REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is
entered into as of April 24, 1997 between Alteon Inc., a Delaware
corporation with offices at 000 Xxxxxxxx Xxxxx, Xxxxxx, Xxx
Xxxxxx 00000 ("Alteon") and each of the entities listed under
"Investors" on the signature page hereto (each an "Investor" and
collectively the "Investors"), each with offices at the address
listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Preferred Stock
Investment Agreement by and between Alteon and the Investors (the
"Investment Agreement"), Alteon has agreed to sell and issue to the
Investors, and the Investors have agreed to purchase from Alteon,
an aggregate of 5,000 shares, par value $0.01, of Alteon's 6%
Cumulative Convertible Preferred Stock (the"Preferred Shares") on
the terms and conditions set forth therein;
WHEREAS, the Investment Agreement contemplates that the
Preferred Shares will be convertible into shares (together with
the Warrant Shares, the "Common Shares") of common stock, par value
$0.01, of Alteon ("Common Stock") pursuant to the terms and
conditions set forth in the Certificate of Designations (the
"Designation") for such Preferred Shares; and
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Investors' agreement to enter into the
Investment Agreement, Alteon has agreed to issue the Warrants and
to provide the Investors with certain registration rights with
respect to the Common Shares and Warrant Shares and certain other
rights and remedies with respect to the Preferred Shares as set
forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in
the Investment Agreement and this Agreement, Alteon and the
Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein
and not otherwise defined shall have the meaning ascribed thereto
in the Investment Agreement or the Designation. As used in this
Agreement, the following terms shall have the following respective
meanings:
"Closing" and "Closing Date" shall have the meanings
ascribed to such terms in the Investment Agreement.
"Commission" shall mean the
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
"Delisting Warrants" shall mean the
warrants in the form of Exhibit 2 to the Investment Agreement.
"Delisting Warrant Shares" shall mean shares of
Common Stock of Alteon issuable upon exercise of the Delisting
Warrants.
"Liquidation Preference" shall have the meaning
ascribed to such term in the Designation. For clarification
purposes, "Liquidation Preference" hereunder shall include any
accrued and unpaid dividends on the Preferred Shares on a per diem
basis through the date of any event for which default payments are
payable pursuant to Section 2(b) below and thereafter.
"Registrable Securities" shall mean: (i) the Common
Shares issued to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares or exercise of the
Warrants or upon any stock split, stock dividend, recapitalization
or similar event with respect to such Common Shares; (ii) any
securities issued or issuable to each Holder upon the exchange or
conversion of any Preferred Shares, Warrants or Common Shares; and
(iii) any other security issued as (A) a dividend or other
distribution with respect to, or (B) in exchange for or in
replacement of, Registrable Securities.
The terms "register", "registered" and
"registration" shall refer to a registration effected by preparing
and filing a registration statement in compliance with the
Securities Act and applicable rules and regulations thereunder, and
the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to
be incurred by Alteon in connection with each Holder's registration
rights under this Agreement, including, without limitation, all
registration and filing fees, printing expenses, fees and
disbursements of counsel for Alteon, blue sky fees and expenses,
reasonable fees and disbursements of counsel to Holders (using a
single counsel selected by a majority in interest of the Holders)
for a "due diligence" examination of Alteon and review of the
Registration Statement and related documents, and the expense of
any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of Alteon,
which shall be paid in any event by Alteon).
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and all fees and disbursements of counsel
for Holders not included within "Registration Expenses".
"Holder" and "Holders" shall include an Investor or
the Investors, respectively, and any transferee of the Preferred
Shares, Warrants or Common Shares or Registrable Securities which
have not been sold to the public to whom the registration rights
conferred by this Agreement have been transferred in compliance
with this Agreement.
"Registration Statement" shall have the meaning set
forth in Section 2(a) herein.
"Regulation D" shall mean Regulation D as
promulgated pursuant to the Securities Act, and as subsequently
amended.
"Securities Act" or "Act" shall mean the Securities
Act of 1933, as amended.
"Warrants" shall mean the warrants in form and
substance of Exhibit 1 to the Investment Agreement.
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"Warrant Shares" shall mean shares of Common Stock
of Alteon issuable upon exercise of the Warrants.
2. Registration Requirements.
Alteon shall use its best efforts to effect the
registration for resale of the Registrable Securities (including
without limitation the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale)
and in all states reasonably requested by the Holder. Such best
efforts by Alteon shall include the following:
(a) Alteon shall, as expeditiously as
reasonably possible after the Closing Date:
(i) Prepare and file a registration
statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the
event that Alteon is ineligible to use such form, such other form
as Alteon is eligible to use under the Securities Act) covering the
Registrable Securities ("Registration Statement"). Thereafter,
Alteon shall use its best efforts to cause such Registration
Statement and other filings to be declared effective prior to the
end of the period terminating 90 days following the Closing Date
(the "Registration Deadline"). Alteon shall provide Holders
reasonable opportunity to review any such Registration Statement
or amendment or supplement thereto prior to filing, and Holders
shall use their best efforts to complete such review in a timely
fashion.
(ii) Prepare and file with the SEC
such amendments and supplements to such Registration Statement and
the prospectus used in connection with such Registration Statement
as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement and notify the Holders of the filing and
effectiveness of such Registration Statement and any amendments or
supplements.
(iii) Furnish to each Holder such
numbers of copies of a current prospectus conforming with the
requirements of the Act, copies of the Registration Statement, any
amendment or supplement thereto and any documents incorporated by
reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(iv) Use its best efforts to register
and qualify the securities covered by such Registration Statement
under such other securities or "Blue Sky" laws of such
jurisdictions as shall be reasonably requested by each Holder;
provided that Alteon shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
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(v) Notify each Holder immediately
of the happening of any event as a result of which the prospectus
(including any supplements thereto or thereof) included in such
Registration Statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing,
and use its best efforts to promptly update and/or correct such
prospectus.
(vi) Notify each Holder immediately
of the issuance by the Commission or any state securities
commission or agency of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings
for that purpose. Alteon shall use its best efforts to prevent the
issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(vii) Permit a single firm of counsel,
designated as Holders' counsel by a majority of the Registrable
Securities included in the Registration Statement, to review the
Registration Statement and all amendments and supplements thereto
within a reasonable period of time prior to each filing, and shall
not file any document in a form to which such counsel reasonably
objects.
(viii) Use its best efforts to list
the Registrable Securities covered by such Registration Statement
with all securities exchange(s) and/or markets on which the Common
Stock is then listed and prepare and file any required filings with
the National Association of Securities Dealers, Inc. or any
exchange or market where the Common Shares are traded.
(ix) Take all steps necessary to
enable Holders to avail themselves of the prospectus delivery
mechanism set forth in Rule 153 (or successor thereto) under the
Act.
(b) Set forth below in this Section 2(b) are
(I) events that may arise that the Investors consider will
interfere with the full enjoyment of their rights under this
Agreement (the "Interfering Events"), and (II) the remedies
applicable in each of these events.
Paragraphs (i) through (iv) of this
Section 2(b) describe the Interfering Events, provide a remedy to
the Investors if an Interfering Event occurs and provide that the
Investors may require that Alteon redeem outstanding Preferred
Shares at a specified price if certain Interfering Events are not
timely cured.
Paragraph (v) provides, inter alia, that
if cash payments required as the remedy in the case of certain of
the Interfering Events are not paid when due, Alteon may be
required by the Investors to repurchase outstanding Preferred
Shares at a specified price.
Paragraph (vi) provides, inter alia, that
the Investors may require that Alteon redeem outstanding Preferred
Shares at a specified price if certain of the Interfering Events
are not timely cured.
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The preceding paragraphs in this Section
2(b) are meant to serve only as an introduction to this Section
2(b), are for convenience only, and are not to be considered in
applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of
Registration Statement. Alteon agrees that it shall file the
Registration Statement complying with the requirements of this
Agreement promptly following the Closing Date and shall use its
best efforts to cause such Registration Statement to become
effective not later than the Registration Deadline. In the event
that such Registration Statement has not been declared effective
by the Registration Deadline, then the Applicable Percentages
otherwise provided for in the Designation shall be increased by .5%
during and after the 30-day period ("Default Period") from and
after the Registration Deadline during any part of which such
Registration Statement is not effective, and such Applicable
Percentage shall be further increased by an additional 1.5% during
and after each Default Period thereafter. For example, if the
Registration Statement does not become effective until 70 days from
the Registration Deadline, the Applicable Percentage will be
increased by 3.5%.
No Listing. In the event that Alteon fails,
refuses or is unable to cause the Registrable Securities covered
by the Registration Statement to be listed with either the National
Association of Securities Dealers Automated Quotation system
National Market ("NASDAQ"), New York Stock Exchange or American
Stock Exchange and, in addition, such other principal securities
exchange(s) and markets on which the Common Stock is then traded
at all times during the period ("Listing Period") from the
Registration Deadline until the Forced Conversion Date (provided
that such Forced Conversion Date shall be deferred 1.5 days for
each day that there is no Effective Registration), then Alteon
shall immediately notify each Holder of such event, and:
(A) Alteon shall pay to each
Holder a default payment in an amount equal to three percent (3%)
of the Liquidation Preference for the Preferred Shares held by such
Holder for each 30-day period during the Listing Period from and
after such failure, refusal or inability to so list the Registrable
Securities until the Registrable Securities are so listed; and
(B) In the event Alteon fails,
refuses or is unable to cause the Registrable Securities covered
by the Registration Statement to be listed with NASDAQ in accord
with subparagraph (ii) above or shares of Common Stock are delisted
from NASDAQ, then the Delisting Warrant shall become exercisable
25 days following (i) the date of the notice required pursuant to
subparagraph (ii) above or (ii) the date of delisting, whichever
is earlier (the "Exercisability Date"). However, the Delisting
Warrant shall not become exercisable on the Exercisability Date,
if, prior thereto, Alteon has either (x) cured such failure to list
the applicable Common Stock, or (y) redeemed from the Holder
(pursuant to subparagraph (C) below) the Preferred Shares held by
such Holder. To the extent the Delisting Warrants are exercised,
the default payments under clause (A) of this subparagraph (ii)
shall be reduced pro rata to the percentage of Delisting Warrants
exercised; and
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(C) In the event that shares
of Common Stock are delisted from NASDAQ at any time following the
Closing Date, Alteon may redeem the Preferred Shares held by such
Holder at a redemption price per share equal to the Premium
Redemption Price (as defined below) upon 20 days' prior notice to
a Holder stating the redemption date, such notice to be binding
upon Alteon. Holder may convert any of its Preferred Shares until
such redemption date. The closing for such redemption shall take
place at the office of the Investors' counsel in New York City on
the redemption date. At such closing, Alteon shall deliver to such
Investor the redemption price for the number of Preferred Shares
redeemed by Alteon hereunder by wire transfer in immediately
available funds to an account designated in writing by such
Investor and, to the extent all of the Preferred Shares are not
redeemed, a replacement Delisting Warrant for the remainder of
shares exercisable. Such Investor shall deliver to Alteon the
unexercised Delisting Warrant and the Preferred Shares being
redeemed. Default payments shall no longer accrue on Preferred
Shares after such shares have been redeemed by Alteon pursuant to
the foregoing provision.
(iii) Blackout Periods. In the
event any Holder's ability to sell Registrable Securities under the
Registration Statement is suspended for more than (i) fifteen (15)
days in any calendar year, including without limitation by reason
of any suspension or stop order with respect to the Registration
Statement or the fact that an event has occurred as a result of
which the prospectus (including any supplements thereto) included
in such Registration Statement then in effect includes an untrue
statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing,
but other than in connection with a Permitted Public Offering (as
hereinafter defined) or (ii) 90 days in the aggregate for so long
as Preferred Shares are outstanding, in connection with one or more
Permitted Public Offerings ("Suspension Grace Period") then Alteon
shall pay to each Holder a default payment in an amount equal to
three percent (3%) of the Liquidation Preference for the Preferred
Shares held by such Holder for each 30-day period from and after
the last day of the Suspension Grace Period. For this purpose, a
Permitted Public Offering shall mean a public offering of at least
$15 million using underwriters reasonably acceptable to the Holders
of Preferred Shares, provided each Holder has received not less
than 20 days notice of the commencement of the suspension period.
(iv) Conversion Deficiency; Premium
Price Redemption for Conversion Deficiency. In the event that
Alteon does not have a sufficient number of Common Shares available
to satisfy Alteon's obligations to any Holder upon receipt of a
Conversion Notice (as defined in the Designation) or is otherwise
unable to issue such Common Shares (including without limitation
by reason of the limit described in Section 11 below) in accordance
with the terms of the Designation for any reason after receipt of
a Conversion Notice, then:
(A) Alteon shall pay to each
Holder a default payment in an amount equal to three percent (3%)
of the Liquidation Preference for the Preferred Shares held by such
Holder for each 30-day period from and after the Conversion Date
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(as defined in the Designation) that Alteon fails or refuses to
issue Common Shares in accordance with the terms thereof; and
(B) at any time after the
commencement of the running of the 30-day period described above
in clause of this paragraph (iv), at the request of any Holder
pursuant to a redemption notice, Alteon promptly shall purchase
from such Holder, at a purchase price equal to the "Premium
Redemption Price", the number of Preferred Shares equal to such
Holder's pro rata share of the "Deficiency", as such terms are
defined below; provided, however, if within three (3) business days
of such redemption notice Alteon delivers to such Holder a notice
stating that Alteon will have a sufficient number of Common Shares
available for conversion of all outstanding Preferred Shares within
ten (10) business days, then Alteon shall not be required to redeem
such Preferred Shares pursuant to this paragraph (iv) unless Alteon
shall fail to have a sufficient number of Common Shares available
for conversion of all outstanding Preferred Shares after such ten
(10) business day period. Pursuant to the foregoing, in the event
any Holder delivers a Conversion Notice and Alteon is unable to
convert any Preferred Shares under the Designation due to an
insufficient number of Common Shares available for any reason,
Alteon promptly shall purchase from such Holder, at a purchase
price equal to the Premium Redemption Price, the number of
Preferred Shares requested to be converted in such Conversion
Notice which are not so converted. The "Premium Redemption Price"
per Share is equal to 1.3 (i.e., 130%) times the Liquidation
Preference of such Share. The "Deficiency" shall be equal to the
number of Preferred Shares that would not be able to be converted
for Common Shares, due to an insufficient number of Common Shares
available, if all the outstanding Preferred Shares were submitted
for conversion at the Conversion Price set forth in the Designation
as of the date such Deficiency is determined. Default payments
shall no longer accrue on Preferred Shares after such shares have
been redeemed by Alteon pursuant to the foregoing provision.
(v) Premium Price Redemption for
Cash Payment Defaults.
(A) Alteon acknowledges that
any failure, refusal or inability by Alteon described in the
foregoing clauses (ii) through (iv) will cause the Holders to
suffer damages in an amount that will be difficult to ascertain,
including without limitation damages resulting from the loss of
liquidity in the Registrable Securities and the additional
investment risk in holding the Registrable Securities, whether or
not such Holders ultimately achieve the return on investment
contemplated in the Designation. Accordingly, the parties agree
that it is appropriate to include in this Agreement the foregoing
provisions for default payments in order to compensate the Holders
for such damages. The parties acknowledge and agree that the
default payments set forth above represent the parties' good faith
effort to quantify such damages and, as such, agree that the form
and amount of such default payments are reasonable and will not
constitute a penalty. The default payments provided for above are
in addition to and not in lieu or limitation of any other rights
the Holders may have at law, in equity or under the terms of the
Designation, the Investment Agreement, the Warrants or this
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Agreement, including without limitation the right to specific
performance.
(B) Each default payment
provided for in the foregoing clauses (ii) through (iv) shall be
in addition to each other default payment; provided, however,
that in no event shall Alteon be obligated to pay to any Holder
default payments in an aggregate amount greater than three
percent (3%) of the Liquidation Preference for the Preferred
Shares held by such Holder for any 30-day period. All default
payments required to be made in connection with the above
provisions shall be paid in cash by the tenth (10th) day of each
calendar month (which payments shall be pro rata on a per diem
basis for any period of less than 30 days). In the event that
Alteon fails or refuses to pay any default payment when due, at
any Holder's request and option Alteon shall purchase all or a
portion of the Preferred Shares held by such Holder (with default
payments accruing through the date of such purchase), within five
(5) days of such request, at a purchase price equal to the
Premium Redemption Price (as defined above), provided that such
Holder may revoke such request at any time prior to receipt of
such payment of such purchase price. Until such time as Alteon
purchases such Preferred Shares at the request of such Holder
pursuant to the preceding sentence, at any Holder's request and
option Alteon shall as to such Holder pay such amount by adding
and including the amount of such default payment to the
Conversion Amount and the Liquidation Preference instead of in
cash. Default payments shall no longer accrue on Preferred
Shares after such shares have been redeemed by Alteon pursuant to
the foregoing provision.
(vi) Premium Price Redemption for
Other Defaults. In the event of any of the circumstances
described in the foregoing clauses (i) through (iv) above, then
the Forced Conversion Date (as defined in the Designation) shall
be deferred by 1.5 days for each day that any of the
circumstances in clauses (i), (ii), (iii) (whether during the
Suspension Grace Period or otherwise), or (iv) exist. In
addition to and without in any way limiting the foregoing, Alteon
agrees that in the event that (A) any failure, refusal or
inability by Alteon described in clause (iii) (after the
expiration of the applicable Suspension Grace Period) of this
Section 2(b) is not cured within ten (10) days of such event
(whether or not Alteon is in compliance with its obligations
under clause (iii) to make the 3% default payments resulting from
such failure, refusal, inability or suspension), or (B) the
Registration Statement has not been declared effective by the
180th day following the Closing Date, then at the option of each
Holder and to the extent such Holder so elects, Alteon shall
redeem the Preferred Shares and/or Common Shares held by such
Holder, in whole or in part, as follows: (i) in the case of
Preferred Shares, such shares shall be redeemed at a redemption
price per share equal to the Premium Redemption Price (as defined
above); and (ii) in the case of Common Shares issued to such
Holder pursuant to conversion of Preferred Shares or exercise of
the Warrants, such shares shall be redeemed at a redemption price
per share equal to 1.3 times the dollar amount which is the
product of (x) the number of shares so to be redeemed pursuant to
this paragraph, and (y) the Agreed Value of the shares (as
defined in the Designation) at the time such shares were received
pursuant to conversion of Preferred Shares; provided, however,
that such Holder may revoke such request at any time prior to
receipt of such payment of such redemption price. Default
payments shall no longer accrue on Preferred Shares after such
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shares have been redeemed by Alteon pursuant to the foregoing
provision.
(c) If the Holder(s) intend to distribute
the Registrable Securities by means of an underwriting, the
Holder(s) shall so advise Alteon. Any such underwriting may only
be administered by investment bankers reasonably satisfactory to
Alteon. Alteon shall only be obligated to permit one underwritten
offering, which offering shall be determined by a seventy-five
percent (75%) majority-in-interest of the Holders. In the event
that there is a cutback in connection with such an offering, such
cutback shall be pro rata among the Investors and any shareholders
with registration rights arising prior to the date of this
Agreement.
(d) Alteon shall enter into such
customary agreements for secondary offerings (including a customary
underwriting agreement with the underwriter or underwriters, if
any) and take all such other reasonable actions reasonably
requested by the Holders in connection therewith in order to
expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the Registrable
Securities are to be sold in an underwritten offering:
(i) make such representations and
warranties to the Holders and the underwriter or underwriters, if
any, in form, substance and scope as are customarily made by
issuers to underwriters in secondary offerings;
(ii) cause to be delivered to the
sellers of Registrable Securities and the underwriter or
underwriters, if any, opinions of independent counsel to Alteon,
on and dated as of the effective day (or in the case of an
underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and within ninety (90) days following the end of each
fiscal year thereafter, which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the Holders and
the underwriter(s), if any, and their counsel and covering, without
limitation, such matters as the due authorization and issuance of
the securities being registered and compliance with securities laws
by Alteon in connection with the authorization, issuance and
registration thereof and other matters that are customarily given
to underwriters in underwritten offerings, addressed to the Holders
and each underwriter, if any; such counsel shall have undertaken
in each such opinion delivered pursuant to the preceding sentence
to update the same during each such fiscal year so that such
updates received by the Holders during such year, if any, shall
have been reasonably satisfactory to such Holders. Alteon hereby
covenants and agrees to advise such counsel of any and all factual
matters which might pertain to any such update or as to which such
an update may be so required, and such counsel may rely upon such
advice in providing any such update. In the absence of such advice
from Alteon, any such update shall be provided to and upon such
counsel's best knowledge insofar as and to the extent such update
depends upon a factual matter.
(iii) in an underwritten offering
only, and then only if required by the underwriters, cause to be
delivered, immediately prior to the effectiveness of the
Registration Statement and at the time of delivery of any
Registrable Securities sold pursuant thereto, and at the beginning
of each fiscal year following a year during which
Alteon's independent certified public accountants shall have
reviewed any of Alteon's books or records, a "comfort" letter
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from Alteon's independent certified public accountants addressed
to the Holders and each underwriter, if any, stating that such
accountants are independent public accountants within the meaning
of the Securities Act and the applicable published rules and
regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary offerings; such accountants
shall have undertaken in each such letter to update the same during
each such fiscal year in which such books or records are being
reviewed so that each such letter shall remain current, correct and
complete throughout such fiscal year; and each such letter and
update thereof, if any, shall be reasonably satisfactory to the
Holders.
(iv) if an underwriting agreement is
entered into, the same shall include customary indemnification and
contribution provisions to and from the underwriters and procedures
for secondary underwritten offerings;
(v) deliver such documents and
certificates as may be reasonably requested by the Holders of the
Registrable Securities being sold or the managing underwriter or
underwriters, if any, to evidence compliance with clause (i) above
and with any customary conditions contained in the underwriting
agreement, if any; and
(vi) deliver to the Holders on
the effective day (or in the case of an underwritten offering,
dated the date of delivery of any Registrable Securities sold
pursuant thereto) of the Registration Statement, and at the
beginning of each fiscal quarter thereafter, a certificate in
form and substance as shall be reasonably satisfactory to the
Holders, executed by an executive officer of Alteon and to the
effect that all the representations and warranties of Alteon
contained in the Investment Agreement are still true and correct
except as disclosed in such certificate; Alteon shall, as to each
such certificate delivered at the beginning of each fiscal
quarter, update or cause to be updated each such certificate
during such quarter so that it shall remain current, complete and
correct throughout such quarter; and such updates received by the
Holders during such quarter, if any, shall have been reasonably
satisfactory to the Holders.
(e) Alteon shall make available
for inspection by the Holders, representative(s) of all the
Holders together, any underwriter participating in any
disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all
financial and other records customary for purposes of the
Holders' due diligence examination of Alteon and review of any
Registration Statement, all SEC Documents (as defined in the
Investment Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of Alteon, and cause Alteon's
officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration
Statement, provided that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above,
Alteon may suspend the use of any prospectus used in connection
with the Registration Statement only (i) in the event, and for
such period of time as, such a suspension is required by the
rules and regulations of the Commission, or (ii) in the event
such a suspension is required by the underwriter in a bona fide,
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underwritten Permitted Public Offering, provided that such
suspension or suspensions under the foregoing clause (i) shall
not exceed fifteen (15) days in any calendar year, and under the
foregoing clause (ii) shall not in the aggregate exceed ninety
(90) days. Alteon will use its best efforts to cause such
suspension to terminate at the earliest possible date.
(g) Alteon shall file a Registration
Statement with respect to any newly authorized and/or reserved
shares constituting Registrable Securities within five (5)
business days of any shareholders meeting authorizing same and
shall use its best efforts to cause such Registration Statement
to become effective within sixty (60) days of such shareholders
meeting. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable
Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration
Statement, subsequent to the date such Registration Statement is
declared effective, and Alteon is unable under the securities
laws to add such securities to the then effective Registration
Statement, Alteon shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement
with respect to such newly Registrable Securities. Alteon shall
use its best efforts to (i) cause any such additional
Registration Statement, when filed, to become effective under the
Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5
below. All of the registration rights and remedies under this
Agreement shall apply to the registration of such newly reserved
shares and such new Registrable Securities, including without
limitation the provisions providing for default payments
contained herein.
2. In the event Alteon is notified by the NASD that it
intends to delist or may seek the delisting of shares of Common
Stock (such date of notification shall hereinafter be referred to
as the "Notification Date"), Alteon shall use its best efforts to,
as expeditiously as reasonably possible after such notification,
prepare and file a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3 under the
Securities Act (or, if Alteon is ineligible to use such form, such
other form as Alteon is eligible to use under the Securities Act)
covering the Delisting Warrant Shares. Thereafter, Alteon shall
use its best efforts to cause such registration statement to be
declared effective as expeditiously as reasonably possible. The
provisions of Section 2(a) shall be effective with respect thereto,
except that references to the "Closing Date" shall be deemed to
refer to the "Notification Date".
3. Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or
compliance with registration pursuant to this Agreement shall be
borne by Alteon, and all Selling Expenses of a Holder shall be
borne by such Holder.
4. Registration on Form S-3. Alteon shall use its best
efforts to qualify for registration on Form S-3 or any comparable
or successor form or forms, or in the event that Alteon is
ineligible to use such form, such form as Alteon is eligible to use
under the Securities Act.
5. Registration Period. In the case of the
registration effected by Alteon pursuant to this Agreement, Alteon
will use its best efforts to keep such registration effective until
all the Holders have completed the sales or distribution described
in the Registration Statement relating thereto or, if earlier,
until such Registrable Securities may be sold under Rule 144(k)
(provided that Alteon's transfer agent has accepted an instruction
from Alteon to such effect).
-11-
6. Indemnification.
(a) Alteon Indemnity. Alteon will
indemnify each Holder, each of its officers, directors and
partners, and each person controlling each Holder, within the
meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who
controls, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document
(including any related registration statement, notification or
the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any
violation by Alteon of the Securities Act or any state securities
law or in either case, any rule or regulation thereunder
applicable to Alteon and relating to action or inaction required
of Alteon in connection with any such registration, qualification
or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling
such Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action,
provided that Alteon will not be liable in any such case to a
Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to Alteon by
such Holder or the underwriter (if any) therefor and stated to be
specifically for use therein. The indemnity agreement contained
in this Section 6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Alteon
(which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder
will, severally and not jointly, if Registrable Securities held
by it are included in the securities as to which such
registration, qualification or compliance is being effected,
indemnify Alteon, each of its directors, officers, partners, and
each underwriter, if any, of Alteon's securities covered by such
a registration statement, each person who controls Alteon or such
underwriter within the meaning of Section 15 of the Securities
Act and the rules and regulations thereunder, each other Holder
(if any), and each of their officers, directors and partners, and
each person controlling such other Holder(s) against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to
make the statement therein not misleading, and will reimburse
Alteon and such other Holder(s) and their directors, officers and
partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information
furnished to Alteon by such Holder and stated to be specifically
for use therein, and provided that the maximum amount for which
such Holder shall be liable under this indemnity shall not exceed
the net proceeds received by such Holder from the sale of the
Registrable Securities. The indemnity agreement contained in
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this Section 6(b) shall not apply to amounts paid in settlement
of any such claims, losses, damages or liabilities if such
settlement is effected without the consent of such Holder (which
consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to
indemnification under this Article (the "Indemnified Party") shall
give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of
any such claim in any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations
under this Article except to the extent that the Indemnifying Party
is materially and adversely affected by such failure to provide
notice. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and
litigation resulting therefrom.
7. Contribution. If the indemnification provided for
in Section 6 herein is unavailable to the Indemnified Parties in
respect of any losses, claims, damages or liabilities referred to
herein (other than by reason of the exceptions provided therein),
then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims,
damages or liabilities as between Alteon on the one hand and any
Holder on the other, in such proportion as is appropriate to
reflect the relative fault of Alteon and of such Holder in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of Alteon
on the one hand and of any Holder on the other shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by Alteon
or by such Holder.
In no event shall the obligation of any Indemnifying
Party to contribute under this Section 7 exceed the amount that
such Indemnifying Party would have been obligated to pay by way of
indemnification if the indemnification provided for under Section
6(a) or 6(b) hereof had been available under the circumstances.
Alteon and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Holders or the
underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as
a result of the losses, claims, damages and liabilities referred
to in the immediately preceding paragraphs shall be deemed to
include, subject to the limitations set forth above, any legal or
-13-
other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this section, no Holder
or underwriter shall be required to contribute any amount in excess
of the amount by which (i) in the case of any Holder, the net
proceeds received by such Holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price
at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case,
the amount of any damages that such Holder or underwriter has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and
warranties of Alteon referred to in Section 2(d)(i) shall remain
operative and in full force and effect regardless of (i) any
termination of this Agreement or the Investment Agreement or
any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of Alteon, and
(iii) the consummation of the sale or successive resales of the
Registrable Securities.
9. Information by Holders. Each Holder shall furnish
to Alteon such information regarding such Holder and the
distribution and/or sale proposed by such Holder as Alteon may
reasonably request in writing and as shall be reasonably required
in connection with any registration, qualification or compliance
referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities
as so provided by such Investor shall be included without
alteration in the Registration Statement covering the Registrable
Securities and shall not be changed without written consent of
such Holder.
10. Intentionally left blank.
11. NASDAQ Limit on Stock Issuances. In the event that
Alteon is unable to issue (i) any Common Shares upon conversion of
Preferred Shares under the Designation or (ii) any Warrant Shares,
due to the rules or regulations of any market or exchange regulator
for the market or exchange on which the Common Shares or Warrant
Shares are then trading, Alteon shall, at the request of any Holder
promptly following such determination, purchase such Preferred
Shares of such Holder which cannot be converted, or Warrant Shares
which cannot be issued, at a purchase price equal to the Premium
Redemption Price.
12. Replacement Certificates. The certificate(s)
representing the Common Shares or Warrant Shares held by any
Investor (or then Holder) may be exchanged by such Investor (or
such Holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number
of Common Shares or Warrant Shares, as reasonably requested by such
Investor (or such Holder) upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
13. Transfer or Assignment. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted
assigns. The rights granted to the Investors by Alteon under this
Agreement to cause Alteon to register Registrable Securities may
-14-
be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares or Warrants, and all other rights
granted to the Investors by Alteon hereunder may be transferred or
assigned to any transferee or assignee of any Preferred Shares or
Warrants; provided in each case that Alteon must be given written
notice by the such Investor at the time of or within a reasonable
time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being
transferred or assigned; and provided further that the transferee
or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement.
14. Miscellaneous.
(a) Remedies. Alteon and the Investors
acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled
by law or equity.
(b) Jurisdiction. Alteon and each of
the Investors (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court, the New York
State courts and other courts of the United States sitting in New
York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit action
or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the
suit, action or proceeding is improper. Alteon and each of the
Investors consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other
manner permitted by law.
(c) Notices. Any notice or other
communication required or permitted to be given hereunder shall
be in writing and shall be effective upon actual receipt of such
mailing. The addresses for such communications shall be:
to Alteon: Alteon Inc.
000 Xxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Fax (000) 000-0000
Attn: Xxxxx X. Xxxxxx
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with copies to: Smith, Stratton, Wise,
Xxxxx & Xxxxxxx
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
to the Investors: To each Investor at the address
and/or fax number set forth on
Schedule I of this Agreement.
with copies to: Kleinberg, Kaplan, Xxxxx &
Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Any party hereto may from time to time change its address for
notices by giving at least 10 days' written notice of such
changed address to the other parties hereto.
(d) Indemnity. Each party shall
indemnify each other party against any loss, cost or damages
(including reasonable attorney's fees) incurred as a result of
such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
(e) Waivers. No waiver by any party of
any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter. The representations and
warranties and the agreements and covenants of Alteon and each
Investor contained herein shall survive the Closing.
Notwithstanding anything contained herein, Alteon's obligation to
pay default payments hereunder may be waived from time to time in
whole or in part by the affirmative vote of a seventy-five percent
(75%) majority-in-interest of the holders of Preferred Shares,
provided, however, that holders of Preferred Shares who are
affiliates of Alteon (and Alteon itself) shall not participate in
such vote and the Preferred Shares of such holders shall be
disregarded and deemed not to be outstanding.
(f) Execution. This Agreement may be
executed in two or more counterparts, all of which shall be
considered one and the same agreement, it being understood that
all parties need not sign the same counterpart.
(g) Publicity. Alteon agrees that it
will not disclose, and will not include in any public announcement,
the name of any Investor without its consent, unless and until such
disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. Alteon agrees that it will
deliver a copy of any public announcement regarding the matters
covered by this Agreement or any agreement and document executed
in connection herewith to each Investor and any public announcement
-16-
including the name of an Investor to such Investor, prior to
publication of such announcements.
(h) Entire Agreement. This Agreement,
together with the Investment Agreement, the Designation and the
Warrants and the agreements and documents contemplated hereby and
thereby, contains the entire understanding and agreement of the
parties, and may not be modified or terminated except by a written
agreement signed by both parties.
(i) Governing Law. This Agreement and
the validity and performance of the terms hereof shall be governed
by and construed in accordance with the laws of the State of New
York, except to the extent that the law of Delaware regulates
Alteon's issuance of securities.
(j) Severability. The parties
acknowledge and agree that the Investors are not agents, affiliates
or partners of each other, that all representations, warranties,
covenants and agreements of the Investors hereunder are several and
not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or
omissions of any other Investor, and that any rights granted to
"Investors" hereunder shall be enforceable by each Investor
hereunder.
(k) Titles. The titles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
-17-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
ALTEON:
ALTEON INC.
By: /s/Xxxxxxx X. Xxxx
_______________________
Name: Xxxxxxx X. Xxxx
Title: SVP and CEO
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.,
as attorney-in-fact
By: PALLADIN CAPITAL MANAGEMENT, L.L.C.
General Partner
By: /s/Xxxxxx X. Xxxxxxx
_________________________
Name: Xxxxxx X. Xxxxxxx
Title:Vice President
GALILEO CAPITAL, L.L.C.
By: /s/Xxxxxx X. Xxxxxxx
__________________________
Name: Xxxxxx X. Xxxxxxx
Title: Authorized Person
RGC INTERNATIONAL INVESTORS, LDC
By: XXXX XXXX CAPITAL MANAGEMENT, L.P.,
Investment Manager
By: RGC GENERAL PARTNER CORP.,
General Partner
By: /s/Xxxxx Xxxxx
________________________
Name:Xxxxx Xxxxx
Title:Managing Director
-18-
HERACLES FUND
By: PROMETHEAN INVESTMENT, GROUP, L.L.C.
Its Investment Advisor
By: /s/Xxxxx X. X'Xxxxx
____________________________
Name: Xxxxx X. X'Xxxxx
Title: President
XXXXX XXXXXX
By: PROMETHEAN INVESTMENT GROUP, L.L.C.
Its Investment Advisor
By: /s/Xxxxx X. X'Xxxxx
____________________________
Name: Xxxxx X. X'Xxxxx
Title: President
XXXXXX X. XXXXXX
By: PROMETHEAN INVESTMENT GROUP, L.L.C.
Its Investment Advisor
By: /s/Xxxxx X. X'Xxxxx
____________________________
Name: Xxxxx X. X'Xxxxx
Title: President
-19-
SCHEDULE I
Name of Purchaser
HALIFAX FUND, L.P.
c/o The Palladin Group, L.P.
Investment Manager
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Name of Purchaser
RGC INTERNATIONAL INVESTORS, LDC
c/o Xxxx Xxxx Capital Management, L.P.,
Investment Manager
000 Xxxx Xxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000
Name of Purchaser
HERACLES FUND
c/o Promethean Investment Group, L.L.C.
Investment Advisor
00 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X'Xxxxx
Tel:(000) 000-0000
Fax:(000) 000-0000
Name of Purchaser
XXXXX XXXXXX
c/o Promethean Investment Group, L.L.C.
Investment Advisor
00 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X'Xxxxx
Tel:(000) 000-0000
Fax:(000) 000-0000
Name of Purchaser
XXXXXX X. XXXXXX
c/o Promethean Investment Group, L.L.C.
Investment Advisor
00 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X'Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Name of Purchaser
GALILEO CAPITAL, L.L.C.
c/o The Palladin Group, L.P.
Investment Manager
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
