SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the Securities
Exchange Act of 1934 (Amendment No.___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
ALTEON INC.
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Name of Registrant as Specified in Its Charter
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[X] No fee required.
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ALTEON INC.
6 CAMPUS DRIVE
PARSIPPANY, NEW JERSEY 07054
To Our Stockholders:
You are most cordially invited to attend the 2004 Annual Meeting of
Stockholders of Alteon Inc. at 9:00 A.M., local time, on June 2, 2004, at the
Hilton Parsippany, One Hilton Court, Parsippany, New Jersey 07054.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented at 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 as soon as possible in the enclosed envelope, which requires no postage if
mailed in the United States. Your stock will be voted in accordance with the
instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
KENNETH I. MOCH
Chairman of the Board
President and Chief Executive Officer
ALTEON INC.
6 CAMPUS DRIVE
PARSIPPANY, NEW JERSEY 07054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 2004
The Annual Meeting of Stockholders of Alteon Inc., a Delaware corporation,
will be held at the Hilton Parsippany, One Hilton Court, Parsippany, New Jersey
07054, on June 2, 2004, at 9:00 A.M., local time, for the following purposes:
(1) To elect three directors to serve until the Annual Meeting to be held
in 2007 and until their successors have been duly elected and qualify;
(2) To ratify the appointment of KPMG LLP as our independent accountants
for the fiscal year ending December 31, 2004;
(3) To consider and vote upon a proposal to amend our certificate of
incorporation to increase the number of authorized shares of common
stock from 80,000,000 to 100,000,000; and
(4) To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 5, 2004, are
entitled to vote at the meeting, or at any adjournment of the meeting. A
complete list of those stockholders will be open to the examination of any
stockholder at our principal executive offices at 6 Campus Drive, Parsippany,
New Jersey 07054, 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 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 ALTEON 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
Parsippany, New Jersey
April 21, 2004
ALTEON'S 2003 ANNUAL REPORT ACCOMPANIES THE PROXY STATEMENT.
ALTEON INC.
6 CAMPUS DRIVE
PARSIPPANY, NEW JERSEY 07054
PROXY STATEMENT
We are furnishing this Proxy Statement in connection with our Annual
Meeting of Stockholders to be held on June 2, 2004, at the Hilton Parsippany,
One Hilton Court, Parsippany, New Jersey 07054, at 9:00 A.M., local time, and at
any adjournment or adjournments thereof. Stockholders of record at the close of
business on April 5, 2004, will be entitled to vote at the meeting and at any
adjournment of the meeting. As of April 5, 2004, there were shares of
common stock issued and outstanding and entitled to vote. Each share of common
stock is entitled to one vote on any matter presented at the meeting.
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
Alteon's Board of Directors is asking for your proxy. Giving us your proxy
by properly signing and returning the accompanying proxy card means you
authorize us to vote your shares at the meeting in the manner you direct. You
may vote for both, one or neither of our director candidates. We will vote as
you direct.
If you properly sign and return the enclosed proxy card but do not specify
how to vote, we will vote your shares (i) FOR the election of the nominees named
below as directors; (ii) FOR the ratification of the appointment of KPMG LLP to
serve as our independent accountants for the fiscal year ending December 31,
2004; (iii) FOR the approval of the amendment to our certificate of
incorporation to increase the number of authorized shares of common stock from
80,000,000 to 100,000,000, and (iv) 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 of the meeting.
You may receive more than one proxy or voting card depending on how you
hold your shares. Shares registered in your name are covered by one card.
However, if you hold shares through someone else, such as a stockbroker, you may
receive material from them asking how you want to vote. Each proxy card should
be signed and returned to assure that all of your shares are voted.
You may revoke your proxy any time before it is voted by submitting a new
proxy with a later date, by voting in person at the meeting or by notifying
Alteon's Secretary in writing. However, your mere presence at the meeting does
not revoke the proxy.
In order to carry on the business of the meeting, we must have a quorum.
This means the holders of at least a majority of our common stock must be
represented at the meeting, either by proxy or in person. Votes that are
withheld and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum.
Directors are elected by a plurality vote, which means that the three
nominees receiving the most votes will be elected to fill the seats on the
Board. The proposed amendment to our certificate of incorporation must be
approved by the affirmative vote of the holders of at least a majority of the
outstanding shares of our common stock. All other actions considered at the
meeting, including an adjournment, may be taken upon the favorable vote of a
majority of the votes present in person or represented by proxy at the meeting.
Only votes cast "for" a matter will constitute affirmatives votes. Votes
withheld or abstentions, because they are not cast "for" a particular proposal,
will have the same effect as negative votes or votes cast "against" such
proposal. Proxies submitted by brokers that do not indicate a vote for some of
the proposals because such brokers do not have discretionary voting authority on
those proposals and have not received instructions from their customers on those
proposals (i.e., broker non-votes) are not considered to be shares present for
the purpose of calculating the vote on such proposals and will not affect the
outcome of proposals which require the affirmative vote of a majority of shares
represented at the Annual Meeting. However, broker non-votes will have the same
effect as a vote against the proposal to amend our certificate of incorporation,
because such proposal requires the affirmative vote of a majority of the
outstanding shares of our common stock.
1
This Proxy Statement, together with the related proxy card, is being mailed
to you on or about April 21, 2004. Our Annual Report to Stockholders for the
year ended December 31, 2003, including financial statements, is being mailed
concurrently with this Proxy Statement to all stockholders of record as of April
5, 2004. In addition, we have provided brokers, dealers, banks, voting trustees
and their nominees, at our expense, with additional copies of the Annual Report
so that they may supply the material to beneficial owners as of April 5, 2004.
ELECTION OF DIRECTORS
At the meeting, three directors are to be elected to hold office until the
Annual Meeting of Stockholders to be held in 2007 and until their successors are
elected and qualify. The nominees for election to the Board of Directors are
Marilyn Breslow, Alan J. Dalby and Thomas A. Moore. Their biographies appear
below.
Pursuant to our 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, Mr. Dalby and Mr. Moore, whose terms will expire at the
meeting. Class B consists of Mr. Moch, Dr. Bransome and Dr. Naimark, whose terms
will expire at the Annual Meeting of Stockholders in 2005. Class C consists of
Dr. Novitch and Mr. McCurdy, whose terms will expire at the Annual Meeting of
Stockholders in 2006.
Proxies solicited by the Board will be voted for the election of the
nominees named above, unless otherwise specified in the proxy. All of the
persons whose names and biographies appear below are at present directors of
Alteon. In the event a 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 ALTEON
---- --- -------------- ---------------------
Kenneth I. Moch................... 49 1998 Chairman of the Board,
President and Chief Executive Officer
Edwin D. Bransome, Jr., M.D. ..... 70 1999 Director
Marilyn G. Breslow(1)............. 59 1988 Director
Alan J. Dalby(1).................. 67 1994 Director
David K. McCurdy.................. 53 1997 Director
Thomas A. Moore(1)................ 53 2001 Director
George M. Naimark, Ph.D. ......... 79 1999 Director
Mark Novitch, M.D. ............... 71 1994 Director
--------------------
(1) A nominee 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:
Kenneth I. Moch, Chairman of the Board, President and Chief Executive
Officer, joined the Company in February 1995, as Senior Vice President, Finance
and Business Development and Chief Financial Officer. Mr. Moch became President,
Chief Executive Officer and a director of the Company in December 1998. In June
2001, he was named Chairman of the Board. From 1990 to 1995, Mr. Moch served as
President and Chief Executive Officer of Biocyte Corporation, a cellular therapy
company that pioneered the use of cord blood stem cells in transplantation
therapy. Mr. Moch was a founder and the Managing General Partner of Catalyst
Ventures, a seed venture capital partnership, and was a founder of The Liposome
Company, Inc. in Princeton, New Jersey, where he served as Vice President from
1982 to 1988. Previously, he was a management consultant with McKinsey &
Company, Inc. and a biomedical technology consultant with Channing, Weinberg &
Company, Inc. Mr. Moch received an A.B. in Biochemistry from Princeton
2
University, and an M.B.A. with emphasis in Finance and Marketing from the
Stanford Graduate School of Business.
Edwin D. Bransome, Jr., M.D., has been a Director of the Company since July
1999. He is a Professor of Medicine and Physiology Emeritus at the Medical
College of Georgia. He retired as Chief of the Section of Endocrinology and
Metabolism in 2000, is the Past-President of the United States Pharmacopoeial
Convention and has been a member of the USP Board of Trustees since 1990. He
served on the Georgia Department of Medical Assistance (Medicaid) Drug
Utilization Board from 1992 to 2000 and was its first Chairman. Currently, Dr.
Bransome is in medical practice as a consultant in Endocrinology. He is a member
of the editorial board of the journal, Diabetes Care. Dr. Bransome has had
faculty positions at the Scripps Clinic and Research Foundation, MIT and the
Harvard University School of Medicine. He received his A.B. in 1954 from Yale
University and received his M.D. from Columbia University College of Physicians
and Surgeons in 1958. His post-graduate training in Internal Medicine and
Clinical Endocrinology fellowship was at the Peter Bent Brigham Hospital in
Boston and in Biochemistry at Columbia University College of Physicians and
Surgeons.
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., the research
subsidiary of W. P. Stewart & Co., Ltd., an investment advisory firm, since
1990, and is President of the New York office of WPS, Inc. She was a General
Partner of Concord Partners and a Vice President of Dillon, Read & Co., Inc.
from 1984 to 1990. Prior to Dillon, Read & Co., she worked at Polaroid
Corporation from 1973 to 1984 and was with Peat, Marwick, Mitchell and Company
from 1970 to 1972 and ICF, Inc. from 1972 to 1973. Ms. Breslow holds a B.S.
degree from Barnard College and an M.B.A. from the Harvard Graduate School of
Business Administration.
Alan J. Dalby has been a Director of the Company since December 1994. He is
the former Chairman of Reckitt Benckiser plc, a household products company, and
former Chairman, Chief Executive Officer and a founder of Cambridge
NeuroScience, Inc. He was Executive Vice President and member of the Board of
Directors for SmithKline Beckman Corporation, retiring in 1987. Mr. Dalby is a
Director of Acambis plc.
David K. McCurdy has been a Director of the Company since June 1997. He is
currently the President of Electronic Industries Alliance ("EIA"), the premier
trade organization representing more than 2,100 of the world's leading
electronics manufacturers. Before becoming President of EIA in November 1998,
Mr. McCurdy was Chairman and Chief Executive Officer of the McCurdy Group
L.L.C., a business consulting and investment firm focused on high-growth
companies in the fields of healthcare, high technology and international
business, which he formed in 1995. Prior to forming the McCurdy Group, Mr.
McCurdy served for 14 years in the United States House of Representatives from
the fourth district of Oklahoma. He attained numerous leadership positions,
including Chairman of the House Intelligence Committee and subcommittee chairs
in both the House Armed Services Committee and the Science and Space Committee.
He held a commission in the United States Air Force Reserve attaining the rank
of major and serving as a Judge Advocate General (JAG). A 1972 graduate of the
University of Oklahoma, Mr. McCurdy received his J.D. in 1975 from Oklahoma's
Law School. He also studied international economics at the University of
Edinburgh, Scotland, as a Rotary International Graduate Fellow.
Thomas A. Moore has been a Director of the Company since October 2001. He
was President and Chief Executive Officer of Biopure Corporation, a leading
developer, manufacturer and marketer of oxygen therapeutics for the treatment of
anemia and other applications, from 2002 to 2004. Prior to joining Biopure in
2002, Mr. Moore was President and Chief Executive Officer of Nelson
Communications Worldwide, one of the largest providers of healthcare marketing
services globally. Mr. Moore was President of Procter & Gamble's worldwide
prescription and over-the-counter healthcare products business, and Group Vice
President of the Procter & Gamble Company. He is a trustee of the Institute for
Cancer Prevention, a non-profit organization that researches the nutritional and
environmental factors in cancer and other diseases. Mr. Moore holds a B.A. in
History from Princeton University.
George M. Naimark, Ph.D., has been a Director of the Company since July
1999. He is President of Naimark & Barba, Inc., a management consultancy, since
September 1966, and Naimark & Associates, Inc. a private healthcare consulting
organization, since February 1994. Dr. Naimark has more than 30 years of
3
experience in the pharmaceutical, diagnostic and medical device industries. His
experience includes management positions in research and development, new
product development and quality control. In addition, Dr. Naimark has authored
books on patent law, communications and business, as well as many articles that
appeared in general business, marketing, scientific and medical journals and was
the editor of a medical journal. He received his Ph.D. from the University of
Delaware in 1951, and received a B.S. and M.S. from Bucknell University in 1947
and 1948, respectively.
Mark Novitch, M.D., has been a Director of the Company since June 1994. 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 United States 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; and Kos Pharmaceuticals, Inc., a developer of
pharmaceutical products for cardiovascular and respiratory conditions. He
graduated from Yale University and received his M.D. from New York Medical
College.
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 Alteon, a
Nominating Committee, which reviews the qualifications of candidates and
proposes nominees to serve as directors on our Board of Directors and nominees
for membership on Board committees, and an Audit Committee, which oversees the
accounting and financial reporting processes and the audits of our financial
statements. In 2003, the Audit, Nominating and Compensation Committees were
comprised of Edwin D. Bransome, Jr., M.D., Marilyn G. Breslow, Alan J. Dalby,
David K. McCurdy, Thomas A. Moore, George M. Naimark, Ph.D., and Mark Novitch,
M.D. All of the members of the Nominating Committee and Audit Committee are
independent, as such term is defined by Section 121A of the American Stock
Exchange listing standards. The Audit Committee held three meetings, the
Compensation Committee held two meetings and the Nominating Committee held no
meetings during the year ended December 31, 2003. There were 10 meetings of the
Board of Directors in 2003. Each of the incumbent directors attended at least
75% of the aggregate of (1) the total number of meetings of the Board of
Directors (held during the period for which he or she was a director) and (2)
the total number of meetings held by all committees of the Board on which he or
she served during the periods that he or she served. We have adopted a written
charter for the Audit Committee, and a copy of such charter is attached as
Appendix I. We have also adopted a written charter for the Nominating Committee,
and it is available on our website at www.alteon.com.
Director Nomination Process
The Nominating Committee reviews the qualifications of candidates and
proposes nominees to serve as directors on our Board of Directors and nominees
for membership on Board committees. It is the Nominating Committee's policy to
consider potential candidates for Board membership recommended by its members,
management, stockholders and others. The Nominating Committee has not
established any specific minimum qualifications that must be met for a
recommendation for a position on the Board of Directors. Instead, the Nominating
Committee conducts appropriate and necessary inquiries into the backgrounds and
qualifications of possible candidates for nomination to the Board of Directors
giving due consideration to such criteria, including without limitation,
diversity, experience, skill set and the ability to act on behalf of
stockholders, as it believes appropriate and in the best interests of Alteon and
its stockholders. No special procedure has been established for the
consideration of director candidates recommended by stockholders. All potential
director candidates are evaluated based upon the same criteria, and the
Nominating Committee makes no distinction in its evaluation of candidates based
upon whether such candidates are recommended by stockholders or others. Once the
evaluation is complete, the Nominating Committee recommends the nominees to the
Board of Directors, who makes the final determination.
4
COMPENSATION OF DIRECTORS
All of the directors are reimbursed for their expenses for each Board
meeting attended. Directors who are not compensated as Alteon employees receive
$1,500 per meeting attended in person and $1,000 for each meeting attended by
telephone for their service to the Board. Non-compensated directors also
receive, upon the date of their election or re-election to the Board and on the
dates of the next two Annual Meetings of Stockholders (subject to their
continued service on the Board of Directors), a stock option to purchase 20,000
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. Each of these options
will vest and become exercisable on the date of Alteon's first Annual Meeting of
Stockholders following the date of grant, subject to the director's continued
service on the Board.
STOCKHOLDER COMMUNICATION
Stockholders and other parties interested in communicating directly with
the Chairman or with the Board of Directors as a group may do so by writing to
Chairman, Alteon Inc., 6 Campus Drive, Parsippany, New Jersey 07054. All
correspondence received by Alteon and addressed to the Chairman is forwarded
directly to the Board of Directors.
DIRECTOR ATTENDANCE AT ANNUAL MEETING
All eight incumbent Directors attended Alteon's Annual Meeting of
Stockholders in 2003. Each Director is expected to dedicate sufficient time,
energy and attention to ensure the diligent performance of his or her duties,
including by attending meetings of the stockholders, the Board and Committees of
which he or she is a member.
EXECUTIVE OFFICERS
The following table identifies our current executive officers:
IN CURRENT
NAME AGE CAPACITIES IN WHICH SERVED POSITIONS SINCE
---- --- ------------------------------ ---------------
Kenneth I. Moch............... 49 Chairman of the Board, June 2001
President and Chief Executive December 1998
Officer
Robert C. deGroof, Ph.D.(1)... 59 Senior Vice President March 2000
Scientific Affairs
Judith S. Hedstrom(2)......... 47 Senior Vice President February 2002
Corporate Development
Elizabeth A. O'Dell(3)........ 43 Vice President, Finance, October 1993
Secretary and Treasurer
--------------------
(1) Robert C. deGroof, Ph.D., joined Alteon as Senior Vice President,
Scientific Affairs, in March 2000. From April 1990 to February 2000, he
was the President of Keystone Scientific Management. Dr. deGroof
previously served as Director of Regulatory Affairs, World Wide
Development Operations, for Bristol-Myers Squibb from July 1987 to
March 1990. From November 1979 to July 1987, he served in various
medical and regulatory positions within Johnson & Johnson. Prior to
joining the industry, Dr. deGroof was an Assistant Professor of
Pharmacology at Jefferson Medical College, Thomas Jefferson University,
was the recipient of a National Institutes of Health postdoctoral
fellowship at the University of Pennsylvania and was a Grass Fellow in
Neurophysiology at the Marine Biological Laboratory, Woods Hole. Dr.
deGroof received his B.S. at the University of Florida in 1967 and his
Ph.D. in Physiology and Pharmacology from Duke University in 1973.
5
(2) Judith S. Hedstrom was appointed Senior Vice President, Corporate
Development, in February 2002. From January 1996 to February 2002, she was
a leader of the Pharmaceuticals and Medical Products Practice at McKinsey &
Company, Inc., a global consulting firm, where she provided strategic
advice on R&D, marketing, sales and business development matters to many
biotechnology and pharmaceutical clients. Prior to that, Ms. Hedstrom was
Vice President of Business Development at APACHE Medical Systems from April
1993 to January 1996. From June 1988 to April 1993, she was a Senior
Consultant with The Wilkerson Group, formerly a leading healthcare
consulting firm. Ms. Hedstrom received her B.A. and M.B.A. degrees from the
University of Chicago.
(3) Elizabeth A. O'Dell has been Vice President, Finance, Secretary and
Treasurer since October 1993. She served as Alteon's Director of Finance
from February 1993 to September 1993 and as Controller of Alteon from
February 1992 to February 1993. Ms. O'Dell was the Controller of
Radiodetection Corporation from November 1991 to January 1992. From March
1987 to November 1991, she held various positions at Kratos Analytical,
Inc. Prior to that, she served for five years in public accounting at
PricewaterhouseCoopers LLP and Deloitte & Touche LLP. Ms. O'Dell received
her B.B.A. and M.B.A. from Pace University. She is also a CPA in New
Jersey.
6
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for the fiscal years ended December 31, 2003, 2002
and 2001, of our Chief Executive Officer and three other highly compensated
executive officers of Alteon who were serving as executive officers at December
31, 2003, or who served as executive officers during the fiscal year ended
December 31, 2003 (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION STOCK
---------------------------- OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (NUMBER OF SHARES) COMPENSATION
--------------------------- ---- -------- -------- ------------------ ------------
Kenneth I. Moch................. 2003 $353,600 $200,000(1) 100,000 $ 3,000(2)
President and 2002 340,000 -- 100,000 2,750(2)
Chief Executive Officer 2001 326,025 100,000(3) 500,000 2,625(2)
Robert C. deGroof, Ph.D......... 2003 $234,780 $ 68,333 75,000 $41,385(4)
Senior Vice President 2002 225,750 -- 175,000 43,514(5)
Scientific Affairs 2001 215,000 50,000(3) 75,000 35,253(6)
Judith S. Hedstrom(7)........... 2003 $223,600 $ 78,333(8) 150,000 $ 3,000(2)
Senior Vice President 2002 188,125 15,000(9) 275,000 2,750(2)
Corporate Development
Elizabeth A. O'Dell............. 2003 $176,800 $ 30,000(10) 150,000 $ 3,000(2)
Vice President, Finance 2002 170,000 -- 30,000 2,750(2)
Secretary and Treasurer 2001 150,800 15,000(3) 11,667 2,625(2)
---------------
(1) Includes a $100,000 deferred performance bonus relating to the year ended
December 31, 2003, paid in 2004.
(2) Represents matching 401(k) contributions we paid on behalf of the executive
officer.
(3) Represents a deferred performance bonus relating to the year ended December
31, 2001, paid in 2002.
(4) Includes a housing allowance of $30,000, medical premiums of $7,885 and
matching 401(k) contributions of $3,500.
(5) Includes a housing allowance of $30,000, medical premiums of $10,514 and
matching 401(k) contributions of $3,000.
(6) Includes a housing allowance of $30,000, medical premiums of $2,628 and
matching 401(k) contributions of $2,625.
(7) Ms. Hedstrom began serving as Senior Vice President, Corporate Development,
in February 2002.
(8) Includes a $45,000 deferred performance bonus relating to the year ended
December 31, 2003, paid in 2004.
(9) Represents a deferred performance bonus relating to the year ended December
31, 2002, paid in 2003.
(10) Includes a $20,000 deferred performance bonus relating to the year ended
December 31, 2003, paid in 2004.
7
The following tables set forth certain information concerning grants and
exercises of stock options during the fiscal year ended December 31, 2003, to
and by the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(1)
OPTIONS IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME GRANTED 2003 PER SHARE DATE 5% 10%
---- ---------- ---------- ----------- ---------- ---------- ----------
Kenneth I. Moch.............. 100,000 13.7% $1.56 12/10/13 $ 98,108 $248,624
Robert C. deGroof, Ph.D...... 75,000 10.2% 1.56 12/10/13 73,581 186,468
Judith S. Hedstrom........... 150,000 20.5% 1.56 12/10/13 147,161 372,936
Elizabeth A. O'Dell.......... 150,000 20.5% 1.56 12/10/13 147,161 372,936
---------------
(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 our stock price over the option term of 10
years.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON AT DECEMBER 31, 2003 AT DECEMBER 31, 2003(1)
EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Kenneth I. Moch............... -- $ -- 605,308 466,667 $211,568 $1,000
Robert C. deGroof, Ph.D....... -- -- 309,583 340,417 -- 750
Judith S. Hedstrom............ -- -- 70,833 354,167 -- 1,500
Elizabeth A. O'Dell........... 15,500 13,439 343,667 180,000 99,031 1,500
---------------
(1) Based on the closing price on the American Stock Exchange at December 31,
2003 ($1.57).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons who served as members of the Compensation Committee of the
Board of Directors during 2003 were Alan J. Dalby, Edwin D. Bransome, Jr., M.D.,
Marilyn G. Breslow, David K. McCurdy, Thomas A. Moore, George M. Naimark, Ph.D.,
and Mark Novitch, M.D. None of the members of the Compensation Committee was an
officer, former officer or employee of Alteon or had any relationship with
Alteon requiring disclosure under Item 404 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
COMPENSATION COMMITTEE REPORT
General Policies
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for reviewing and approving Alteon's general compensation policies
and compensation plans, as well as the specific compensation levels for officers
and highly compensated employees. The Committee also acts as
8
the Administrator under Alteon's Amended and Restated 1987 Stock Option Plan and
Amended 1995 Stock Option Plan, and, from time to time, grants options under
such Plans.
Under the supervision of the Committee, Alteon 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 Alteon to attract and retain high-caliber executive personnel, and
(2) seek to align the financial interests of Alteon's employees with those of
its stockholders by relying heavily on long-term incentive compensation that is
tied to performance.
The primary components of executive compensation include base salary and
long-term equity incentives in the form of stock options. Alteon relies on
long-term incentive compensation (i.e., stock options) to motivate the executive
officers and other employees. This allows Alteon to retain cash for research and
development projects. In determining the size of stock option grants to
individual executives, the Committee considers a number of factors, including
the following: the level of an executive's job responsibilities; the executive's
past performance; the size and frequency of grants by comparable companies; the
executive's salary level; the need to provide incentive for the purpose of
retaining qualified personnel in light of Alteon's current conditions and
prospects; the size of any prior grants; and the achievement of designated
milestones by the executive. The Committee assigns no specific weight to any of
the foregoing (other than achievement of designated milestones by the executive
in cases where the executive's employment agreement provides for a grant of a
specific size upon achievement of the milestone) when making determinations as
to the size of stock option grants.
Executive officers are also eligible to earn an annual cash incentive
award, the amount of which is based upon (1) the position level of the executive
officer, and (2) the attainment of specific individual non-financial performance
objectives. The Committee sets the performance objectives at the beginning of
the fiscal year.
The Chief Executive Officer is responsible for the development of the
annual salary plan for executive officers other than himself. The plan is based
on industry and peer group comparisons and national surveys and on performance
judgments as to the past and expected future contributions of the individuals.
To maintain a competitive level of compensation, Alteon targets base salary at
the upper percentiles of a comparative group composed of other biotechnology
companies. Base salary may exceed this level as a result of individual
performance. The Committee reviews the annual plan and makes recommendations to
the Board of Directors, with any modifications it deems appropriate. The
Committee believes it has established executive compensation levels which are
competitive with companies in the industry, taking into account individual
experience, performance of both Alteon and the individual, company size,
location and stage of development.
Compensation of the Chief Executive Officer
Mr. Moch's compensation was determined on the basis of his expertise and
experience, which include over 20 years of experience in the biotechnology and
venture capital fields. Mr. Moch received a base salary of $353,600 in 2003. In
2003, Mr. Moch received options to purchase 100,000 shares of Alteon's common
stock at an exercise price of $1.56 per share, the fair market value of the
common stock on the date of the grant. The total number of shares underlying
this option vest monthly over a three-year period, starting on January 1, 2004.
The Committee believes that Mr. Moch's compensation arrangements reflect the
compensation package necessary to retain his services for Alteon in light of
Alteon's current condition and prospects and is commensurate with his expertise
and experience as well as with compensation offered by comparable biotechnology
companies.
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 our executive officers for 2003 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
9
under our stock option plans which would not be deductible by Alteon. Alteon
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.
COMPENSATION COMMITTEE
Alan J. Dalby
Edwin D. Bransome, Jr., M.D.
Marilyn G. Breslow
David K. McCurdy
Thomas A. Moore
George M. Naimark, Ph.D.
Mark Novitch, M.D.
10
AUDIT COMMITTEE REPORT
The Audit Committee's powers and responsibilities and the qualifications
required of each of its members, are set forth in the Audit Committee Charter.
RESPONSIBILITIES
The primary function of the Audit Committee is to oversee Alteon's
accounting and financial reporting processes and the audits of its financial
statements. Management is solely responsible for the financial statements and
the financial reporting process, including the system of internal controls, and
has represented to the Audit Committee and the Board of Directors that the
financial statements discussed below were prepared in accordance with accounting
principles generally accepted in the United States of America appropriate in the
circumstances and necessarily include some amounts based on management's
estimates and judgments. Alteon's independent accountants are responsible for
auditing those financial statements and expressing an opinion on the conformity
of these financial statements, in all material respects, with accounting
principles generally accepted in the United States of America.
INDEPENDENCE
As required by Independence Standards Board Standard No. 1, as currently in
effect, Alteon's independent accountants, KPMG LLP ("KPMG") have disclosed to
the Audit Committee any relationships between it (and its related entities) and
Alteon (and its related entities), which, in its professional judgment, may
reasonably be thought to affect its ability to be independent. In addition, KPMG
has discussed its independence with the Audit Committee and confirmed in a
letter to the Audit Committee that, in its professional judgment, it is
independent of Alteon within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934.
RECOMMENDATION
Acting pursuant to its Charter, the Audit Committee has reviewed Alteon's
audited annual financial statements for the year ended December 31, 2003 and the
related report by KPMG, and has discussed the audited financial statements and
report with management and with the independent accountants. The Audit Committee
has also discussed with management and the independent accountants the matters
required to be discussed by Statement on Auditing Standards 61, as currently in
effect. These matters include significant accounting policies, management
judgments and accounting estimates, management's consultation with other
accountants, and any difficulties encountered in performing the audit,
significant audit adjustment or disagreements with management. Based on the
review and discussions described above, the Audit Committee recommended to
Alteon's Board of Directors that the audited financial statements be included in
Alteon's annual report on Form 10-K for the fiscal year ended December 31, 2003
for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Marilyn G. Breslow
Edwin D. Bransome, Jr., M.D.
Alan J. Dalby
David K. McCurdy
Thomas A. Moore
George M. Naimark, Ph.D.
Mark Novitch, M.D.
11
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following graph compares the cumulative total stockholder return on our
common stock over the five-year period ending December 31, 2003, with the
cumulative total return of the American Stock Exchange U.S. Index ("Amex US")
and the American Stock Exchange Health Products & Services Index ("Amex HP&S").
The graph assumes (i) an investment of $100 in our common stock and in each of
the indices, and (ii) reinvestment of all dividends. No cash dividends have been
declared on our common stock as of December 31, 2003. The stock performance set
forth below is not necessarily indicative of future price performance.
ALTEON INC. RELATIVE STOCK PERFORMANCE
ALTEON INC. AMEX US AMEX HP&S
----------- ------- ---------
31-Dec-98 100.00 100.00 100.00
31-Dec-99 112.04 131.94 110.18
31-Dec-00 440.14 122.38 131.61
29-Dec-01 582.59 113.91 124.24
31-Dec-02 262.48 93.10 85.87
31-Dec-03 201.02 126.03 150.43
--------------------------------------------------------------------------------------------
31-Dec-98 31-Dec-99 31-Dec-00 29-Dec-01 31-Dec-02 31-Dec-03
--------- --------- --------- --------- --------- ---------
--------------------------------------------------------------------------------------------
ALTEON 100.00 112.04 440.14 582.59 262.48 201.02
AMEX US 100.00 131.94 122.38 113.91 93.10 126.03
AMEX HP&S 100.00 110.18 131.61 124.24 85.87 150.43
The preceding performance graph, the Compensation Committee report and the
Audit Committee report contained in this Proxy Statement are not to be
incorporated by reference into filings we have made or may make under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, that incorporate other filings we have made or may make under those
statutes.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE
OFFICERS
Kenneth I. Moch entered into a three-year amended and restated employment
agreement with Alteon as of December 15, 1998. By letter agreement dated
December 3, 2001, the term of Mr. Moch's amended and restated employment
agreement was extended for an additional three years to December 15, 2004.
Pursuant to this letter agreement, Mr. Moch received stock options to purchase
an aggregate of 500,000 shares of our common stock. Under the amended and
restated employment agreement, Mr. Moch serves as our Chief Executive Officer
and is entitled to an annual salary of $300,000 (subject to annual review by the
Board of Directors) plus an annual bonus awarded at the discretion of the Board
of
12
Directors. Based on the provisions of his agreement, in December 2003, the Board
of Directors approved an increase in Mr. Moch's base salary to $367,744.
Robert C. deGroof, Ph.D., entered into a three-year employment agreement
with Alteon as of March 14, 2000. By letter agreement dated March 14, 2003, the
term of Dr. deGroof's amended and restated employment agreement was extended for
an additional three years to March 14, 2006. Pursuant to this letter agreement,
Dr. deGroof received stock options to purchase an aggregate of 100,000 shares of
our common stock and is entitled to an annual salary of $234,780 (subject to
annual review by the Board of Directors) plus an annual bonus awarded at the
discretion of the Board of Directors. Based on the provisions of his agreement,
in December 2003, the Board of Directors approved an increase in Dr. deGroof's
base salary to $250,000.
Judith S. Hedstrom entered into a three-year employment agreement with
Alteon as of February 11, 2002. Under the employment agreement, Ms. Hedstrom is
entitled to an annual salary of $215,000 (subject to annual review by the Board
of Directors) plus an annual bonus awarded at the discretion of the Board of
Directors. Ms. Hedstrom received stock options to purchase 200,000 shares of our
common stock. Pursuant to the agreement, in December 2003, the Board of
Directors approved an increase in Ms. Hedstrom's base salary to $250,000.
Elizabeth A. O'Dell, by letter agreement dated December 22, 2003, entered
into an amended and restated employment agreement for an additional three years
to December 31, 2006. Pursuant to this letter agreement, Ms. O'Dell received
stock options to purchase an aggregate of 100,000 shares of our common stock and
is entitled to an annual salary of $182,872 (subject to annual review by the
Board of Directors) plus an annual bonus awarded at the discretion of the Board
of Directors.
In addition to provisions in the above-described agreements requiring each
individual to maintain the confidentiality of our information and assign
inventions to us, such executive officers have agreed that during the terms of
their agreements and for one year thereafter, they will not compete with us by
engaging in any capacity in any business that is competitive with our business.
The employment agreements of Mr. Moch, Dr. deGroof, Ms. Hedstrom and Ms. O'Dell
provide that either party may terminate the agreement upon 30 days' prior
written notice, subject to a salary continuation obligation of Alteon if it
terminates the agreements without cause. Mr. Moch and Ms. O'Dell will receive a
12-month salary continuation and Dr. deGroof and Ms. Hedstrom will receive a
six-month salary continuation under such circumstances.
All employment agreements between Alteon 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 Alteon.
CHANGE IN CONTROL SEVERANCE BENEFITS PLAN
In February 1996, we adopted the Alteon Inc. Change in Control Severance
Benefits Plan 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 Alteon. The
Severance Plan provides for severance benefits to employees upon certain
terminations of employment after or in connection with a change in control of
Alteon as defined in the Severance Plan. Following a qualifying termination that
occurs as a result of a change in control, officers of Alteon will be entitled
to continuation of (i) their base salary for a period of 24 months, and (ii) all
benefit programs and plans providing for health and insurance benefits for a
period of up to 18 months. In addition, upon a change in control of Alteon, all
outstanding unexercisable stock options held by employees will become
exercisable.
401(K) PLAN
We have a tax-qualified employee savings and retirement plan (the "401(k)
Plan") covering all of our employees. Pursuant to the 401(k) Plan, employees may
elect to reduce their current compensation by up to the statutorily prescribed
annual limit ($13,000 in 2004) and have the amount of such reduction
13
contributed to the 401(k) Plan. The 401(k) Plan does not require that we make
additional matching contributions to the 401(k) Plan on behalf of participants
in the 401(k) Plan. However, in 1998, we began making discretionary
contributions at a rate of 25% of employee contributions up to a maximum of 5%
of their base salary. Contributions by employees to the 401(k) 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of February 23, 2004, except as otherwise set
forth below, by each (i) person who is known to Alteon to own beneficially more
than 5% of the common stock, and (ii) 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)
--------------------------- ----------------------- ----------
Charles Livingston Grimes................................... 2,500,000(3) 6.2%
P.O. Box 136
Mendenhall, PA 19357
William Harris Investors, Inc. ............................. 2,083,400(4) 5.1%
2 North LaSalle Street, Suite 400
Chicago, IL 60602
Kenneth I. Moch............................................. 649,097(5) 1.5%
Edwin D. Bransome, Jr., M.D................................. 72,500(6) *
Marilyn G. Breslow**........................................ 128,467(7) *
Alan J. Dalby**............................................. 134,998(8) *
David K. McCurdy............................................ 106,067(9) *
Thomas A. Moore**........................................... 59,000(10) *
George M. Naimark, Ph.D..................................... 82,337(11) *
Mark Novitch, M.D........................................... 394,667(12) *
Robert C. deGroof, Ph.D..................................... 330,416(13) *
Judith S. Hedstrom.......................................... 91,666(14) *
Elizabeth A. O'Dell......................................... 403,667(15) *
All current directors and officers as a group (11
persons).................................................. 2,452,882(16) 5.7%
---------------
* Less than one percent.
** Nominee for election to the Board of Directors.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to stock options and warrants currently exercisable or exercisable within
60 days are deemed outstanding for computing the percentage ownership of
the person holding such options and the percentage ownership of any group
of which the holder is a member, but are not deemed outstanding for
computing the percentage ownership of any other person. Except as indicated
by footnote, and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
(2) Applicable percentage of ownership is based on 40,472,898 shares of common
stock outstanding.
(3) As set forth in Schedule 13D/A, dated August 20, 2003, filed by Mr. Grimes
with the Securities and Exchange Commission.
(4) As set forth in Schedule 13G, dated February 17, 2004, filed by William
Harris Investors, Inc. with the Securities and Exchange Commission.
14
(5) Includes 2,023 shares of common stock and 646,974 shares of common stock
subject to options which were exercisable as of February 23, 2004, or which
will become exercisable within 60 days after February 23, 2004, and 100
shares held by Mr. Moch's sons. Does not include options to purchase
425,001 shares of common stock which will become exercisable more than 60
days after February 23, 2004, nor options to purchase 1,150,025 shares of
common stock held in trust for Mr. Moch's minor children, for which Mr.
Moch's wife is the trustee and Mr. Moch disclaims beneficial ownership.
(6) Includes 10,000 shares of common stock held directly by Dr. Bransome, 2,500
shares held by his wife and 60,000 shares of common stock subject to
options that were exercisable as of February 23, 2004, or which will become
exercisable within 60 days after February 23, 2004. Does not include an
option to purchase 20,000 shares of common stock which will become
exercisable more than 60 days after February 23, 2004.
(7) Includes 128,467 shares of common stock subject to options that were
exercisable as of February 23, 2004, or which will become exercisable
within 60 days after February 23, 2004. Does not include an option to
purchase 20,000 shares of common stock which will become exercisable more
than 60 days after February 23, 2004.
(8) Includes 12,467 shares of common stock and 122,531 shares of common stock
subject to options which were exercisable as of February 23, 2004, or which
will become exercisable within 60 days after February 23, 2004. Does not
include an option to purchase 20,000 shares of common stock which will
become exercisable more than 60 days after February 23, 2004.
(9) Includes 106,067 shares of common stock subject to options which were
exercisable as of February 23, 2004, or which will become exercisable
within 60 days after February 23, 2004. Does not include an option to
purchase 20,000 shares of common stock which will become exercisable more
than 60 days after February 23, 2004.
(10) Includes 24,000 shares of common stock held directly by Mr. Moore and
35,000 shares of common stock subject to options which were exercisable as
of February 23, 2004, or which will become exercisable within 60 days after
February 23, 2004. Does not include an option to purchase 20,000 shares of
common stock which will become exercisable more than 60 days after February
23, 2004.
(11) Includes 5,000 shares of common stock held directly by Dr. Naimark, 4,000
shares held jointly by Dr. Naimark and his wife and 73,337 shares of common
stock subject to options which were exercisable as of February 23, 2004, or
which will become exercisable within 60 days after February 23, 2004. Does
not include an option to purchase 20,000 shares of common stock which will
become exercisable more than 60 days after February 23, 2004.
(12) Includes 5,000 shares of common stock held jointly by Dr. Novitch and his
wife and 389,667 shares of common stock subject to options that were
exercisable as of February 23, 2004, or which will become exercisable
within 60 days after February 23, 2004. Does not include an option to
purchase 20,000 shares of common stock which will become exercisable more
than 60 days after February 23, 2004.
(13) Includes 330,416 shares of common stock subject to options which were
exercisable as of February 23, 2004, or which will become exercisable
within 60 days after February 23, 2004. Does not include options to
purchase 319,584 shares of common stock which will become exercisable more
than 60 days after February 23, 2004.
(14) Includes 91,666 shares of common stock subject to options that were
exercisable as of February 23, 2004, or which will become exercisable
within 60 days after February 23, 2004. Does not include options to
purchase 333,334 shares of common stock which will become exercisable more
than 60 days after February 23, 2004.
(15) Includes 35,500 shares of common stock held directly by Ms. O'Dell, 2,000
shares of common stock held by Ms. O'Dell's husband and 366,167 shares of
common stock subject to options which were exercisable as of February 23,
2004, or which will become exercisable within 60 days after
15
February 23, 2004. Does not include options to purchase 167,500 shares of common
stock which will become exercisable more than 60 days after February 23, 2004.
(16) Includes 2,350,292 shares of common stock subject to options which were
exercisable as of February 23, 2004, or which will become exercisable
within 60 days after February 23, 2004.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has appointed, subject to stockholder ratification, KPMG LLP
("KPMG") to serve as our independent accountants for the fiscal year ending
December 31, 2004.
KPMG served as our independent accountants for the fiscal year ended
December 31, 2003.
If the stockholders do not ratify the Board's decision to appoint KPMG, we
may reconsider our selection. The affirmative vote of a majority of the shares
voted at the Annual Meeting is required for ratification.
Representatives of KPMG are expected to be present at the Annual Meeting to
respond to appropriate questions from our stockholders. They will be given the
opportunity to make a statement if they wish to do so.
The following table summarizes the fees paid or payable to KPMG for
services rendered for the fiscal years ended December 31, 2003 and December 31,
2002:
FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 31, DECEMBER 31,
TYPE OF FEES 2003 2002
------------ ----------------- -----------------
Audit Fees.................................................. $82,700 $53,500
Audit-Related Fees.......................................... -- --
Tax Fees.................................................... 15,250 --
All other Fees.............................................. -- --
------- -------
Total Fees................................................ $97,950 $53,500
======= =======
The caption "audit fees" are fees we paid KPMG for professional services
for the audit of our financial statements included in our Form 10-K, review of
our financial statements included in our Form 10-Qs and for the issuance of
comfort letters and/or consents in connection with registration statements. "Tax
fees" are fees for tax compliance, tax advice and tax planning.
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES BY
INDEPENDENT ACCOUNTANTS
The Audit Committee pre-approves all audit and legally permissible
non-audit services provided by the independent accountants. The Audit Committee
pre-approved all services performed by the independent accountants during 2002
and 2003.
CHANGE IN ACCOUNTANTS
On May 30, 2002, we dismissed Arthur Andersen LLP ("Andersen") as our
principal independent accountants and engaged KPMG to serve as Alteon's
principal independent accountants for the fiscal year ended December 31, 2002.
The Board of Directors reviewed whether Alteon should continue the retention of
Andersen in light of then recent events involving Andersen, and following its
review, authorized the engagement of KPMG in lieu of Andersen. Andersen's
reports on Alteon's financial statements for the years ended December 31, 2001
and 2000, did not contain an adverse opinion or a disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principles. During the years ended December 31, 2001 and 2000, and the period
from December 31, 2001 to the date of dismissal of Andersen, (i) there were no
disagreements with Andersen on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which
disagreements, if not
16
resolved to Andersen's satisfaction, would have caused Andersen to make
reference to the subject matter of the disagreement(s) in connection with its
report, and (ii) there were no "reportable events" within the meaning of the
applicable rules of the Securities and Exchange Commission. During the years
ended December 31, 2001 and 2000, and the period from December 31, 2001 to the
date of engagement of KPMG, neither Alteon nor anyone acting on its behalf
consulted with KPMG with respect to the application of accounting principles to
a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on Alteon's financial statements or any matter
that was either the subject of disagreement or a reportable event. Andersen's
letter to the Securities and Exchange Commission stating its agreement with the
statements made herein is filed as an exhibit to our current report on Form 8-K
filed with the Securities and Exchange Commission on May 30, 2002.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT ACCOUNTANTS.
APPROVAL OF AMENDMENT
TO OUR CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK FROM 80,000,000 SHARES TO 100,000,000 SHARES
The Board of Directors has adopted a resolution recommending that the
stockholders consider and adopt at the meeting an amendment to Article FOURTH of
Alteon's certificate of incorporation. The proposed amendment would increase the
number of authorized shares of common stock, $.01 par value per share, from
80,000,000 to 100,000,000 shares.
For the reasons described below, the Board of Directors believes that the
proposed amendment is in the best interests of Alteon and its stockholders. If
the amendment is approved, it will become effective upon the filing of a
certificate of amendment to the certificate of incorporation with the Secretary
of State of Delaware. The text of the proposed amended Article FOURTH is set
forth below:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 101,993,329 shares. The
Corporation is authorized to issue two classes of stock designated
"Common Stock" and "Preferred Stock," respectively. The total number
of shares of Common Stock authorized to be issued by the Corporation
is 100,000,000, and each such share of Common Stock shall have a par
value of $.01 per share. The total number of shares of Preferred Stock
authorized to be issued by the Corporation is 1,993,329 and each such
share shall have a par value of $.01 per share."
The Board of Directors believes that it is in the best interest of Alteon
to increase our authorized common stock in order to meet possible contingencies
and opportunities for which the issuance of common stock may be deemed
advisable. From time to time we have given, and in the future are likely to
give, consideration to the feasibility of obtaining funds for appropriate
corporate objectives, such as advancement of our research and drug development
programs, through the public or private sale of equity securities. The ability
to issue additional shares of common stock in any future capital raising
endeavor or expansion transaction, without the costs and delays incident to
obtaining stockholder approval at the time of such issuance, is vital to our
success in a competitive marketplace.
We have no current plans and have not entered into any arrangements or
understandings whereby we would be required to issue any of the additional
shares of common stock for which authority is now sought. However, the number of
shares of common stock which we are required to issue upon the conversion of our
outstanding Series G Preferred Stock and Series H Preferred Stock varies with
the market price of the common stock. Therefore, depending on the market price
of our common stock, these additional shares may be issued upon the conversion
of currently outstanding convertible securities and the exercise of currently
outstanding warrants.
17
Other purposes for which the additional shares of common stock could be
issued include financing transactions, the acquisition of the shares or assets
of other corporations, stock splits or dividends, dividend reinvestment programs
and employee benefit plans.
As of March 1, 2004, there were 40,472,898 shares of common stock issued
and outstanding. We have reserved additional shares of common stock in
connection with the conversion of our outstanding preferred stock, the exercise
of outstanding warrants and the exercise of options granted under our Amended
and Restated 1987 Stock Options Plan and Amended 1995 Stock Option Plan. In the
opinion of the Board of Directors, the remaining authorized and unissued shares
of common stock are insufficient to meet our capital needs.
The newly authorized shares of common stock, which will be identical to the
shares of common stock presently authorized, may be issued for such
consideration as shall be authorized from time to time by the Board of
Directors, subject to any required regulatory approvals, but without further
action by the stockholders unless specifically required by applicable law or
rules of the American Stock Exchange or any other exchange or market system on
which the common stock is then traded. In connection with any issuance and sale
of such shares, the number of shares to be issued and sold and the terms upon
which they may be issued and sold will necessarily be determined by conditions
existing at the time of such issuance and sale.
Our stockholders do not have preemptive rights to subscribe on a pro rata
basis to any future issuance of shares. If Alteon elects to issue additional
shares of common stock, stockholders would not have any preferential right to
purchase them, and their ownership would therefore be diluted. Although the
Board is not aware of any efforts by any person to acquire control of Alteon,
the authorized but unissued shares could be used to make it more difficult to
effect a change in control, and thereby make it more difficult for stockholders
to obtain an acquisition premium for their shares or remove incumbent
management. Such shares could be used to create impediments for persons seeking
to gain control of Alteon by means of a merger, tender offer, proxy contest, or
by other means. For example, substantial dilution of a potential acquiring party
could be achieved through private placement of securities with purchasers who
might cooperate with the Board of Directors in opposing the potential acquiring
party. The amendment is not part of a plan by our Board of Directors to propose
a series of new anti-takeover measures, and the Board of Directors does not
presently intend to propose additional anti-takeover measures in future proxy
solicitations.
In accordance with the Delaware Corporation Act, the proposed amendment to
our certificate of incorporation must be approved by the affirmative vote of the
holders of at least a majority of the outstanding shares of our common stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO OUR
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 80,000,000 TO 100,000,000 SHARES.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers and directors, and persons who own more than 10% of a registered
class of our equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission.
Officers, directors and greater than 10% stockholders are required by the
Securities and Exchange Commission regulation to furnish Alteon with copies of
all Forms 3, 4 and 5 they file.
Based solely on our review of the copies of such forms we have received and
written representations from certain reporting persons that they were not
required to file Forms 5 for specified fiscal years, we
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believe that all of our officers, directors, and greater than 10% beneficial
owners complied with all filing requirements applicable to them with respect to
transactions during fiscal 2003.
STOCKHOLDERS' PROPOSALS
Stockholders deciding to submit proposals for inclusion in our proxy
statement and form of proxy relating to our 2005 annual stockholders' meeting
must advise Alteon's Secretary of such proposals in writing by December 22,
2004. In addition, the proxy solicited by the Board of Directors for the 2005
annual stockholders' meeting will confer discretionary authority to vote on any
stockholder proposal presented at that meeting of which notice was untimely. In
accordance with our bylaws, notice of a proposal will be considered untimely,
unless Alteon's Secretary receives written notice of such proposal by March 4,
2005 (but not earlier than February 2, 2005).
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 properly come before the meeting, it is intended that holders of the
proxies will vote thereon in their discretion.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Alteon, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by Alteon.
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
Alteon who will not be specially compensated for these services. Alteon has
retained the services of American Stock Transfer & Trust Company to assist in
the proxy solicitation at a fee estimated to be $15,000. We 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. We 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 Alteon 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, 2003, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS STOCKHOLDERS OF RECORD ON
APRIL 5, 2004, AND WILL FURNISH TO EACH BENEFICIAL STOCKHOLDER SUCH REPORT UPON
WRITTEN REQUEST MADE TO THE SECRETARY OF ALTEON. A REASONABLE FEE WILL BE
CHARGED FOR COPIES OF REQUESTED EXHIBITS.
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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
Parsippany, New Jersey
April 21, 2004
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APPENDIX I
ALTEON INC.
AUDIT COMMITTEE CHARTER
1. Purpose
The primary function of the Audit Committee (the "Committee") is to oversee
the accounting and financial reporting processes and the audits of the financial
statements of Alteon Inc. (the "Corporation"). The Committee will fulfill these
responsibilities and duties primarily by carrying out the activities enumerated
in this Charter.
2. Composition
The Committee shall consist of three or more members of the Board of
Directors of the Corporation as determined by the Board of Directors. All
members of the Committee shall be "independent," as determined in accordance
with the rules and regulations of the Securities and Exchange Commission (the
"SEC") and the American Stock Exchange ("Amex") or any other applicable exchange
or market, and shall be able to read and understand fundamental financial
statements. The foregoing notwithstanding, one non-independent director may
serve on the Committee pursuant to the "exceptional and limited circumstances"
exception under Amex rules, provided, however, that such director may not serve
(i) for more than two years, or (ii) as chairperson of the Committee.
At least one member of the Committee shall have past employment experience
in finance or accounting, requisite professional certification in accounting, or
any other comparable experience or background which results in such member's
financial sophistication, including but not limited to being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities. A member of the Committee who is an "audit
committee financial expert" within the meaning of rules adopted by the SEC shall
be deemed to satisfy this requirement.
The Board shall appoint a Committee member to serve as the chairperson of
the Committee.
3. Meetings
The Committee shall meet at stated times without notice, or on notice to
all by the Chairman or Vice Chairman of the Board of Directors, the Chief
Executive Officer, the President, the Chief Financial Officer, or by one of the
members of the Committee, at least once per fiscal quarter, or more frequently
as circumstances and needs of the Corporation shall dictate. As part of its
responsibilities to foster open communication, the Committee should meet at
least annually with management and the independent accountants for the
Corporation separately to discuss any matters that the Committee or each of
these groups believe should be discussed privately. The Committee may ask
members of management or others to attend its meetings and to provide pertinent
information as necessary.
4. Responsibilities, Duties and Authority
The Committee shall have the specific responsibilities and authority
necessary to comply with Rule 10A-3(b)(2) through (5) of the Securities Exchange
Act of 1934 concerning: (i) the appointment, compensation, retention and
oversight of the independent accountants, and (ii) complaints relating to
accounting, internal accounting controls or auditing matters.
To fulfill its responsibilities and duties the Committee shall:
a. Review and reassess, at least annually, the effectiveness of the
Committee and the adequacy of this Charter and make recommendations to the
Board of Directors, as conditions dictate, to update this Charter.
b. Review with management and the independent accountants the
Corporation's annual and quarterly financial statements, including, with
respect to the annual statements, a discussion with the
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independent accountants of the matters required to be discussed by
Statement on Auditing Standards No. 61, as it may be modified or
supplemented.
c. Recommend to the Board of Directors that, based on the Committee's
review and discussions with management and the independent accountants, the
annual and quarterly financial statements be included in the quarterly and
annual reports on Forms 10-Q and 10-K, respectively, filed with the
Securities and Exchange Commission.
d. Review the performance of the independent accountants, who shall
report directly and be accountable to the Committee.
e. Oversee independence of the accountants by:
1. Receiving from the independent accountants, on a periodic basis
(but not less frequently than annually), a formal written statement
delineating all relationships between the independent accountants and
the Corporation consistent with Independent Standards Board Standard No.
1.
2. Recommending, if necessary, that the Board of Directors take
appropriate action to satisfy itself of the independent accountants'
independence based on the report provided.
3. Discussing with the independent accountants any disclosed
relationships or services between the independent accountants and the
Corporation or any other disclosed relationships or services that may
impact the objectivity and independence of the accountants.
4. Monitoring partner rotation of the independent accountants and
the hiring of former employees of the independent accountants in
accordance with applicable laws and Amex and SEC rules and regulations.
5. Reviewing at least annually the independence of the independent
accountants, including a review of the services provided by the
independent accountants and related fees, consistent with applicable
laws and Amex and SEC rules and regulations.
f. Review in consultation with the independent accountants the audit
scope and plan of the independent accountants.
g. Review with the independent accountants and management the
adequacy and effectiveness of internal controls of the Corporation by
1. Reviewing with the independent accountants and management the
adequacy and effectiveness of the systems of internal controls
(including any significant deficiencies and significant changes in
internal controls reported to the Committee by the independent
accountants or management), accounting practices, and disclosure
controls and procedures (and management reports thereon) of the
Corporation.
2. Reviewing the determinations made by the Corporation's Chief
Executive Officer and Chief Financial Officer during their certification
process for the Corporation's Forms 10-K and Forms 10-Q about (i) any
significant deficiencies in the design or operation of internal controls
or material weakness therein, (ii) any fraud involving management or
other associates who have a significant role in the Corporation's
internal controls and (iii) any significant changes in internal controls
or in other factors that could significantly affect internal controls.
3. Reviewing management's annual report on internal control over
financial reporting and the attestation report of the independent
accountants thereon.
h. Report through the Committee's chairperson to the Board of
Directors following a meeting of the Committee.
i. Maintain minutes or other records of meetings and activities of
the Committee.
j. Require that the independent accountants report directly to the
Committee on critical accounting policies used in the audit, alternative
treatments of financial information discussed with
I-2
management and material written communications between the independent
accountants and management.
k. Review all related party transactions as required by applicable
laws and Amex and SEC rules and regulations.
l. Review and discuss with management the Corporation's financial
results, including a draft of the earnings press releases, prior to the
issuance of the Corporation's quarterly and year-end earnings press
release.
m. Inquire of management, the director of internal auditing, and the
independent accountants about significant risks or exposures and assess the
steps management has taken to minimize such risks to the Corporation.
n. Review and discuss with management and the independent accountants
all significant matters related to the independent accountants' review of
the unaudited quarterly financial statements, prior to the Corporation's
issuing the quarterly earnings press release.
o. Review and approve any material off-balance sheet arrangements or
other material financial arrangements of the Corporation that do not appear
on the financial statements of the Corporation.
p. Obtain from the independent accountants assurance that they have
complied with SEC rules and regulations.
q. Prepare and provide a report for inclusion in the Corporation's
annual proxy statement and any other disclosures required by SEC rules and
regulations.
r. Pre-approve all audit and audit related services and non-audit
services provided by the independent accountants, as required under
applicable law and the Amex and SEC rules and regulations.
s. Monitor the independent accountants' compliance with records
retention requirements in accordance with applicable laws and Amex and SEC
rules and regulations.
t. Be directly responsible for the appointment, compensation,
retention and oversight of the work of the independent accountants engaged
for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Corporation (including resolution
of disagreements between management and the independent accountants
regarding financial reporting).
u. Establish procedures for the receipt, retention, and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls, or auditing matters, and the confidential, anonymous
submission by employees of the Corporation of concerns regarding
questionable accounting or auditing matters.
v. Be authorized to engage independent counsel, accountants and other
advisers, as the Committee determines necessary to carry out its duties.
w. Have the appropriate funding, as determined by the Committee, for
payment of: (i) compensation to any independent accountants; (ii)
compensation to any advisers employed by the Committee; and (iii) ordinary
administrative expenses of the Committee that are necessary or appropriate
in carrying out its duties.
x. Perform any other activities consistent with this Charter and the
Corporation's By-Laws as the Committee or the Board of Directors deems
necessary or appropriate.
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ANNUAL MEETING OF STOCKHOLDERS OF
ALTEON INC.
JUNE 2, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
(arrow) (arrow)
Please detach along perforated line and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
1. ELECTION OF DIRECTORS
NOMINEES:
[ ] FOR ALL NOMINEES O Marilyn G. Breslow
O Alan J. Dalby
[ ] WITHHOLD AUTHORITY O Thomas A. Moore
FOR ALL NOMINEES
[ ] FOR ALL NOMINEES EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL NOMINEES EXCEPT" and fill in the circle next to
each nominee you wish to withhold, as shown here: -
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please [ ]
note that changes to the registered name(s) on the account may not
be submitted via this method.
FOR AGAINST ABSTAIN
2. Approval of the proposal to ratify the [ ] [ ] [ ]
appointment of KPMG LLP as Alteon's
independent public accountants for the
fiscal year ending December 31, 2004.
3. Approval of the proposal to [ ] [ ] [ ]
amend Alteon's certificate of
incorporation to increase the
number of authorized shares of
common stock from 80,000,000 to
100,000,000.
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 AND 3, AND, WITH RESPECT TO SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING, AND ANY ADJOURNMENT OR ADJOURNMENTS THEREOF,
AS THE PROXIES MAY DETERMINE.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING. [ ]
Signature of Stockholder Date:
---------------------------- ----------------------
Signature of Stockholder Date:
---------------------------- ----------------------
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
REVOCABLE PROXY
ALTEON INC.
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 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 Hilton Parsippany, One Hilton Court, Parsippany, New
Jersey at 9:00 A.M., local time, on Wednesday, June 2, 2004, 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).
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)