Exhibit 10.1
ALTEON
INC.
CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT
1. Purchase and Sale . On the Closing Date (as defined herein), each
of the undersigned (each a “ Lender ”
and, collectively, the “ Lenders ”),
hereby agrees to purchase from Alteon Inc., a Delaware corporation
(the “ Company ”), a Senior
Convertible Secured Promissory Note, in the form attached hereto as
Exhibit A (each, a “ Convertible Note
” and, collectively, the “ Convertible
Notes ”), in the principal amount set forth opposite
such Lender’s name on Schedule A , and a warrant in
the form attached hereto as Exhibit B (each a “
Warrant ” and collectively the “
Warrants ”, and together with the
Convertible Notes, the “ Securities
”), to purchase the number of shares of common stock, $0.01
par value per share, of the Company (“ Common
Stock ”), set forth opposite such Lender’s
name on Schedule A .
2. Closing Date and Payment . The closing (the “
Closing ”) of the purchase and sale of the
Securities shall take place at the offices of the Company at 10:00
a.m. on the date hereof (the “ Closing Date
”). At the Closing, subject to the terms and conditions
contained in this Agreement, each Lender shall deliver to the
Company by check or by wire transfer the aggregate purchase price
for its Securities in exchange for the Securities to be issued to
such Lender.
3. Representations and Warranties of each
Lender . Each Lender
hereby acknowledges, represents, warrants and/or agrees as
follows:
(a) Neither the sale of the Securities nor the
issuance of the shares of capital stock upon conversion or exercise
thereof or upon conversion, if applicable, of such capital stock
(collectively, such shares are referred to herein as the “
Conversion Securities ”) has been registered
under the Securities Act of 1933, as amended, or any successor
statute (the “ Securities Act ”), or
any state securities laws. The Lender understands that the offering
and sale of the Securities is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2)
and/or Section 4(6) of the Securities Act and the provisions of
Regulation D promulgated thereunder;
(b) The Lender is acquiring the Securities solely
for its own account for investment and not with a view to resale or
distribution and has no present intention of transferring the
Securities to any other person or entity;
(c) The Lender is an “accredited
investor” as that term is defined in Rule 501 of Regulation D
under the Securities Act;
(d) The Lender is a sophisticated investor and has
such knowledge and experience in financial, tax, and business
matters, including, without limitation, experience in investments
by actual participation, so as to enable it to utilize the
information made available to it in connection with the offering of
the Securities, to evaluate the merits and risks of an investment
in the Securities and to make an informed investment decision with
respect thereto;
(e) The Lender is either a natural person or an
entity which was not formed for the specific purpose of acquiring
the Securities. With respect to any entity-Lender, the execution,
delivery and performance of this Agreement by the Lender have been
duly authorized and the Agreement is a valid and legally binding
agreement of the Lender;
(f) The Lender has received all documents requested
by the Lender regarding the Company and has reviewed them and
believes it is well-informed about the Company;
(g) The Lender acknowledges that neither the U.S.
Securities and Exchange Commission (“ SEC
”) nor any U.S. state or foreign securities commission has
approved the Securities or any of the Conversion Securities or
passed upon or endorsed the merits of the offering;
(h) The Lender is aware that an investment in the
Securities involves a number of very significant risks;
(i) The Lender must bear the economic risk of the
investment indefinitely because none of the Securities or
Conversion Securities may be sold, hypothecated or otherwise
disposed of unless subsequently registered under the Securities Act
and applicable state securities laws or an exemption from
registration is available. Legends shall be placed on the
Securities and Conversion Securities to the effect that they have
not been registered under the Securities Act or applicable state
securities laws and of the resulting limitations on transfer and
that appropriate notations thereof will be made in the
Company’s books and stock transfer records;
(j) The aggregate purchase price of the Securities
does not exceed twenty percent (20%) of the investor’s net
worth;
(k) The Lender has taken no action which would give
rise to any claim by any person for brokerage commission,
finders’ fees or the like relating to this Agreement or the
transactions contemplated hereby; and
(l) The information contained herein is accurate
and may be relied upon by the Company in determining the
availability of an exemption from registration under Federal and
state securities laws in connection with the offering of the
Securities and Conversion Securities.
4. Representations and Warranties of the
Company . The Company
hereby acknowledges, represents, warrants and/or agrees as
follows:
(a) Organization, Standing and Qualification of the
Company . The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own and operate its
properties and to carry on its business as now being conducted and
as proposed to be conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which failure to so qualify would materially and
adversely affect the business, properties, operations or condition,
financial or otherwise, of the Company. The resolutions adopted by
the directors of the Company on January 5, 2007 authorizing the
transactions contemplated by this Agreement have not been amended
or modified in any way, have not been rescinded and are in full
force and effect on the date hereof.
(b) Corporate Authority; Enforceability
. The Company has full right, power
and authority to issue and sell the Securities as herein
contemplated and the Company has full power and authority to enter
into and perform its obligations under this Agreement, the
Securities, the Security Agreement (defined in Section 7(a)), the
Intellectual Property Security Agreement (defined in Section 7(a))
and the Registration Rights Agreement (defined in Section 7(a)).
The execution and delivery of this Agreement, the Securities, the
Security Agreement, the Intellectual Property Security Agreement
and the Registration Rights Agreement by the Company and the
consummation of the transactions contemplated herein and therein
have been duly authorized and approved by all requisite corporate
action, and each of this Agreement, the Securities, the Security
Agreement, the Intellectual Property Security Agreement and the
Registration Rights Agreement are a valid and legally binding
obligation of the Company; provided , however , that
(i) the conversion of the Convertible Notes may require approval of
the Company’s stockholders under the applicable rules of the
American Stock Exchange, which approval has not been obtained and
(ii) insofar as any foreclosure on the collateral under the
Security Agreement would constitute a sale of all or substantially
all of the Company’s assets requiring stockholder approval,
such stockholder approval has not been obtained.
(c) Conflicts . Subject to Section 4(b)(i) and (ii) above,
neither the authorization, execution and delivery of this
Agreement, the Securities, the Security Agreement, the Intellectual
Property Security Agreement and the Registration Rights Agreement
nor the consummation of the transactions herein and therein
contemplated, will (i) conflict with or result in a breach of any
of the terms of the Company’s Certificate of Incorporation or
By-Laws, (ii) violate any judgment, order, injunction, decree or
award of any court or governmental body, having jurisdiction over
the Company, against or binding on the Company or to which its
property is subject, (iii) violate any material law or regulation
of any jurisdiction which is applicable to the Company, (iv)
violate, conflict with or result in the breach or termination of,
or constitute a default under, the terms of any material agreement
to which the Company is a party, except for such violations or
defaults which do not materially and adversely affect the business,
assets, operations or financial condition of the Company, or (v)
violate or conflict with the rules and regulations of the American
Stock Exchange applicable to the Company.
(d) Capitalization . The capitalization of the Company is as set
forth on Schedule 4(d) attached hereto. The Company has not
issued any capital stock since its most recently filed periodic
report under the Securities Exchange Act of 1934, as amended (the
“ Exchange Act ”), other than pursuant
to the exercise of employee stock options under the Company’s
stock option plans and the issuance of shares of Common Stock to
employees pursuant to the Company’s employee stock purchase
plan outstanding as of the date of the most recently filed periodic
report under the Exchange Act. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and
nonassessable. No further approval or authorization of any
stockholder or the Board of Directors of the Company is required
for the issuance and sale of the Securities, the Conversion
Securities issuable upon exercise of the Warrants or, except as
described in Section 4(b)(i) above, the Conversion Securities
issuable upon conversion of the Convertible Notes. The issuance of
the Securities pursuant to the provisions of this Agreement will
not violate any preemptive rights or rights of first refusal
granted by the Company that will not be validly waived or complied
with, and will be free of any liens or encumbrances, other than any
liens or encumbrances created by or imposed upon the Lenders
through no action of the Company. There are no stockholders
agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company
is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders.
(e) Litigation . There are no actions, suits or proceedings at
law or in equity or by or before any governmental instrumentality
or other agency or regulatory authority now pending, or, to the
best knowledge of the Company, threatened against the Company
which, if adversely determined, could materially and adversely
affect the business, assets, operations or condition, financial or
otherwise, of the Company. There is no action, suit or proceeding
by the Company currently pending or that the Company currently
intends to initiate.
(f) Compliance with Laws . The Company is not in violation of any
statute, law, rule or regulation, or in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court
or governmental agency or instrumentality, except for such
violations or defaults which do not materially and adversely affect
the business, assets, operations or condition, financial or
otherwise, of the Company.
(g) Governmental Consents . Subject to the accuracy of the representations
and warranties of the Lenders set forth herein, no registration or
filing with, or consent or approval of or other action by, any
Federal, state or other government agency under laws and
regulations thereof as now in effect is or will be necessary for
the valid execution, delivery and performance by the Company of
this Agreement, the Security Agreement, the Intellectual Property
Security Agreement and the Registration Rights Agreement, and the
issuance, sale and delivery of the Securities, other than the
filing of a Form D with the SEC and the filings required by state
securities law.
(h) Title . The Company has good and marketable title in
fee simple to all real property and good and marketable title to
all personal property owned by it which is material to the business
of the Company, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect
the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company. Any real
property and facilities held under lease by the Company are held by
it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the
Company.
(i) Regulatory Matters . The clinical, pre-clinical and other trials,
studies and tests conducted by or on behalf of or sponsored by the
Company relating to its pharmaceutical product candidates were and,
if still pending, are being conducted in all material respects in
accordance with medical and scientific protocols and research
procedures that the Company reasonably believes are appropriate.
The descriptions of the results of such trials, studies and tests
as set forth in the SEC Documents (as defined in Section 4(k)),
provided to the Lenders are accurate in all material respects and
fairly present the data derived from such trials, studies and
tests. The Company has operated and currently is in compliance in
all material respects with applicable statutes and implementing
regulations administered or enforced by the United States Food and
Drug Administration (“ FDA ”). Except
as set forth in the SEC Documents, the Company has not received any
warning letters or written correspondence from the FDA and/or any
other governmental entity requiring the termination, suspension or
modification of any clinical, pre-clinical and other trials,
studies or tests that are material to the Company. The Company has
submitted to the FDA an Investigational New Drug Application or
amendment or supplement thereto for all clinical trials it has
conducted or sponsored or is conducting or sponsoring with respect
to its product candidates termed “Alagebrium” and
“ALT-2074” (the “ Specified
Candidates ”), and all such submissions were in
material compliance with applicable laws and rules and regulations
when submitted and no material deficiencies are presently being
asserted by the FDA with respect to any such submissions. None of
the clinical trials that the Company is currently conducting or
sponsoring or intends to conduct or sponsor with respect to the
Specified Candidates is subject to any temporary or permanent
clinical hold by the FDA or any other government agency, and the
Company has no reason to believe that such clinical trials will be
subject to any such action.
(j) Material License Agreements
. Each of the Material License
Agreements (as defined below) is in full force and effect, and
neither the Company nor, to its knowledge, the licensor, is in
breach of any Material License Agreement and the Company is aware
of no circumstances or grounds that would reasonably be expected to
give rise to a claim of material breach or right of rescission,
termination, revision, or amendment of any Material License
Agreement. Any consent of the licensor required pursuant to any
Material License Agreement in connection with the transactions
contemplated by this Agreement, the Security Agreement, the
Intellectual Property Security Agreement and the Registration
Rights Agreement has been obtained and is in full force and effect.
As used herein, the term “ Material License
Agreement ” shall mean: Exclusive License Agreement
dated as of September 28, 2004 by and between Oxis International, a
Delaware corporation, and HaptoGuard, as amended on March 22, 2005
and further amended on July 19, 2006; and License and Research
Agreement dated as of July 12, 2004 by and between BIO-RAP
Technologies, Ltd., an Israeli corporation, on its own behalf and
on behalf of the Rappaport Family Institute for Research in the
Medical Sciences, and HaptoGaurd.
(k) SEC Documents; Financial Statements
. During the two (2) years
prior to the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the Exchange Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the “ SEC
Documents ”). The Company has delivered to the
Lenders or their respective representatives true, correct and
complete copies of each of the SEC Documents not available on the
Electronic Data Gathering, Analysis, and Retrieval system of the
SEC (“ EDGAR ”) that have been
requested by each Lender. As of their respective dates, the SEC
Documents complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and
none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as in effect
as of the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting
principles (“ GAAP ”), consistently
applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements,
to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). The Company has no liabilities or obligations
required to be disclosed in the SEC Documents that are not so
disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company’s business. The information
contained in the Company’s interim balance sheet as of
November 30, 2006 is true and correct in all material
respects.
(l) Sarbanes-Oxley; Internal Accounting
Controls . Except as set
forth in Part I - Item 4 of the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2006 SEC Documents
(the “ Specified Weakness ”), the
Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the
Closing Date. The Company is taking all reasonable measures to
implement remedial controls to address the Specified Weakness. The
Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules
and forms. The Company’s certifying officers have evaluated
the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the
Exchange Act (such date, the “ Evaluation
Date ”). The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no
changes in the Company’s internal control over financial
reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial
reporting.
(m) Absence of Changes . Except as disclosed in
Schedule 4(m) , since September 30, 2006, and except as
otherwise disclosed in the SEC Documents, the Company has not
(i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of One Hundred Thousand
Dollars ($100,000) outside of the ordinary course of business, or
(iii) had capital expenditures, individually or in the
aggregate, in excess of One Hundred Thousand Dollars ($100,000).
During the two (2) years prior to the date hereof, except as
disclosed in the SEC Documents (i) the Common Stock has been
designated for quotation on the American Stock Exchange,
(ii) trading in the Common Stock has not been suspended by the
SEC or the American Stock Exchange and (iii) the Company has
received no communication, written or oral, from the SEC or the
American Stock Exchange regarding the suspension or delisting of
the Common Stock from the American Stock Exchange.
The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have
any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge
of any fact which would reasonably lead any creditor or creditors
having claims individually or in the aggregate in excess of One
Hundred Thousand Dollars ($100,000) to do so. Based on the
financial condition of the Company as of the Closing, after giving
effect to the receipt by the Company of the proceeds from the
transactions contemplated hereby, the Company reasonably believes
that (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities
(including, without limitation, known contingent liabilities and
the principal and interest on the Convertible Notes) as they
mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now
conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of
the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its
liabilities when such amounts are required to be paid, including,
without limitation, with respect to the principal and interest on
the Convertible Notes. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The SEC Documents set forth as of the dates
thereof all outstanding secured and unsecured Indebtedness of the
Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement,
“ Indebtedness ” shall mean (a) any
liabilities for borrowed money or amounts owed (other than trade
accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or
should be reflected in the Company’s balance sheet (or the
notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business; and (c) the present value of any
lease payments due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
(n) Patents and Trademarks . The Company has rights to use all patents,
patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses
and other intellectual property rights and similar rights necessary
or material for use in connection with its business as described in
the SEC Documents and which the failure to so have would have a
material adverse effect on the results of operations, assets,
business, or condition (financial or otherwise) of the
Company (collectively, the “ Intellectual
Property Rights ”). The Company has not received any
notice (written or otherwise) that the Intellectual Property Rights
used by the Company violate or infringe upon the rights of any
other person or entity. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no
existing infringement by another person or entity of any of the
Intellectual Property Rights. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value
of all of its Intellectual Property Rights.
(o) Labor Relations . No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to
result in a material adverse effect on the results of operations,
assets, business, prospects or condition (financial or otherwise)
of the Company. To the knowledge of the Company, no executive
officer is, or is now expected to be, in violation of any material
term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant, and
the continued employment of each such executive officer does not
subject the Company to any liability with respect to any of the
foregoing matters. The Company is in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or
otherwise) of the Company.
(p) Offering . Assuming the accuracy of the representations
and warranties of the Lenders contained in Section 3 hereof,
the offer, issue, and sale of the Securities and Conversion
Securities are exempt from the registration and prospectus delivery
requirements of the Securities Act and the registration or
qualification requirements of all applicable state securities laws.
Neither the Company nor any authorized agent acting on its behalf
will knowingly take any action hereafter that would cause the loss
of such exemptions.
(q) Acknowledgment . The Company acknowledges and agrees that each
Lender is acting solely in the capacity of an arm’s length
purchaser with respect to the Securities and the transactions
contemplated hereby and thereby and that no Lender is (i) an
officer or director of the Company, (ii) an
“affiliate” of the Company (as defined in Rule 144 of
the Securities Act) or (iii) to the knowledge of the Company,
a “beneficial owner” of more than 10% of the shares of
Common Stock (as defined for purposes of Rule 13d-3 of the Exchange
Act). The Company further acknowledges that no Lender is acting as
a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby, and any advice given by any Lender or any of
its representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to such
Lender’s purchase of the Securities. The Company further
represents to each Lender that the Company’s decision to
enter into this Agreement, the Security Agreement, the Intellectual
Property Security Agreement and the Registration Rights Agreement
and issue the Securities has been based solely on the independent
evaluation by the Company and its representatives.
(r) No General Solicitation; Placement Agent’s
Fees . Neither the
Company, nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D of the
Securities Act) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or
brokers’ commissions (other than for persons engaged by any
Lender or its investment advisor) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold
each Lender harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim.
The Company acknowledges that it has engaged Rodman & Renshaw,
LLC as placement agent (the “ Agent ”)
in connection with the sale of the Securities. Other than the
Agent, the Company has not engaged any placement agent or other
agent in connection with the sale of the Securities.
(s) No Integrated Offering . Neither the Company nor any person acting on
its behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the
Securities under the Securities Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules
and regulations of the American Stock Exchange or any
other
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