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
One or more representatives of Arthur Andersen LLP is expected to attend
the Meeting and have an opportunity to make a statement and/or respond to
appropriate questions from stockholders.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission ("SEC") and NASDAQ. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during 1996 except that the Initial Statement of
Beneficial Ownership on Form 3 for Dr. Butler was filed late and a Form 4 for
four transactions for Dr. Cerami was filed late.
STOCKHOLDERS' PROPOSALS
Stockholders deciding to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 1998 Annual Meeting of
Stockholders must advise the Secretary of the Company of such proposals in
writing by January 1, 1998.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.
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INCORPORATION BY REFERENCE
Item 7 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 and the financial statements contained therein are
incorporated herein by reference. A copy of the Company's Annual Report on Form
10-K for the year ended December 31, 1996 is included with the Company's annual
report to stockholders which accompanies this proxy statement.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by the
Company.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by directors, officers and other employees of
the Company who will not be specially compensated for these services. The
Company has retained the services of Registrar and Transfer Company to assist in
the proxy solicitation at a fee estimated to be $15,000. The Company will also
request that brokers, nominees, custodians and other fiduciaries forward
soliciting materials to the beneficial owners of shares held of record by such
brokers, nominees, custodians and other fiduciaries. The Company will reimburse
such persons for their reasonable expenses in connection therewith.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.
ALTEON HAS FURNISHED, WITHOUT CHARGE, A COPY OF ITS REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS STOCKHOLDERS OF RECORD ON
APRIL 18, 1997, AND WILL FURNISH TO EACH BENEFICIAL STOCKHOLDER SUCH REPORT UPON
WRITTEN REQUEST MADE TO THE SECRETARY OF THE COMPANY. A REASONABLE FEE WILL BE
CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
ELIZABETH A. O'DELL
Secretary
Ramsey, New Jersey
May 12, 1997
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Alteon Inc.:
We have audited the accompanying balance sheets of Alteon Inc. (a Delaware
corporation) as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alteon Inc. as of December 31,
1995 and 1996, and the results of its operations and cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 20, 1997
28
REVOCABLE PROXY
ALTEON INC.
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION FOR THE
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby constitutes and appoints Kenneth I. Moch and
Elizabeth A. O'Dell and each of them, his or her true and lawful agents and
proxies with full power of substitution in each, to represent and to vote on
behalf of the undersigned all of the shares and warrants of Alteon Inc. (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Grand Hyatt, Park Avenue at Grand
Central, New York, New York at 9:00 A.M., local time, on Tuesday, June 10,
1997, and at any adjournment or adjournments thereof, upon the following
proposals more fully described in the Notice of Annual Meeting of Stockholders
and Proxy Statement for the Meeting (receipt of which is hereby acknowledged).
Please be sure to sign and date Dated:
this Proxy in the box below ________________________________
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Signature of Stockholder Signature of Stockholder if held jointly
1. ELECTION OF DIRECTORS.
(Mark one only)
FOR WITHHOLD FOR ALL EXCEPT
/ / / / / /
NOMINEES: DR. ROBERT N. BUTLER AND DR. MARK NOVITCH.
(INSTRUCTIONS: To withhold authority for any individual nominee, write that
nominee's name in the space provided below.)
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2. Approval of the proposal to ratify the appointment of Arthur Andersen LLP as
the independent public accountants of the Company for the fiscal year ending
December 31, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of the proposal to ratify the amendment of the Alteon Inc. Amended
and Restated 1995 Stock Option Plan to increase the number of shares of
Common Stock reserved for issuance upon the exercise of options granted under
the Plan from 1,000,000 shares to 2,000,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
4. Approval of the proposal to remove the limitation on the number of shares of
Common Stock issuable upon conversion of the 6% Cumulative Convertible
Preferred Stock.
FOR AGAINST ABSTAIN
/ / / / / /
5. Approval of the proposal to authorize the issuance and sale of additional
shares of Preferred Stock.
FOR AGAINST ABSTAIN
/ / / / / /
6. In their discretion, the proxies are authorized to vote upon other matters as
may properly come before the Meeting.
/ / / / ATTEND
I WILL WILL NOT THE
MEETING
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
ALTEON INC.
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This proxy must be signed exactly as the name appears hereon. When shares are
held by joint tenants, both should sign. If the signer is a corporation, please
sign full corporate name by duly authorized officer, giving full title as such.
If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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