<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
September 30, 1996 0-19635
GENTA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CERTIFICATE OF INCORPORATION)
Delaware 33-0326866
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3550 General Atomics Court
San Diego, California 92121
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(619) 455-2700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at October 31, 1996
------- --------------------------------------
Common Stock, $.001 par value 34,113,727
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<PAGE>
GENTA INCORPORATED
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1996
and December 31, 1995. . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Quarters
and Nine Months Ended September 30, 1996 and 1995. . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995. . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters from September 19, 1996 Special Meeting
of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
GENTA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1996 1995
-------------- --------------
(UNAUDITED) (NOTE)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 1,726,985 $ 271,755
Receivable from sale of preferred stock . . . . . . . . . . . . - 2,785,800
Trade accounts receivable . . . . . . . . . . . . . . . . . . . 532,580 471,296
Notes receivable from officers and employees. . . . . . . . . . 62,000 362,000
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 1,051,866 702,644
Other current assets. . . . . . . . . . . . . . . . . . . . . . 161,089 151,923
-------------- --------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 3,534,520 4,745,418
-------------- --------------
Property and equipment, net. . . . . . . . . . . . . . . . . . . . 3,706,147 4,656,955
Investment in and advances to joint venture. . . . . . . . . . . . - 258,896
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . 3,858,900 3,577,654
Deposits and other assets. . . . . . . . . . . . . . . . . . . . . 2,436,228 2,392,220
-------------- --------------
$ 13,535,795 $ 15,631,143
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . $ 2,221,495 $ 2,260,495
Accrued dividends payable . . . . . . . . . . . . . . . . . . . 3,096,065 1,572,588
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . 1,515,113 2,036,498
Deficit in joint venture. . . . . . . . . . . . . . . . . . . . 1,070,540 -
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . 193,608 148,532
Short term notes payable. . . . . . . . . . . . . . . . . . . . - 760,000
Current portion of notes payable and
capital lease obligations . . . . . . . . . . . . . . . . . . 2,906,437 1,120,013
-------------- --------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . 11,003,258 7,898,126
-------------- --------------
Notes payable, less current portion. . . . . . . . . . . . . . . . 1,200,018 1,437,481
Capital lease obligations, less current portion. . . . . . . . . . 444,702 896,465
Stockholders' equity:
Preferred stock; 5,000,000 shares authorized:
Series A convertible preferred stock, $.001 par value;
528,100 and 600,000 shares issued and outstanding
at September 30, 1996 and December 31, 1995,
respectively, liquidation value is $29,112,000 at
September 30, 1996 . . . . . . . . . . . . . . . . . . . . 528 600
Series B convertible preferred stock, $.001 par value;
no shares and 3,000 shares issued and outstanding
at September 30, 1996 and December 31, 1995,
respectively . . . . . . . . . . . . . . . . . . . . . . . - 3
Series C convertible preferred stock, $.001 par value;
1,424 shares and no shares issued and outstanding
at September 30, 1996 and December 31, 1995,
respectively, liquidation value is $1,454,000 at
September 30, 1996 . . . . . . . . . . . . . . . . . . . . 1 -
Common stock, $.001 par value; 150,000,000 shares authorized;
34,113,727 and 23,963,534 shares issued and outstanding at
September 30, 1996 and December 31, 1995, respectively. . . . 34,113 23,964
Additional paid-in capital. . . . . . . . . . . . . . . . . . . 107,485,265 102,374,105
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (106,582,114) (96,949,625)
Notes receivable from stockholders. . . . . . . . . . . . . . . (49,976) (49,976)
-------------- --------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 887,817 5,399,071
-------------- --------------
$ 13,535,795 $ 15,631,143
-------------- --------------
-------------- --------------
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
3
<PAGE>
GENTA INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Product sales . . . . . . . . . . . . . . . $ 1,011,115 $ 1,070,221 $ 3,622,310 $ 2,812,104
Collaborative research and development. . . - 375,000 - 1,125,000
-------------- -------------- -------------- --------------
1,011,115 1,445,221 3,622,310 3,937,104
-------------- -------------- -------------- --------------
Cost and expenses:
Cost of products sold . . . . . . . . . . . 483,905 526,587 1,747,740 1,409,413
Research and development. . . . . . . . . . 1,657,662 2,375,431 4,687,904 9,213,070
Charge for acquired in-process research
and development . . . . . . . . . . . . . - - - 4,762,000
Selling, general and administrative . . . . 1,671,624 1,140,275 4,006,997 4,066,810
-------------- -------------- -------------- --------------
3,813,191 4,042,293 10,442,641 19,451,293
-------------- -------------- -------------- --------------
Loss from operations . . . . . . . . . . . . . (2,802,076) (2,597,072) (6,820,331) (15,514,189)
Equity in net loss ofjoint venture . . . . . . (831,689) (1,322,184) (2,981,312) (4,756,389)
Other income (expense):
Interest and other income . . . . . . . . . 179,175 89,993 353,978 305,518
Interest expense. . . . . . . . . . . . . . (42,009) (70,656) (184,824) (258,001)
-------------- -------------- -------------- --------------
137,166 19,337 169,154 47,517
-------------- -------------- -------------- --------------
Net loss . . . . . . . . . . . . . . . . . . . $ (3,496,599) $ (3,899,919) $ (9,632,489) $ (20,223,061)
Dividends on preferred stock . . . . . . . . . (595,150) (637,500) (1,949,234) (1,912,500)
-------------- -------------- -------------- --------------
Net loss applicable to common shares . . . . . $ (4,091,749) $ (4,537,419) $(11,581,723) $ (22,135,561)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net loss per common share. . . . . . . . . . . $ (.13) $ (.20) $(.42) $ (1.21)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Shares used in computing net loss
per common share. . . . . . . . . . . . . . 31,169,803 22,634,356 27,516,277 18,317,674
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See accompanying notes.
4
<PAGE>
GENTA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,632,489) $ (20,223,061)
Items reflected in net loss not requiring cash:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . 1,191,483 1,331,402
Equity in net loss of joint venture . . . . . . . . . . . . . . . . . . . . . 2,981,312 4,756,389
Charge for acquired in-process research and development . . . . . . . . . . . - 3,612,000
Changes in operating assets and liabilities . . . . . . . . . . . . . . . . . (634,978) (781,662)
-------------- --------------
Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . (6,094,672) (11,304,932)
INVESTING ACTIVITIES
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . (114,079) -
Maturities of short-term investments . . . . . . . . . . . . . . . . . . . . . . - 3,843,685
Investment in and advances to joint venture. . . . . . . . . . . . . . . . . . . (1,651,876) (7,176,387)
Deposits and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (407,849) (2,417,788)
-------------- --------------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . (2,173,804) (5,750,490)
FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,475,786 9,216,947
Proceeds from notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,240,000 4,113,104
Proceeds from notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . 2,910,722 -
Repayments of notes payable and capital lease obligations. . . . . . . . . . . . (902,802) (1,314,003)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 47,188
-------------- --------------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . 9,723,706 12,063,236
-------------- --------------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . 1,455,230 (4,992,186)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 271,755 7,259,220
-------------- --------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 1,726,985 $ 2,267,034
-------------- --------------
-------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $144,299 $235,563
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Preferred stock dividends accrued. . . . . . . . . . . . . . . . . . . . . . . . $ 1,949,234 $ 1,912,500
</TABLE>
See accompanying notes
5
<PAGE>
GENTA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required to be presented for
complete financial statements. The accompanying financial statements reflect
all adjustments (consisting only of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods presented. Certain balances in 1995 have been reclassified to
conform with the presentation in 1996.
The consolidated financial statements and related disclosures have been
prepared with the presumption that users of the interim financial information
have read or have access to the audited financial statements for the preceding
fiscal year. Accordingly, these financial statements should be read in
conjunction with the audited consolidated financial statements and the related
notes thereto included in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995.
The Company has experienced significant quarterly fluctuations in operating
results and it expects that these fluctuations in revenues, expenses and losses
will continue.
(2) INVENTORIES
Inventories are comprised of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ -----------
(UNAUDITED)
Raw materials and supplies. . . . . . . . . . $ 328,357 $ 280,621
Work-in-process . . . . . . . . . . . . . . . 273,258 162,097
Finished goods. . . . . . . . . . . . . . . . 450,251 259,926
----------- -----------
$ 1,051,866 $ 702,644
----------- -----------
----------- -----------
(3) NET LOSS PER COMMON SHARE
Net loss per common share is computed using the weighted average number of
common shares outstanding during each of the interim periods. Shares issuable
upon the exercise of outstanding stock options and warrants and upon the
conversion of convertible preferred stock are not reflected as their effect is
anti-dilutive.
(4) INTANGIBLE ASSETS
Intangible assets, consisting primarily of capitalized patent costs and
purchased proprietary technology, are amortized using the straight line basis
over a term of 5-17 years for issued patents, 14 years for purchased proprietary
technology and 5-7 years for organizational and other amortizable costs.
The carrying value of the Company's intangible assets is reviewed
periodically based upon the projected cash flows to be received from the related
product revenues, collaborative revenues, license fees, royalties and other
revenues. If such projected cash flows are less than the carrying amount of the
associated intangible asset, the asset will be written down to the present value
of the estimated future cash flows.
6
<PAGE>
(5) STOCKHOLDERS' EQUITY
During the third quarter of 1996, holders of 55,900 shares of Series A
Convertible preferred stock (the "Series A preferred stock") and 4,120 shares of
Series C Convertible preferred stock (the "Series C preferred stock") converted
such shares and related accrued dividends into approximately 2,423,000 and
4,164,000 shares, respectively, of the Company's common stock pursuant to terms
of the Company's Restated Certificate of Incorporation, as amended.
(6) GENTA JAGO JOINT VENTURE
An analysis of the carrying value of the investment in and advances to
joint venture as of September 30, 1996 is set forth below:
Initial capital contribution. . . . . . . . . . . . $ 4,000,000
Working capital loans to Genta Jago,
net of principal repayments and credits . . . . . 15,287,099
Adjustment of working capital loans to Genta Jago
associated with the return of product rights
to Genta . . . . . . . . . . . . . . . . . . . . 4,437,945
Equity in net loss of joint venture for period
from inception (December 15, 1992) through
September 30, 1996 . . . . . . . . . . . . . . . (23,161,485)
Other, net. . . . . . . . . . . . . . . . . . . . . (1,634,099)
------------
$ (1,070,540)
------------
------------
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since its inception in February 1988, Genta has devoted its principal
efforts toward drug discovery, research and development. Genta has been
unprofitable to date and, if it obtains financing to continue its operations,
expects to incur substantial operating losses for the next several years due to
continued requirements for ongoing research and development activities,
preclinical testing and clinical trials, manufacturing activities, regulatory
activities, establishment of a sales and marketing organization, and development
activities undertaken by Genta Jago Technologies B.V. ("Genta Jago"), the
Company's joint venture with Jagotec AG. From the period since its inception to
September 30, 1996, the Company has incurred a cumulative net loss of $106.6
million. The Company has experienced significant quarterly fluctuations in
operating results and, if it obtains financing to continue its operations, the
Company expects that these fluctuations in revenues, expenses and losses will
continue. See "Risk Factors".
In October 1996, the Company announced that it intends to divide itself into
two entities. The Company hopes to evolve into a focused drug delivery company
while a new, separately funded antisense cancer company, based on the company's
proprietary ANTICODE-TM- technology, would be created. The Company intends to
have significant ownership interest in the new company if it is formed. As
part of the restructuring process, nine current Genta employees assigned to
antisense projects were terminated from their employment effective October
16, 1996. The Company's European operation has been down-sized and its
dermatology business offered for sale. In addition, the Company intends to
sell its JBL subsidiary, a producer of diagnostic and pharmaceutical
intermediates. The Company is in contract negotiations with a potential buyer
at this time. If a sale of JBL is consummated, the Company intends to use
the funds received from such a sale to help implement its restructuring plan.
The restructuring has also included a reduction in the general and
administrative functions. In addition, in October 1996, the Company
announced that two members of its Board of Directors, its Chief Financial
Officer and its Vice President of Corporate Development resigned. In October
1996, Genta Jago entered into a collaborative licensing and development
agreement with Krypton Ltd. ("Krypton"), a subsidiary of London-based
SkyePharma PLC, whereby Genta Jago would sublicense to Krypton, rights to
develop and commercialize bioequivalent GEOMATRIX-Registered Trademark-
versions of five currently marketed products and a second agreement granting
Krypton an option to sublicense rights to develop and commercialize an
improved version of a sixth product, and is currently negotiating with other
pharmaceutical companies regarding additional collaborative agreements. The
Company is also actively seeking additional equity financing and other
funding arrangements. However, there can be no assurance that any such
collaborative agreements or other sources of funding will be available on
favorable terms, if at all. If such funding is not available, the Company
will run out of funding in December of 1996, and will be required to consider
restructuring alternatives such as liquidation or seeking protection under
the federal bankruptcy laws. See "Risk Factors".
Except for the historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-Q are forward-looking
statements that involve risks and uncertainties, including obtaining
sufficient financing to maintain the Company's planned operations, obtaining
the necessary approvals of its equity holders and others to implement the
sale of its JBL subsidiary and other aspects of its proposed restructuring
plan or delisting of the Company's common stock from the Nasdaq National
Market, the timely development, receipt of necessary regulatory approvals and
acceptance of new products, the successful application of the Company's
technology and products, the impact of competitive products and pricing and
reimbursement policies, changing market conditions and other risks detailed
throughout this Form 10-Q. Actual results may differ materially from those
projected. These forward-looking statements represent the Company's judgment
as of the date of the filing of this Form 10-Q. The Company disclaims,
however, any intent or obligation to update these forward-looking statements.
See "Risk Factors".
RESULTS OF OPERATIONS
Operating revenues totaled $1.0 million in the third quarter of 1996 compared
to $1.4 million in the third quarter of 1995, and $3.6 million for the nine
months ended September 30, 1996 compared to $3.9 million in the comparable
period of 1995. During the third quarter and nine months ended September 30,
1996, sales of specialty chemical and pharmaceutical intermediate products have
increased. However, the loss of collaborative research and development revenues
during the third quarter and nine months ending September 30, 1996, relative to
the comparable
8
<PAGE>
periods of 1995, has decreased revenues. Increased sales of products were
primarily attributable to increased market penetration of existing products
and, to a lesser degree, the introduction of new products. The Company has
historically experienced significant quarterly fluctuations in its level of
product sales, generally reflecting the timing of customer demand for certain
products, and the Company anticipates that these sales fluctuations may
continue in future periods. Collaborative research and development revenues
recorded during the third quarter and nine months ended September 30, 1995
represented revenues earned pursuant to the Company's collaboration with The
Procter & Gamble Company which ended in late 1995. The Company is actively
seeking to establish new collaborative agreements with potential corporate
partners. However, there can be no assurance that any such collaborative
agreements will be successfully secured.
Costs and expenses decreased to $3.8 million in the third quarter of 1996
from $4.0 million in the third quarter of 1995, and to $10.4 million for the
nine months ended September 30, 1996 compared to $19.5 million in the comparable
period of 1995. Costs and expenses during the nine months ended September 30,
1995 included charges of $4.8 million for acquired in-process research and
development associated with the expansion of Genta Jago to obtain the rights to
develop additional GEOMATRIX-based products. Exclusive of these charges, the
decrease in costs and expenses was primarily attributable to the Company's
restructuring, related workforce reductions and other cost saving measures
implemented during 1995 and 1996. In addition to the Company's restructuring
and cost saving measures implemented thus far, the Company is seeking to realize
additional reductions in operating expenses. However, the Company anticipates
that, if sufficient collaborative revenues and other funding is available,
research and development and other operating expenses may increase in future
periods due to requirements for clinical trials and increased regulatory costs.
The Company's equity in net loss of joint venture (Genta Jago) decreased to
$832,000 in the third quarter of 1996 from $1.3 million in the third quarter of
1995, and to $3.0 million for the nine months ended September 30, 1996 compared
to $4.8 million in the comparable period of 1995. Such decrease is largely
attributable to the fact that a greater portion of development activities were
funded pursuant to Genta Jago's collaborative agreements, spending decreased
overall in other projects not funded by collaborative agreements, and that the
joint venture's development efforts are now focused exclusively on GEOMATRIX-
based drug delivery products.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily from
private and public offerings of its equity securities. Cash provided from
these offerings totaled $97.9 million through September 30, 1996, including
net proceeds of $7.4 million raised during the nine months ended September
30, 1996. At September 30, 1996, the Company had cash, cash equivalents and
short-term investments totaling $1.7 million compared to $272,000 at December
31, 1995. The increase in cash and cash equivalents during the nine months
ended September 30, 1996 is largely attributable to proceeds from the
Company's private placements of preferred stock and the overseas placement of
4% convertible debentures due August 1, 1997 (the "convertible debentures"),
including the receipt of $2.8 million in net proceeds from the Company's sale
of Series B preferred stock completed in December 1995 and reflected as a
receivable at December 31, 1995, less cash used in the Company's operations.
In connection with the Genta Jago joint venture, the Company entered into a
working capital agreement with Genta Jago which expires in October 1998.
Pursuant to this agreement, the Company is required to make loans to Genta Jago
up to a mutually agreed upon maximum commitment amount, which amount is
established by the parties on a periodic basis. As of September 30, 1996, the
Company had advanced working capital loans of approximately $15.3 million to
Genta Jago, net of principal repayments, which amount fully satisfied the loan
commitment established by the parties through September 30, 1996. Such loans
bear interest and are payable in full in October 1998, or earlier in the event
certain revenues are received by Genta Jago from third parties. There can be no
assurance, however, that Genta Jago will obtain sufficient financial resources
to repay such loans to Genta. The amount of future loans by Genta to Genta Jago
will depend upon several factors including the amount of funding obtained by
Genta Jago through collaborative arrangements, Genta's
9
<PAGE>
ability to provide loans, and the timing and cost of Genta Jago's preclinical
studies, clinical trials and regulatory activities. Genta Jago entered into
collaborative development agreements with Gensia, Inc., Apothecon, Inc., and
Krypton during January 1993, March 1996, and October 1996, respectively.
Such agreements provide funding to Genta Jago for the development and
clinical testing of selected controlled-release pharmaceuticals in addition
to potential milestone payments and royalties on future product sales. In
October 1996, in accordance with the terms of the agreements, Krypton has
paid $1 million in aggregate up front fees to Genta Jago. The joint venture
offset the payment against advances to the joint venture allowing the Company
to receive the $1 million payment. This infusion of cash will sustain the
Company's operations into December 1996.
Terms of the Company's Series A and Series C preferred stock require the
payment of dividends. Dividends may be paid in cash or common stock or a
combination thereof, at the Company's option if permitted by Delaware law. The
Company may redeem the Series A preferred stock under certain circumstances and
was required to redeem the Series A preferred stock, subject to certain
conditions, in September 1996 at a redemption price of $50 per share, plus
accrued and unpaid dividends (the "Redemption Price"). The Company elected
to pay the Redemption Price in common stock. In September 1996, holders of
55,900 shares of Series A Preferred Stock converted such shares and related
accrued dividends into 2,423,500 shares of the Company's common stock. The
Company is obligated to use its reasonable efforts to arrange for a firm
commitment underwriting in order to redeem the Series A preferred stock. The
Company is currently in discussions to renegotiate certain terms of its
agreement with the holders of Series A preferred stock. However, there can
be no assurance that the holders of Series A preferred stock will agree to
any such proposed changes. The Company is restricted from paying cash
dividends on common stock until such time as all cumulative dividends on
outstanding shares of Series A and Series C preferred stock have been paid.
In addition, the consent of the holders of Series A preferred stock is
required to approve a sale of JBL and will be required concerning certain
aspects of the Company's proposed restructuring plan. The Company also has
commitments associated with its notes payable, capital leases and operating
leases.
The Company will run out of its existing cash resources in December of 1996.
Substantial additional sources of financing will be required in order for the
Company to continue its planned operations thereafter. The Company is in
discussions with potential corporate partners and other sources regarding
collaborative agreements, restructurings and other financing arrangements and is
actively seeking additional equity financing. However, there can be no
assurance that any such collaborative agreements, restructurings, financing
arrangements or other sources of funding will be available on favorable terms,
if at all. If such funding is unavailable, the Company will be required to
consider the license or sale of certain of its assets and technology, delay or
curtailment of certain of its development programs, further reductions in
workforce and spending, other restructuring alternatives including,
discontinuing its operations, liquidation or seeking protection under the
federal bankruptcy laws.
If the Company successfully secures sufficient levels of collaborative
revenues and other sources of financing, it expects to incur substantial
additional costs, including costs related to ongoing research and development
activities, preclinical testing and clinical trials, manufacturing activities,
costs associated with the market introduction of potential products, expansion
of its administrative activities, and development activities undertaken by Genta
Jago. The Company will need substantial additional funds before it can expect
to realize significant product revenue. The Company anticipates that
significant additional sources of financing, including equity financings, will
be required in order for the Company to continue its planned principal
operations. The Company's working capital and additional funding requirements
will depend upon numerous factors, including: (i) the availability of funding;
(ii) the progress of the Company's research and development programs; (iii) the
timing and results of preclinical testing and clinical trials; (iv) the timing
and costs of obtaining regulatory approvals; (v) the level of resources devoted
to Genta Jago; (vi) the level of resources that the Company devotes to sales and
marketing capabilities; (vii) technological advances; (viii) the activities of
competitors; and (ix) the ability of the Company to establish and maintain
collaborative arrangements with others to fund certain research and development,
to conduct clinical trials, to obtain regulatory approvals and, if such
approvals are obtained, to manufacture and market products.
10
<PAGE>
RISK FACTORS
NEEDS FOR ADDITIONAL FUNDS: RISK OF INSOLVENCY. Genta's operations to
date have consumed substantial amounts of cash. The Company will run out of its
existing cash resources in December of 1996. Substantial additional sources of
financing will be required in order for the Company to continue its planned
operations thereafter. The Company's independent auditors have included an
emphasis paragraph in their opinion concerning the Company's financial
statements for the year ended December 31, 1995 with respect to the Company's
ability to continue as a going concern. The Company is in discussions with
potential corporate partners and other sources regarding collaborative
agreements, restructurings and other financing arrangements and is actively
seeking additional equity financing. However, there can be no assurance that
any such collaborative agreements, restructurings, financing arrangements or
other sources of funding will be available on favorable terms, if at all. If
such funding is unavailable, the Company will be required to consider the
license or sale of certain of its assets and technology, delay or curtailment
of certain of its development programs, further reductions in workforce and
spending, other restructuring alternatives including, discontinuing its
operations, liquidation or seeking protection under the federal bankruptcy
laws.
SUBORDINATION OF COMMON STOCK TO AND REDEMPTION OF SERIES A PREFERRED
STOCK: POTENTIAL DEFAULT UNDER CERTIFICATE OF INCORPORATION. The common stock
is expressly subordinate to the approximately $29.1 million preference of the
528,100 outstanding shares of Series A preferred stock in the event of the
liquidation, dissolution or winding up of the Company. Further, no dividends
may be paid on the common stock unless full cumulative dividends on the Series A
preferred stock have been paid or funds set aside for such preferred dividends
by the Company. In addition, the conversion ratio of the Series A preferred
stock and the exercise price of warrants issued in connection with the Series A
preferred stock (the "Series A Warrants") is subject to adjustment, among other
things, upon certain issuances of common stock or securities convertible into
common stock at $6.75 per share or less. Each share of Series A preferred stock
is presently convertible into 8.65 shares of common stock and the exercise price
of the Series A Warrants is $6.32 per share. The Series A preferred stock was
also subject to a mandatory redemption (the "Mandatory Redemption") by the
Company on September 23, 1996 (the "Redemption Date"). Under the terms of the
Mandatory Redemption, as set forth in the Company's Certificate of
Incorporation, the redemption price of $50 per share plus accrued dividends
was to be paid, subject to certain conditions, in common stock valued at an
average trading price for 10 trading days before August 20, 1996. The
Company elected to effect the Mandatory Redemption through the use of common
stock, and then was required to use its best efforts to arrange with an
investment bank acceptable to the holders of Series A preferred stock for a
firm commitment underwriting relating to such shares. The Company was unable
to arrange for such a firm commitment offering and is now required to use its
reasonable efforts to arrange for a firm commitment underwriting as promptly
as practicable and to redeem any remaining outstanding shares of Series A
preferred stock upon arranging for such firm commitment underwriting. Even
if the Company is successful in satisfying its Mandatory Redemption
obligations with its shares of common stock, holders of common stock will
experience substantial dilution at the time of such redemption. Terms of the
Company's Series A preferred stock provide for the payment of dividends
annually of $5 per share per annum. Dividends may be paid in cash or common
stock or a combination thereof, at the Company's option, if permitted under
Delaware law. Dividends on the preferred stock accrue on a daily basis
(whether or not declared) and all accumulate to the extent not paid on the
annual dividend payment date following the dividend period for which they
accrue. The Company has previously paid dividends in shares of the Company's
common stock, however, the Company may not be able to do so in the future
because of Delaware law constraints. The Company has not declared the
dividend accrued on the Series A preferred stock. The Company has been in
discussions to renegotiate certain terms of its agreement with the holders of
Series A preferred stock for a number of months and has been unable to reach
any agreement with them. There can be no assurance that the holders of
Series A preferred stock will agree to any such proposed changes.
POTENTIAL DELISTING FROM THE NASDAQ NATIONAL MARKET AND CONSEQUENT
REQUIREMENT TO REPURCHASE SERIES A PREFERRED STOCK FOR CASH. As of September
30, 1996, the Company did not meet certain criteria required for continued
listing on the Nasdaq National Market, therefore, the Nasdaq National Market may
delist the Company's common stock. Such a delisting of the common stock may
constitute a "Fundamental Change" under the Company's Certificate of
Incorporation. The Certificate of Incorporation currently provides that upon
the occurrence of a "Fundamental Change" the holders of Series A preferred stock
have the option of requiring the Company to repurchase all of each such holder's
shares of Series
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<PAGE>
A preferred stock at the Redemption Price, an event that would result in the
Company being required to pay to the holders of Series A preferred stock cash
in the aggregate amount of approximately $29.1 million. The Certificate of
Incorporation allows the Company to satisfy its redemption obligations
arising as a result of a Fundamental Change through the issuance of shares of
common stock, but only if the common stock is listed on a United States
national securities exchange or quoted on the Nasdaq National Market at the
time of payment. Upon the occurrence of a Fundamental Change, the holders of
Series A preferred stock may in effect become unsecured creditors of the
Company, which would materially and adversely affect the Company. Given the
Company's current financial condition and market conditions, it is unlikely
that the Company would be able to make such payment to the holders of the
Series A preferred stock and it is therefore likely that the Company would be
forced to discontinue operations or liquidate part or all of its assets and
may seek protection from creditors under the federal bankruptcy laws.
Further, a delisting could adversely affect the liquidity of the common
stock. The Company is currently in discussions to renegotiate certain terms
of its agreement with the holders of Series A preferred stock. However, there
can be no assurance that the holders of Series A preferred stock will
agree to any such proposed changes.
OBLIGATIONS UNDER EQUIPMENT FINANCING AGREEMENTS. The Company's equipment
financing agreements contain certain financial covenants, the most significant
of which require the Company to provide certain deposits in the event that the
Company's cash and investment balances fell below specified levels. During
1995, the Company was required to deposit $1.2 million in additional security
pursuant to terms of certain of these agreements. The Company also issued
warrants during 1995, exercisable for 247,312 shares of the Company's common
stock, to two equipment financing companies in lieu of posting certain
additional security deposits to one company and in connection with another
company waiving a default under the terms of its equipment financing agreement.
In the event the Company does not comply with the financial covenants contained
in its equipment financing agreements, it will be in default under the terms of
such agreements. Such a default would have a material and adverse affect on the
Company.
SUBORDINATION OF COMMON STOCK TO SERIES C PREFERRED STOCK. The common
stock is also expressly subordinate to the approximately $1.5 million preference
of the 1,424 outstanding shares of Series C preferred stock in the event of a
liquidation, dissolution or winding up of the Company. Further, no dividends
may be paid on the common stock unless full cumulative dividends on the Series C
preferred stock have been paid or declared and set aside for payment. Each
share of Series C preferred stock is subject to certain conditions, at the
option of the holder, into that number of shares of common stock determined by
dividing the sum of $1,000, plus all accrued dividends on each share of Series C
preferred stock, by the conversion price of the Series C preferred stock. The
Conversion Price of the Series C preferred stock is equal to 75% of the average
of the closing bid prices of the Company's common stock on the Nasdaq National
Market for a specified period.
SUBORDINATION OF COMMON STOCK TO THE CONVERTIBLE DEBENTURES AND RISK OF
DILUTION. The common stock is also expressly subordinate to the
approximately $2.0 million preference of the convertible debentures in the
event of a liquidation, dissolution or winding up of the Company. Further,
no dividends may be paid or set aside for payment. Each convertible
debenture is subject to certain conditions, at the option of the holder, into
that number of shares of common stock determined by dividing the face value
of the convertible debenture plus all accrued interest on each convertible
debenture by the conversion price of the convertible debentures. The
Conversion Price of the convertible debentures is equal to 75% of the average
of the closing bid prices of the Company's common stock on the Nasdaq
National Market for a specified period.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 19, 1996, the Company held a Special Meeting of
Stockholders. The following action was taken at the Special Meeting.
(1.) The amendment of the Company's Certificate of Incorporation
to increase the Company's authorized shares of common stock
by 105,000,000 shares was approved. 25,663,867 shares voted
in favor of the amendment, 390,546 shares were voted against
the amendment, 115,674 shares abstained, and 4,788,048 shares
were not voted or were broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description of Document
- ------- -----------------------
4.1 Warrant for the purchase of 213,415 shares of common stock issued
to Lyon & Lyon.
4.2 Warrant for the purchase of 100,000 shares of common stock issued to
Michael Arnouse.
10.1* Form of Regulation S Securities Subscription Agreement entered into
between the Company and certain purchasers of the 4% Convertible
Debentures, due August 1, 1997.
10.2* Form of 4% Convertible Debentures due August 1, 1997.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K dated September 17, 1996
reporting under Item 5 that it had raised gross proceeds of
$2.0 million by issuing 4% Convertible Debentures in a private
placement outside the U.S.
* Incorporated by reference to the Exhibits of the same number to the
Company's Form 8-K dated September 17, 1996 (File No. 0-19635).
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENTA INCORPORATED
(Registrant)
Date: November 14, 1996 THOMAS H. ADAMS
-----------------------------------------
Thomas H. Adams, Ph.D.
Chairman, Chief Executive Officer and
Acting Chief Financial Officer
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<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT.
*****************************************
Genta Incorporated
COMMON STOCK PURCHASE WARRANT
*****************************************
This certifies that, for good and valuable consideration, Genta
Incorporated, a Delaware corporation ("Genta" or the "Company"), grants to
Lyon & Lyon, or registered assigns (the "Warrantholder"), the right to
subscribe for and purchase from the Company 375,123 validly issued, fully
paid and nonassessable shares (the "Warrant Shares") of the Company's Common
Stock, par value $.001 (the "Common Stock"), at the purchase price per share
of $1.32 (the "Exercise Price"), exercisable at any time and from time to
time during the period (the "Exercise Period") commencing on the Closing Date
and ending at 5:00 P.M. California time on the fifth anniversary of the
Closing Date, all subject to the terms, conditions and adjustments herein set
forth.
- --------------------------------------------------------------------------------
<PAGE>
1. DURATION AND EXERCISE OF WARRANT; LIMITATION ON EXERCISE; PAYMENT
OF TAXES.
1.1 DURATION AND EXERCISE OF WARRANT.
(a) CASH EXERCISE. This Warrant may be exercised by the Warrantholder by
(i) the surrender of this Warrant to the Company, with a duly executed Exercise
Form specifying the number of Warrant Shares to be purchased, during normal
business hours on any Business Day during the Exercise Period and (ii) the
delivery of payment to the Company, for the account of the Company, by cash or
by certified or bank cashier's check, of the Exercise Price for the number of
Warrant Shares specified in the Exercise Form in lawful money of the United
States of America. The Company agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as the record holder of such Warrant Shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Warrant Shares as aforesaid. A stock
certificate or certificates for the Warrant Shares specified in the Exercise
Form shall be delivered to the Warrantholder as promptly as practicable, and in
any event within 10 days, thereafter. The stock certificate or certificates so
delivered shall be in denominations of 100 shares each or such lesser or greater
denominations as may be reasonably specified by the Warrantholder in the
Exercise Form. If this Warrant shall have been exercised only in part, the
Company shall, at the time of delivery of the stock certificate or certificates,
deliver to the Warrantholder a new Warrant evidencing the rights to purchase the
remaining Warrant Shares, which new Warrant shall in all other respects be
identical with this Warrant. No adjustments shall be made on Warrant Shares
issuable on the exercise of this Warrant for any cash dividends paid or payable
to holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
(b) NET ISSUE EXERCISE. In lieu of exercising this Warrant pursuant to
Section 1.1(a), this Warrant may be exercised by the Warrantholder by the
surrender of this Warrant to the Company, with a duly executed Exercise Form
marked to reflect Net Issue Exercise and specifying the number of Warrant
Shares to be purchased, during normal business hours on any Business Day
during the Exercise Period. The Company agrees that such Warrant Shares
shall be deemed to be issued to the Warrantholder as the record holder of
such Warrant Shares as of the close of business on the date on which this
Warrant shall have been surrendered as aforesaid. Upon such exercise, the
Warrantholder shall be entitled to receive shares equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant
to the Company together with notice of such election in which event the
Company shall issue to Warrant-
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<PAGE>
holder a number of shares of the Company's Common Stock computed as of
the date of surrender of this Warrant to the Company using the following
formula:
Y x (A-B)
X = ---------
A
Where X = the number of shares of Common Stock to be issued to
Warrantholder under this Section 1.1(b);
Y = the number of shares of Common Stock otherwise purchasable under this
Warrant (at the date of such calculation);
A = the fair market value of one share of the Company's Common Stock (at
the date of such calculation);
B = the Exercise Price (as adjusted to the date of such calculation).
(c) FAIR MARKET VALUE. For purposes of Section 1.1(b) fair market value
of one share of the Company's Common Stock shall mean:
(i) the closing price per share of the Company's Common Stock on
the principal national securities exchange on which the Common Stock
is listed or admitted to trading or,
(ii) if not listed or traded on any such exchange, the last
reported sales price per share on the Nasdaq National Market or the
Nasdaq Small-Cap Market (collectively, "Nasdaq") or,
(iii) if not listed or traded on any such exchange or Nasdaq,
the average of the bid and asked price per share as reported in the
"pink sheets" published by the National Quotation Bureau, Inc. (the
"pink sheets") or,
(iv) if such quotations are not available, the fair market value
per share of the Company's Common Stock on the date such notice was
received by the Company as reasonably determined by the Board of
Directors of the Company.
1.2 PAYMENT OF TAXES. The issuance of certificates for Warrant Shares
shall be made without charge to the Warrantholder for any stock transfer or
other issuance tax in respect thereto; PROVIDED, HOWEVER, that the Warrantholder
shall be required to pay any and all taxes which may be payable in respect of
any transfer involved in the issuance and delivery of any certifi-
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<PAGE>
cate in a name other than that of the then Warrantholder as reflected upon
the books of the Company.
1.3 DIVISIBILITY OF WARRANT. This Warrant may be divided into warrants
exercisable for 500 Warrant Shares or multiples thereof (or such lesser or
greater denominations as may be reasonably requested by the Warrantholder), upon
surrender at the principal office of the Company, without charge to any
Warrantholder. Upon such division, subject to the restrictions on transfer
referred to in Section 2, the Warrants may be transferred of record as the then
Warrantholder may specify without charge to such Warrantholder (other than any
applicable transfer taxes).
1.4 INFORMATION. Upon receipt of a written request from a Warrantholder,
the Company agrees to deliver promptly to such Warrantholder a copy of its
current financial statements and to provide such other publicly available
information concerning the business and operations of the Company as such
Warrantholder may reasonably request in order to assist the Warrantholder in
evaluating the merits and risks of exercising the Warrant and to make an
informed investment decision in connection with such exercise.
2. RESTRICTIONS ON TRANSFER; RESTRICTIVE LEGENDS.
Except as otherwise permitted by this Section 2, each Warrant shall (and
each Warrant issued upon direct or indirect transfer or in substitution for any
Warrant issued pursuant to Section 4 shall) be stamped or otherwise imprinted
with a legend in substantially the following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT."
Except as otherwise permitted by this Section 2, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT."
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<PAGE>
Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a Warrant or a stock certificate for Warrant Shares, in each case without
a legend, if (i) the issuance of such Warrant Shares has been registered under
the Securities Act, (ii) such Warrant or such Warrant Shares, as the case may
be, have been registered for resale under the Securities Act or (iii) the
Warrantholder reasonably believes that such registration is not required with
respect to such Warrant or such Warrant Shares, as the case may be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees that all Warrant Shares which are issued
upon the exercise of this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens, security interests,
charges and other encumbrances with respect to the issue thereof, other than
taxes in respect of any transfer occurring contemporaneously with such issue.
The Company further covenants and agrees that, during the Exercise Period, the
Company will at all times have authorized and reserved, and keep available free
from preemptive rights, a sufficient number of shares of Common Stock to provide
for the exercise of the rights represented by this Warrant and will, at its
expense, upon each such reservation of shares, procure such listing of such
shares of Common Stock (subject to issuance or notice of issuance) as then may
be required on all stock exchanges on which the Common Stock is then listed or
on Nasdaq.
4. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, upon surrender of this Warrant
to the Company with a duly executed Assignment Form and funds sufficient to pay
any transfer tax, the Company shall, without charge, execute and deliver a new
Warrant or Warrants of like tenor in the name of the assignee named in such
Assignment Form and this Warrant shall promptly be canceled. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of such mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like tenor.
The term "Warrant" as used in this Agreement shall be deemed to include any
Warrants issued in substitution or exchange for this Warrant.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the person in whose name this Warrant is
registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon
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<PAGE>
made by anyone other than the Company) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant
for registration of transfer as provided in Section 4.
6. [RESERVED.]
7. CERTAIN ADJUSTMENTS.
7.1 The number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment as follows:
(a) STOCK DIVIDENDS. If at any time after the date hereof (i) the Company
shall fix a record date for the issuance of any stock dividend payable in shares
of Common Stock to holders of Common Stock or (ii) the number of shares of
Common Stock shall have been increased by a subdivision or split-up of shares of
Common Stock, then, on the record date fixed for the determination of holders of
Common Stock entitled to receive such dividend or immediately after the
effective date of subdivision or split-up, as the case may be, the number of
shares of Common Stock to be delivered upon exercise of this Warrant will be
increased so that the Warrantholder will be entitled to receive the number of
shares of Common Stock that such Warrantholder would have owned immediately
following such action had this Warrant been exercised immediately prior thereto,
and the Exercise Price will be adjusted as provided below in paragraph (g).
(b) COMBINATION OF STOCK. If the number of shares of Common Stock
outstanding at any time after the date hereof shall have been decreased by a
combination of the outstanding shares of Common Stock, then, immediately after
the effective date of such combination, the number of shares of Common Stock to
be delivered upon exercise of this Warrant will be decreased so that the
Warrantholder thereafter will be entitled to receive the number of shares of
Common Stock that such Warrantholder would have owned immediately following such
action had this Warrant been exercised immediately prior thereto, and the
Exercise Price will be adjusted as provided below in paragraph (g).
(c) REORGANIZATION, ETC. If, after the date hereof, any capital
reorganization of the Company, or any reclassification of the Common Stock,
or any consolidation of the Company with or merger of the Company with or
into any other person or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other person, shall be
effected in such a way that the holders of Common Stock shall be entitled to
receive stock, other securities or assets (whether such stock, other
securities or assets are issued or distributed by the Company or another
person) with respect to or in exchange for
-5-
<PAGE>
Common Stock, then, upon exercise of this Warrant the Warrantholder shall
have the right to receive the kind and amount of stock, other securities or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer by a holder of the number of shares
of Common Stock that such Warrantholder would have been entitled to receive
upon exercise of this Warrant had this Warrant been exercised immediately
before such reorganization, reclassification, consolidation, merger or sale,
lease or other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 7.
(d) STOCK AND RIGHTS OFFERING.
(i) If at any time after the date hereof, the Company shall
issue to all holders of its Common Stock or sell or fix a record date
for the issuance to all holders of its Common Stock of (A) Common
Stock or (B) rights, options or warrants entitling the holders thereof
to subscribe for or purchase Common Stock (or securities convertible
or exchangeable into or exercisable for Common Stock), in any such
case, at a price per share (or having a conversion, exchange or
exercise price per share) that is less than the closing price per
share of the Company's Common Stock on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or traded on any such exchange, on Nasdaq
or, if not listed or traded on any such exchange or Nasdaq, the
average of the bid and asked price per share as reported in the pink
sheets or, if such quotations are not available, the fair market value
per share of the Company's Common Stock as reasonably determined by
the Board of Directors of the Company (the "Closing Price") on the
date of such issuance or sale or on such record date then, in each
such case, unless the Company elects to reserve Common Stock or
rights, options or warrants for Common Stock or such other securities
for distribution to the Warrantholder upon exercise of the Warrants of
such Warrantholder so that, in addition to the shares of Common Stock
to which such Warrantholder is entitled, such Warrantholder will
receive upon such exercise Common Stock or the amount and kind of such
rights, options or warrants which such Warrantholder would have
received if the Warrantholder had, immediately prior to the record
date for the distribution of such Common Stock, rights, options or
warrants, exercised the Warrant for Common Stock, the number of shares
of Common Stock to be delivered upon exercise of this Warrant shall be
appropriately increased so that the
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<PAGE>
Warrantholder thereafter, will be entitled to receive the number of shares
of Common Stock determined by multiplying the number of shares of Common
Stock such Warrantholder would have been entitled to receive immediately
before the date of such issuance or sale or such record date by a fraction,
the denominator of which will be the number of shares of Common Stock
outstanding (including, for this purpose, all Common Stock issuable
upon conversion of all preferred stock that is convertible into Common
Stock (the "Convertible Preferred Stock")), on such date plus the
number of shares of Common Stock that the aggregate offering price of
the total number of shares so offered for subscription or purchase (or
the aggregate initial conversion price, exchange price or exercise
price of the convertible securities or exchangeable securities or
rights, options or warrants, as the case may be, so offered) would
purchase at such Closing Price, and the numerator of which will be the
number of shares of Common Stock outstanding (including, for this
purpose, all Common Stock issuable upon conversion of all Convertible
Preferred Stock) on such date plus the number of additional shares of
Common Stock offered for subscription or purchase (or into which the
convertible or exchangeable securities or rights, options or warrants
so offered are initially convertible or exchangeable or exercisable,
as the case may be), and the Exercise Price shall be adjusted as
provided below in paragraph (g).
(ii) If the Company shall, at any time after the date hereof
distribute to all holders of its Common Stock any shares of capital
stock of the Company (other than Common Stock) or evidences of its
indebtedness or assets (excluding cash dividends or distributions paid
from retained earnings of the Company) or rights or warrants to
subscribe for or purchase any of its securities (excluding those
referred to in paragraph (d)(i) above) (any of the foregoing being
hereinafter in this paragraph (d)(ii) called the "Securities"), then
in each such case, unless the Company elects to reserve shares or
other units of such Securities for distribution to the Warrantholder
upon exercise of the Warrants of such Warrantholder so that, in
addition to the shares of Common Stock to which such Warrantholder is
entitled, such Warrantholder will receive upon such exercise the
amount and kind of such Securities which such Warrantholder would have
received if the Warrantholder had, immediately prior to the record
date for the distribution of the Securities, exercised the Warrant,
the number of shares of Common Stock to be delivered
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<PAGE>
to such Warrantholder upon exercise of the Warrant shall be appropriately
increased so that the Warrantholder thereafter shall be entitled to
receive the number of shares of Common Stock determined by multiplying
the number of shares of Common Stock such Warrantholder would have
been entitled to receive immediately before such record date, had the
Warrantholder exercised the Warrant immediately prior thereto by a
fraction, the numerator of which shall be the Closing Price per share
of Common Stock on such record date plus the then fair market value
(as reasonably determined by the Board of Directors of the Company),
of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable
to one share of Common Stock, and the denominator of which shall be
the Closing Price of the Common Stock, and the Exercise Price shall be
adjusted as provided below in paragraph (g).
(e) FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
shall be issued to any Warrantholder in connection with the exercise of this
Warrant. Instead of any fractional shares of Common Stock that would otherwise
be issuable to such Warrantholder, the Company will pay to such Warrantholder a
cash adjustment in respect of such fractional interest in an amount equal to
that fractional interest of the then current Closing Price per share of Common
Stock.
(f) CARRYOVER. Notwithstanding any other provision of this Section 7, no
adjustment shall be made to the number of shares of Common Stock to be delivered
to the Warrantholder (or to the Exercise Price) if such adjustment represents
less than 1% of the number of shares to be so delivered, but any lesser
adjustment shall be carried forward and shall be made at the time and together
with the next subsequent adjustment which together with any adjustments so
carried forward shall amount to 1% or more of the number of shares to be so
delivered.
(g) EXERCISE PRICE ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant is adjusted, as herein provided,
the Exercise Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
purchasable immediately thereafter.
(h) NO DUPLICATE ADJUSTMENTS. Notwithstanding anything else to the
contrary contained herein, in no event will an adjustment be made under the
provisions of this Section 7 to the
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number of Warrant Shares issuable upon exercise of this Warrant or the
Exercise Price for any event if an adjustment having substantially the same
effect to the Warrantholder as any adjustment that otherwise would be made
under the provisions of this Section 7 is made by the Company for any such
event to the number of shares of Common Stock (or other Securities) issuable
upon exercise of this Warrant.
7.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 7.1, no
adjustment in respect of any dividends shall be made during the term of the
Warrant or upon the exercise of this Warrant.
7.3 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or the
Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of the
chief financial officer of the Company setting forth the number of Warrant
Shares and the Exercise Price of such Warrant Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made.
8. REGISTRATION RIGHTS.
8.1 REGISTRATION.
(a) If at any time within three years after the date hereof, the
Company shall determine to register for its own account or the account of
others under the Securities Act any of the Common Stock, (other than on Form
S-8 or Form S-4 or their then equivalents relating to shares of Common Stock
to be issued in connection with any acquisition of any entity or business or
issuable in connection with stock option or other employee benefit plans),
the Company shall send to the Warrantholder written notice of such
determination. If, within 15 days after receipt of such notice, the
Warrantholder shall so request in writing, the Company shall use all
reasonable efforts to include in such registration statement all or any part
of the Warrant Shares the Warrantholder requests to be registered; PROVIDED,
HOWEVER, that the Company shall have the right to postpone or withdraw any
such registration at any time without obligation to the Warrantholder. In
connection with any offering under this Section 8.1 involving an
underwriting, the Company shall not be required to include any Warrant Shares
in such underwriting unless (i) the holders thereof accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, (ii) if such underwriting has been initiated by the Company or
requested by another party that has contractual registration rights, all of
the shares of Common Stock held by the parties making such request or
entitled to
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include shares of Common Stock pursuant to the same rights as the requesting
parties have been included in such registration, (iii) all of the shares of
Common Stock held by existing holders of registration rights on the date
hereof for which such registration has been requested by such holders have
been included in such registration, and (iv) then only in such quantity as
will not, in the opinion of the underwriters, interfere with the successful
public offering and sale of shares of Common Stock included in the
registration statement.
(b) If, in connection with any offering involving an underwriting of
Common Stock to be issued by the Company, the managing underwriter shall impose
a limitation on the number of shares of such Common Stock which may be included
in the registration statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution, then the Company shall be
obligated to include in such registration statement only such limited position
(if any) of the Warrant Shares with respect to which the Warrantholder has
requested inclusion hereunder and the managing underwriter shall approve;
PROVIDED, HOWEVER, that the Company shall not so exclude any Warrant Shares held
by the Warrantholders unless the Company has first excluded any and all
securities to be offered and sold by directors, officers and employees of
stockholders of the Company who do not have contractual "piggyback" rights to
include such securities.
(c) The Company shall use all reasonable efforts to maintain the
effectiveness for up to 30 days (or such shorter period of time as the
underwriters need to complete the distribution of the registered offering) of
any registration statement pursuant to which any of the Warrant Shares are being
offered pursuant to a registration under this Agreement, and from time to time
will amend or supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the Securities Act and
any applicable state securities or blue sky laws. The Company shall also
provide the Warrantholder with as many copies of the prospectus contained in any
such registration statement in which the Warrantholders' Warrant Shares are
included as it may reasonably request.
(d) Genta shall pay all Registration Expenses (as defined below) in
connection with any registration, qualification or compliance hereunder, and
the Warrantholder shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Warrant Shares
resold by the Warrantholder. "Registration Expenses" shall mean all
expenses, except for Selling Expenses, incurred by Genta in complying with
the registration provisions herein described, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow
fees, fees and
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disbursements of counsel for Genta and one counsel for the selling
stockholders, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration. "Selling Expenses"
shall mean all selling commissions, underwriting fees and stock transfer
taxes applicable to the Warrant Shares, and all other expenses incurred by
Warrantholder or any transferee of Warrantholder in connection with sales of
the Warrant Shares.
(e) With a view to making available to the Warrantholder the benefits of
Rule 144 promulgated under the Securities Act ("Rule 144") and any other rule or
regulation of the SEC that may at any time permit the Warrantholder to sell
Warrant Shares to the public pursuant to a registration statement, Genta
covenants and agrees to: (i) make and keep public information available, as
those terms are understood and defined in Rule 144, until the earlier of (A) the
third anniversary of the date hereof or (B) such date as all of the Warrant
Shares shall have been resold; (ii) file with the SEC in a timely manner all
reports and other documents required of Genta under the Securities Act and
Exchange Act; and (iii) furnish to the Warrantholder upon request, as long as
the Warrantholder owns any Warrant Shares (A) a written statement by Genta that
it has complied with the reporting requirements of the Securities Act and the
Exchange Act, (B) a copy of the most recent annual or quarterly report of Genta,
and (C) such other information as may be reasonably requested in order to avail
the Warrantholder of any rule or regulation of the SEC that permits the selling
of any such Warrant Shares pursuant to Rule 144.
8.2 INDEMNIFICATION.
(a) Genta agrees to indemnify and hold harmless the Warrantholder from and
against any losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) to which the Warrantholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement of a material fact contained in the
Registration Statement, on the effective date thereof, or in any amendment or
supplement thereto, or arise out of any failure by Genta to fulfill any
undertaking included in the Registration Statement or any amendment or
supplement thereto, and Genta will, except as provided below, as incurred,
reimburse the Warrantholder for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim; provided, however, that Genta shall not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of, or is based
upon (i) an untrue statement made in such Registration Statement or any
amendment or supplement thereto in reliance upon and in conformity with written
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information furnished to Genta by or on behalf of the Warrantholder specifically
for use in preparation of the Registration Statement; or (ii) an untrue
statement which is subsequently corrected in a supplement or amendment to the
Registration Statement and which supplement or amendment has been delivered by
Genta to the Warrantholder via overnight courier at least five (5) days prior to
the consummation of the transaction out of which arose such claim, damage or
liability.
(b) The Warrantholder agrees to indemnify and hold harmless Genta from and
against any losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) to which Genta may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon an untrue
statement made in such Registration Statement or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
Genta by or on behalf of the Warrantholder specifically for use in preparation
of the Registration Statement or any amendment or supplement thereto; provided,
however, that the Warrantholder shall not be liable in any such case for any
untrue statement included in any Prospectus which statement has been corrected,
in writing, by the Warrantholder and delivered to Genta in sufficient time
before the sale from which such loss occurred for Genta to have corrected the
Registration Statement and delivered an updated Prospectus or Prospectus
supplement to the Warrantholder.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 8.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the
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indemnified person shall be entitled to retain its own counsel at the expense
of such indemnifying person.
(d) If the indemnification provided for in this Section 8.2 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of Genta on the one hand and the Warrantholder on the other in connection
with the matters that resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by Genta on the one hand or the Warrantholder on the other
and the parties' relevant intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Genta and the
Warrantholder agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. 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.
(e) The obligations of Genta and the Warrantholder under this Section 8.2
shall be in addition to any liability which Genta and the Warrantholder may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls Genta or the Warrantholder within the meaning of
the Securities Act.
8.3 TRANSFERABILITY. The rights and obligations under this Section 8
shall be binding upon and available to subsequent transferees of this Warrant
and the Warrant Shares.
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<PAGE>
9. NOTICES OF CORPORATE ACTION.
In the event of
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger involving the Company and any other party, including without limitation,
any Change of Control, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company, the Company will mail to the Warrantholder a notice specifying
(i) the date or expected date on which any such record is to be taken for the
purpose of such dividend, distribution or right and the amount and character of
any such dividend, distribution or right, (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, Change of Control, dissolution, liquidation or winding-up
is to take place and the time, if any such time is to be fixed, as of which the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for the securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, Change of Control, dissolution,
liquidation or winding-up and (iii) that in the event of a Change of Control,
the Warrants are exercisable immediately prior to the consummation of such
Change of Control.
10. DEFINITIONS.
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
ASSIGNMENT FORM: an Assignment Form in the form annexed hereto as
Exhibit B.
BUSINESS DAY: any day other than a Saturday, Sunday or a day on which
national banks are authorized by law to close in the City of New York, State of
New York.
CHANGE OF CONTROL: shall mean (i) the consolidation of the Company with
or merger of the Company with or into any other person in which the Company
is not the surviving corporation, (ii) the sale of all or substantially all
of the assets of the
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Company to any other person or (iii) any sale or transfer of any capital
stock of the Company after the date of this Agreement, following which 60% of
the combined voting power of the Company becomes beneficially owned by one
person or group acting together. For purposes of this definition, "group"
shall have the meaning as such term is used in Section 13(d)(1) under the
Exchange Act.
CLOSING DATE: shall mean October 1, 1996.
CLOSING PRICE: the meaning specified in Section 7.1(d)(i).
COMPANY OR GENTA: Genta Incorporated, a Delaware corporation.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934, as amended, shall include a
reference to a comparable section, if any, of any successor federal statute.
EXERCISE FORM: an Exercise Form in the form annexed hereto as Exhibit A.
EXERCISE PRICE: the meaning specified on the cover of this Warrant, as
such price may be adjusted pursuant to Section 7 hereof.
NASDAQ: the meaning specified in Section 1.1(c)(ii).
RULE 415: Rule 415 under the Securities Act or any successor rule
providing for the offering of securities on a continuous basis.
SEC: the Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act or the Exchange Act, whichever is the
relevant statute for the particular purpose.
SECURITIES: the meaning specified in Section 7.1(d)(ii).
SECURITIES ACT: the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section
of the Securities Act of 1933, as amended, shall include a reference to the
comparable section, if any, of any successor federal statute.
WARRANTHOLDER: the meaning specified on the cover of this Warrant.
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<PAGE>
WARRANT SHARES: the meaning specified on the cover of this Warrant,
subject to the provisions of Section 7.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to this Warrant.
11.2 BINDING EFFECTS; BENEFITS. This Warrant shall inure to the benefit
of and shall be binding upon the Company and the Warrantholder and their
respective heirs, legal representatives, successors and assigns. Nothing in
this Warrant, expressed or implied, is intended to or shall confer on any person
other than the Company and the Warrantholder, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant.
11.3 AMENDMENTS AND WAIVERS. This Warrant may not be modified or amended
except by an instrument or instruments in writing signed by the Company and the
holder of this Warrant. Either the Company or the holder of this Warrant may,
by an instrument in writing, waive compliance by the other party with any term
or provision of this Warrant on the part of such other party hereto to be
performed or complied with. The waiver by any such party of a breach of any
term or provision of this Warrant shall not be construed as a waiver of any
subsequent breach.
11.4 SECTION AND OTHER HEADINGS. The section and other headings contained
in this Warrant are for reference purposes only and shall not be deemed to be a
part of this Warrant or to affect the meaning or interpretation of this Warrant.
11.5 FURTHER ASSURANCES. Each of the Company and the Warrantholder shall
do and perform all such further acts and things and execute and deliver all such
other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
11.6 NOTICES. All notices and other communications required or permitted
to be given under this Warrant shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by United States mail, postage
prepaid, to the parties hereto at the following addresses or to such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
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(a) if to the Company, addressed to:
Genta Incorporated
3550 General Atomics Drive
San Diego, California 92121
Telecopier: (619) 455-2712
Attention: Chairman of the Board and Executive Officer
with a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, California 94101
Telecopier: (415) 983-7396
Attention: Thomas E. Sparks, Jr., Esq.
(b) if to the Warrantholder, addressed to the address of such
Warrantholder appearing on the books of the Company.
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
11.7 SEPARABILITY. Any term or provision of this Warrant which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
11.8 GOVERNING LAW. This Warrant shall be deemed to be a contract made
under the laws of the State of California and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
agreements made and to be performed entirely within such State.
11.9 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in
this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any
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securities whether such liabilities are asserted by the Company or by
creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated as of October 1, 1996.
GENTA INCORPORATED
By /s/ Thomas Adams
-------------------------------------
Thomas Adams, Chairman of the
Board and Chief Executive Officer
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<PAGE>
EXHIBIT A
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT.
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Shares and (check one):
/ / herewith tenders payment for _______ of the Warrant Shares to the
order of Genta Incorporated in the amount of $_________ in accordance
with the terms of this Warrant; or
/ / herewith tenders this Warrant for _______ Warrant Shares pursuant to
the Net Issue Exercise provisions of Section 1.1(b) of the Warrant.
The undersigned requests that a certificate (or certificates) for such Warrant
Shares be registered in the name of the undersigned and that such certificate
(or certificates) be delivered to the undersigned's address below.
The undersigned represents that it is acquiring such Warrant Shares for its
own account for investment and not with a view to or for sale in connection with
any distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control).
Dated: ___________________.
Signature
----------------------------------------
----------------------------------------
(Print Name)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
_____________________________
A-1
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EXHIBIT B
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT.
ASSIGNMENT FORM
(To be executed only upon transfer of this Warrant)
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ____________________ the right
represented by such Warrant to purchase __________ shares of Common Stock of
Genta Incorporated to which such Warrant relates and all other rights of the
Warrantholder under the within Warrant (including, without limitation, the
registration rights provided in Section 8 of the within Warrant), and appoints
_________________ as Attorney to make such transfer on the books of Genta
Incorporated maintained for such purpose, with full power of substitution in the
premises.
Dated: .
---------------------------------
Signature
----------------------------------------
----------------------------------------
(Print Name)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ---------------------------------------
B-1
<PAGE>
Exhibit 4.2
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT.
*****************************************
Genta Incorporated
COMMON STOCK PURCHASE WARRANT
*****************************************
This certifies that, for good and valuable consideration, Genta
Incorporated, a Delaware corporation ("Genta" or the "Company"), grants to
Michael Arnouse, or registered assigns (the "Warrantholder"), the right to
subscribe for and purchase from the Company 100,000 validly issued, fully paid
and nonassessable shares (the "Warrant Shares") of the Company's Common Stock,
par value $.001 (the "Common Stock"), at the purchase price per share of $1.50
(the "Exercise Price"), exercisable at any time and from time to time during the
period (the "Exercise Period") commencing on the Closing Date and ending at 5:00
P.M. California time on the fifth anniversary of the Closing Date, all subject
to the terms, conditions and adjustments herein set forth.
- --------------------------------------------------------------------------------
<PAGE>
1. DURATION AND EXERCISE OF WARRANT; LIMITATION ON EXERCISE; PAYMENT
OF TAXES.
1.1 DURATION AND EXERCISE OF WARRANT.
(a) CASH EXERCISE. This Warrant may be exercised by the Warrantholder by
(i) the surrender of this Warrant to the Company, with a duly executed Exercise
Form specifying the number of Warrant Shares to be purchased, during normal
business hours on any Business Day during the Exercise Period and (ii) the
delivery of payment to the Company, for the account of the Company, by cash or
by certified or bank cashier's check, of the Exercise Price for the number of
Warrant Shares specified in the Exercise Form in lawful money of the United
States of America. The Company agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as the record holder of such Warrant Shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Warrant Shares as aforesaid. A stock
certificate or certificates for the Warrant Shares specified in the Exercise
Form shall be delivered to the Warrantholder as promptly as practicable, and in
any event within 10 days, thereafter. The stock certificate or certificates so
delivered shall be in denominations of 100 shares each or such lesser or greater
denominations as may be reasonably specified by the Warrantholder in the
Exercise Form. If this Warrant shall have been exercised only in part, the
Company shall, at the time of delivery of the stock certificate or certificates,
deliver to the Warrantholder a new Warrant evidencing the rights to purchase the
remaining Warrant Shares, which new Warrant shall in all other respects be
identical with this Warrant. No adjustments shall be made on Warrant Shares
issuable on the exercise of this Warrant for any cash dividends paid or payable
to holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
(b) NET ISSUE EXERCISE. In lieu of exercising this Warrant pursuant to
Section 1.1(a), this Warrant may be exercised by the Warrantholder by the
surrender of this Warrant to the Company, with a duly executed Exercise Form
marked to reflect Net Issue Exercise and specifying the number of Warrant
Shares to be purchased, during normal business hours on any Business Day
during the Exercise Period. The Company agrees that such Warrant Shares
shall be deemed to be issued to the Warrantholder as the record holder of
such Warrant Shares as of the close of business on the date on which this
Warrant shall have been surrendered as aforesaid. Upon such exercise, the
Warrantholder shall be entitled to receive shares equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant
to the Company together with notice of such election in which event the
Company shall issue to Warrant-
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holder a number of shares of the Company's Common Stock computed as of the
date of surrender of this Warrant to the Company using the following formula:
Y x (A-B)
X = ---------
A
Where X = the number of shares of Common Stock to be issued to
Warrantholder under this Section 1.1(b);
Y = the number of shares of Common Stock otherwise purchasable under this
Warrant (at the date of such calculation);
A = the fair market value of one share of the Company's Common Stock (at
the date of such calculation);
B = the Exercise Price (as adjusted to the date of such calculation).
(c) FAIR MARKET VALUE. For purposes of Section 1.1(b) fair market value
of one share of the Company's Common Stock shall mean:
(i) the closing price per share of the Company's Common Stock on
the principal national securities exchange on which the Common Stock
is listed or admitted to trading or,
(ii) if not listed or traded on any such exchange, the last
reported sales price per share on the Nasdaq National Market or the
Nasdaq Small-Cap Market (collectively, "Nasdaq") or,
(iii) if not listed or traded on any such exchange or Nasdaq,
the average of the bid and asked price per share as reported in the
"pink sheets" published by the National Quotation Bureau, Inc. (the
"pink sheets") or,
(iv) if such quotations are not available, the fair market value
per share of the Company's Common Stock on the date such notice was
received by the Company as reasonably determined by the Board of
Directors of the Company.
1.2 PAYMENT OF TAXES. The issuance of certificates for Warrant Shares
shall be made without charge to the Warrantholder for any stock transfer or
other issuance tax in respect thereto; PROVIDED, HOWEVER, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect of any transfer involved in the issuance and delivery of any
certifi-
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cate in a name other than that of the then Warrantholder as reflected upon
the books of the Company.
1.3 DIVISIBILITY OF WARRANT. This Warrant may be divided into warrants
exercisable for 500 Warrant Shares or multiples thereof (or such lesser or
greater denominations as may be reasonably requested by the Warrantholder), upon
surrender at the principal office of the Company, without charge to any
Warrantholder. Upon such division, subject to the restrictions on transfer
referred to in Section 2, the Warrants may be transferred of record as the then
Warrantholder may specify without charge to such Warrantholder (other than any
applicable transfer taxes).
1.4 INFORMATION. Upon receipt of a written request from a Warrantholder,
the Company agrees to deliver promptly to such Warrantholder a copy of its
current financial statements and to provide such other publicly available
information concerning the business and operations of the Company as such
Warrantholder may reasonably request in order to assist the Warrantholder in
evaluating the merits and risks of exercising the Warrant and to make an
informed investment decision in connection with such exercise.
2. RESTRICTIONS ON TRANSFER; RESTRICTIVE LEGENDS.
Except as otherwise permitted by this Section 2, each Warrant shall (and
each Warrant issued upon direct or indirect transfer or in substitution for any
Warrant issued pursuant to Section 4 shall) be stamped or otherwise imprinted
with a legend in substantially the following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT."
Except as otherwise permitted by this Section 2, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT."
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Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a Warrant or a stock certificate for Warrant Shares, in each case without
a legend, if (i) the issuance of such Warrant Shares has been registered under
the Securities Act, (ii) such Warrant or such Warrant Shares, as the case may
be, have been registered for resale under the Securities Act or (iii) the
Warrantholder reasonably believes that such registration is not required with
respect to such Warrant or such Warrant Shares, as the case may be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees that all Warrant Shares which are issued
upon the exercise of this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens, security interests,
charges and other encumbrances with respect to the issue thereof, other than
taxes in respect of any transfer occurring contemporaneously with such issue.
The Company further covenants and agrees that, during the Exercise Period, the
Company will at all times have authorized and reserved, and keep available free
from preemptive rights, a sufficient number of shares of Common Stock to provide
for the exercise of the rights represented by this Warrant and will, at its
expense, upon each such reservation of shares, procure such listing of such
shares of Common Stock (subject to issuance or notice of issuance) as then may
be required on all stock exchanges on which the Common Stock is then listed or
on Nasdaq.
4. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, upon surrender of this Warrant
to the Company with a duly executed Assignment Form and funds sufficient to pay
any transfer tax, the Company shall, without charge, execute and deliver a new
Warrant or Warrants of like tenor in the name of the assignee named in such
Assignment Form and this Warrant shall promptly be canceled. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of such mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like tenor.
The term "Warrant" as used in this Agreement shall be deemed to include any
Warrants issued in substitution or exchange for this Warrant.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the person in whose name this Warrant is
registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon
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made by anyone other than the Company) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant
for registration of transfer as provided in Section 4.
6. [RESERVED.]
7. CERTAIN ADJUSTMENTS.
7.1 The number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment as follows:
(a) STOCK DIVIDENDS. If at any time after the date hereof (i) the Company
shall fix a record date for the issuance of any stock dividend payable in shares
of Common Stock to holders of Common Stock or (ii) the number of shares of
Common Stock shall have been increased by a subdivision or split-up of shares of
Common Stock, then, on the record date fixed for the determination of holders of
Common Stock entitled to receive such dividend or immediately after the
effective date of subdivision or split-up, as the case may be, the number of
shares of Common Stock to be delivered upon exercise of this Warrant will be
increased so that the Warrantholder will be entitled to receive the number of
shares of Common Stock that such Warrantholder would have owned immediately
following such action had this Warrant been exercised immediately prior thereto,
and the Exercise Price will be adjusted as provided below in paragraph (g).
(b) COMBINATION OF STOCK. If the number of shares of Common Stock
outstanding at any time after the date hereof shall have been decreased by a
combination of the outstanding shares of Common Stock, then, immediately after
the effective date of such combination, the number of shares of Common Stock to
be delivered upon exercise of this Warrant will be decreased so that the
Warrantholder thereafter will be entitled to receive the number of shares of
Common Stock that such Warrantholder would have owned immediately following such
action had this Warrant been exercised immediately prior thereto, and the
Exercise Price will be adjusted as provided below in paragraph (g).
(c) REORGANIZATION, ETC. If, after the date hereof, any capital
reorganization of the Company, or any reclassification of the Common Stock,
or any consolidation of the Company with or merger of the Company with or
into any other person or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other person, shall be
effected in such a way that the holders of Common Stock shall be entitled to
receive stock, other securities or assets (whether such stock, other
securities or assets are issued or distributed by the Company or another
person) with respect to or in exchange for
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<PAGE>
Common Stock, then, upon exercise of this Warrant the Warrantholder shall
have the right to receive the kind and amount of stock, other securities or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer by a holder of the number of shares
of Common Stock that such Warrantholder would have been entitled to receive
upon exercise of this Warrant had this Warrant been exercised immediately
before such reorganization, reclassification, consolidation, merger or sale,
lease or other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 7.
(d) STOCK AND RIGHTS OFFERING.
(i) If at any time after the date hereof, the Company shall
issue to all holders of its Common Stock or sell or fix a record date
for the issuance to all holders of its Common Stock of (A) Common
Stock or (B) rights, options or warrants entitling the holders thereof
to subscribe for or purchase Common Stock (or securities convertible
or exchangeable into or exercisable for Common Stock), in any such
case, at a price per share (or having a conversion, exchange or
exercise price per share) that is less than the closing price per
share of the Company's Common Stock on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or traded on any such exchange, on Nasdaq
or, if not listed or traded on any such exchange or Nasdaq, the
average of the bid and asked price per share as reported in the pink
sheets or, if such quotations are not available, the fair market value
per share of the Company's Common Stock as reasonably determined by
the Board of Directors of the Company (the "Closing Price") on the
date of such issuance or sale or on such record date then, in each
such case, unless the Company elects to reserve Common Stock or
rights, options or warrants for Common Stock or such other securities
for distribution to the Warrantholder upon exercise of the Warrants of
such Warrantholder so that, in addition to the shares of Common Stock
to which such Warrantholder is entitled, such Warrantholder will
receive upon such exercise Common Stock or the amount and kind of such
rights, options or warrants which such Warrantholder would have
received if the Warrantholder had, immediately prior to the record
date for the distribution of such Common Stock, rights, options or
warrants, exercised the Warrant for Common Stock, the number of shares
of Common Stock to be delivered upon exercise of this Warrant shall be
appropriately increased so that the
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<PAGE>
Warrantholder thereafter, will be entitled to receive the number of
shares of Common Stock determined by multiplying the number of shares
of Common Stock such Warrantholder would have been entitled to receive
immediately before the date of such issuance or sale or such record date
by a fraction, the denominator of which will be the number of shares of
Common Stock outstanding (including, for this purpose, all Common Stock
issuable upon conversion of all preferred stock that is convertible into
Common Stock (the "Convertible Preferred Stock")), on such date plus the
number of shares of Common Stock that the aggregate offering price of
the total number of shares so offered for subscription or purchase (or
the aggregate initial conversion price, exchange price or exercise
price of the convertible securities or exchangeable securities or
rights, options or warrants, as the case may be, so offered) would
purchase at such Closing Price, and the numerator of which will be the
number of shares of Common Stock outstanding (including, for this
purpose, all Common Stock issuable upon conversion of all Convertible
Preferred Stock) on such date plus the number of additional shares of
Common Stock offered for subscription or purchase (or into which the
convertible or exchangeable securities or rights, options or warrants
so offered are initially convertible or exchangeable or exercisable,
as the case may be), and the Exercise Price shall be adjusted as
provided below in paragraph (g).
(ii) If the Company shall, at any time after the date hereof
distribute to all holders of its Common Stock any shares of capital
stock of the Company (other than Common Stock) or evidences of its
indebtedness or assets (excluding cash dividends or distributions paid
from retained earnings of the Company) or rights or warrants to
subscribe for or purchase any of its securities (excluding those
referred to in paragraph (d)(i) above) (any of the foregoing being
hereinafter in this paragraph (d)(ii) called the "Securities"), then
in each such case, unless the Company elects to reserve shares or
other units of such Securities for distribution to the Warrantholder
upon exercise of the Warrants of such Warrantholder so that, in
addition to the shares of Common Stock to which such Warrantholder is
entitled, such Warrantholder will receive upon such exercise the
amount and kind of such Securities which such Warrantholder would have
received if the Warrantholder had, immediately prior to the record
date for the distribution of the Securities, exercised the Warrant,
the number of shares of Common Stock to be delivered
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to such Warrantholder upon exercise of the Warrant shall be appropriately
increased so that the Warrantholder thereafter shall be entitled to
receive the number of shares of Common Stock determined by multiplying
the number of shares of Common Stock such Warrantholder would have
been entitled to receive immediately before such record date, had the
Warrantholder exercised the Warrant immediately prior thereto by a
fraction, the numerator of which shall be the Closing Price per share
of Common Stock on such record date plus the then fair market value
(as reasonably determined by the Board of Directors of the Company),
of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable
to one share of Common Stock, and the denominator of which shall be
the Closing Price of the Common Stock, and the Exercise Price shall be
adjusted as provided below in paragraph (g).
(e) FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
shall be issued to any Warrantholder in connection with the exercise of this
Warrant. Instead of any fractional shares of Common Stock that would otherwise
be issuable to such Warrantholder, the Company will pay to such Warrantholder a
cash adjustment in respect of such fractional interest in an amount equal to
that fractional interest of the then current Closing Price per share of Common
Stock.
(f) CARRYOVER. Notwithstanding any other provision of this Section 7, no
adjustment shall be made to the number of shares of Common Stock to be delivered
to the Warrantholder (or to the Exercise Price) if such adjustment represents
less than 1% of the number of shares to be so delivered, but any lesser
adjustment shall be carried forward and shall be made at the time and together
with the next subsequent adjustment which together with any adjustments so
carried forward shall amount to 1% or more of the number of shares to be so
delivered.
(g) EXERCISE PRICE ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant is adjusted, as herein provided,
the Exercise Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
purchasable immediately thereafter.
(h) NO DUPLICATE ADJUSTMENTS. Notwithstanding anything else to the
contrary contained herein, in no event will an adjustment be made under the
provisions of this Section 7 to the
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number of Warrant Shares issuable upon exercise of this Warrant or the
Exercise Price for any event if an adjustment having substantially the same
effect to the Warrantholder as any adjustment that otherwise would be made
under the provisions of this Section 7 is made by the Company for any such
event to the number of shares of Common Stock (or other Securities) issuable
upon exercise of this Warrant.
7.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 7.1, no
adjustment in respect of any dividends shall be made during the term of the
Warrant or upon the exercise of this Warrant.
7.3 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or the
Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of the
chief financial officer of the Company setting forth the number of Warrant
Shares and the Exercise Price of such Warrant Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made.
8. REGISTRATION RIGHTS.
8.1 REGISTRATION.
(a) If at any time within three years after the date hereof, the
Company shall determine to register for its own account or the account of
others under the Securities Act any of the Common Stock, (other than on Form
S-8 or Form S-4 or their then equivalents relating to shares of Common Stock
to be issued in connection with any acquisition of any entity or business or
issuable in connection with stock option or other employee benefit plans),
the Company shall send to the Warrantholder written notice of such
determination. If, within 15 days after receipt of such notice, the
Warrantholder shall so request in writing, the Company shall use all
reasonable efforts to include in such registration statement all or any part
of the Warrant Shares the Warrantholder requests to be registered; PROVIDED,
HOWEVER, that the Company shall have the right to postpone or withdraw any
such registration at any time without obligation to the Warrantholder. In
connection with any offering under this Section 8.1 involving an
underwriting, the Company shall not be required to include any Warrant Shares
in such underwriting unless (i) the holders thereof accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, (ii) if such underwriting has been initiated by the Company or
requested by another party that has contractual registration rights, all of
the shares of Common Stock held by the parties making such request or
entitled to
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<PAGE>
include shares of Common Stock pursuant to the same rights as the requesting
parties have been included in such registration, (iii) all of the shares of
Common Stock held by existing holders of registration rights on the date
hereof for which such registration has been requested by such holders have
been included in such registration, and (iv) then only in such quantity as
will not, in the opinion of the underwriters, interfere with the successful
public offering and sale of shares of Common Stock included in the
registration statement.
(b) If, in connection with any offering involving an underwriting of
Common Stock to be issued by the Company, the managing underwriter shall impose
a limitation on the number of shares of such Common Stock which may be included
in the registration statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution, then the Company shall be
obligated to include in such registration statement only such limited position
(if any) of the Warrant Shares with respect to which the Warrantholder has
requested inclusion hereunder and the managing underwriter shall approve;
PROVIDED, HOWEVER, that the Company shall not so exclude any Warrant Shares held
by the Warrantholders unless the Company has first excluded any and all
securities to be offered and sold by directors, officers and employees of
stockholders of the Company who do not have contractual "piggyback" rights to
include such securities.
(c) The Company shall use all reasonable efforts to maintain the
effectiveness for up to 30 days (or such shorter period of time as the
underwriters need to complete the distribution of the registered offering) of
any registration statement pursuant to which any of the Warrant Shares are being
offered pursuant to a registration under this Agreement, and from time to time
will amend or supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the Securities Act and
any applicable state securities or blue sky laws. The Company shall also
provide the Warrantholder with as many copies of the prospectus contained in any
such registration statement in which the Warrantholders' Warrant Shares are
included as it may reasonably request.
(d) Genta shall pay all Registration Expenses (as defined below) in
connection with any registration, qualification or compliance hereunder, and the
Warrantholder shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Warrant Shares
resold by the Warrantholder. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by Genta in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and
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disbursements of counsel for Genta and one counsel for the selling
stockholders, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration. "Selling Expenses"
shall mean all selling commissions, underwriting fees and stock transfer
taxes applicable to the Warrant Shares, and all other expenses incurred by
Warrantholder or any transferee of Warrantholder in connection with sales of
the Warrant Shares.
(e) With a view to making available to the Warrantholder the benefits of
Rule 144 promulgated under the Securities Act ("Rule 144") and any other rule or
regulation of the SEC that may at any time permit the Warrantholder to sell
Warrant Shares to the public pursuant to a registration statement, Genta
covenants and agrees to: (i) make and keep public information available, as
those terms are understood and defined in Rule 144, until the earlier of (A) the
third anniversary of the date hereof or (B) such date as all of the Warrant
Shares shall have been resold; (ii) file with the SEC in a timely manner all
reports and other documents required of Genta under the Securities Act and
Exchange Act; and (iii) furnish to the Warrantholder upon request, as long as
the Warrantholder owns any Warrant Shares (A) a written statement by Genta that
it has complied with the reporting requirements of the Securities Act and the
Exchange Act, (B) a copy of the most recent annual or quarterly report of Genta,
and (C) such other information as may be reasonably requested in order to avail
the Warrantholder of any rule or regulation of the SEC that permits the selling
of any such Warrant Shares pursuant to Rule 144.
8.2 INDEMNIFICATION.
(a) Genta agrees to indemnify and hold harmless the Warrantholder from and
against any losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) to which the Warrantholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement of a material fact contained in the
Registration Statement, on the effective date thereof, or in any amendment or
supplement thereto, or arise out of any failure by Genta to fulfill any
undertaking included in the Registration Statement or any amendment or
supplement thereto, and Genta will, except as provided below, as incurred,
reimburse the Warrantholder for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim; provided, however, that Genta shall not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of, or is based
upon (i) an untrue statement made in such Registration Statement or any
amendment or supplement thereto in reliance upon and in conformity with written
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information furnished to Genta by or on behalf of the Warrantholder specifically
for use in preparation of the Registration Statement; or (ii) an untrue
statement which is subsequently corrected in a supplement or amendment to the
Registration Statement and which supplement or amendment has been delivered by
Genta to the Warrantholder via overnight courier at least five (5) days prior to
the consummation of the transaction out of which arose such claim, damage or
liability.
(b) The Warrantholder agrees to indemnify and hold harmless Genta from and
against any losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) to which Genta may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon an untrue
statement made in such Registration Statement or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
Genta by or on behalf of the Warrantholder specifically for use in preparation
of the Registration Statement or any amendment or supplement thereto; provided,
however, that the Warrantholder shall not be liable in any such case for any
untrue statement included in any Prospectus which statement has been corrected,
in writing, by the Warrantholder and delivered to Genta in sufficient time
before the sale from which such loss occurred for Genta to have corrected the
Registration Statement and delivered an updated Prospectus or Prospectus
supplement to the Warrantholder.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 8.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the
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indemnified person shall be entitled to retain its own counsel at the expense
of such indemnifying person.
(d) If the indemnification provided for in this Section 8.2 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of Genta on the one hand and the Warrantholder on the other in connection
with the matters that resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by Genta on the one hand or the Warrantholder on the other
and the parties' relevant intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Genta and the
Warrantholder agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. 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.
(e) The obligations of Genta and the Warrantholder under this Section 8.2
shall be in addition to any liability which Genta and the Warrantholder may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls Genta or the Warrantholder within the meaning of
the Securities Act.
8.3 TRANSFERABILITY. The rights and obligations under this Section 8
shall be binding upon and available to subsequent transferees of this Warrant
and the Warrant Shares.
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9. NOTICES OF CORPORATE ACTION.
In the event of
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger involving the Company and any other party, including without limitation,
any Change of Control, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company, the Company will mail to the Warrantholder a notice specifying
(i) the date or expected date on which any such record is to be taken for the
purpose of such dividend, distribution or right and the amount and character of
any such dividend, distribution or right, (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, Change of Control, dissolution, liquidation or winding-up
is to take place and the time, if any such time is to be fixed, as of which the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for the securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, Change of Control, dissolution,
liquidation or winding-up and (iii) that in the event of a Change of Control,
the Warrants are exercisable immediately prior to the consummation of such
Change of Control.
10. DEFINITIONS.
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
ASSIGNMENT FORM: an Assignment Form in the form annexed hereto as
Exhibit B.
BUSINESS DAY: any day other than a Saturday, Sunday or a day on which
national banks are authorized by law to close in the City of New York, State of
New York.
CHANGE OF CONTROL: shall mean (i) the consolidation of the Company with or
merger of the Company with or into any other person in which the Company is not
the surviving corporation, (ii) the sale of all or substantially all of the
assets of the
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Company to any other person or (iii) any sale or transfer of any capital
stock of the Company after the date of this Agreement, following which 60% of
the combined voting power of the Company becomes beneficially owned by one
person or group acting together. For purposes of this definition, "group"
shall have the meaning as such term is used in Section 13(d)(1) under the
Exchange Act.
CLOSING DATE: shall mean October 1, 1996.
CLOSING PRICE: the meaning specified in Section 7.1(d)(i).
COMPANY OR GENTA: Genta Incorporated, a Delaware corporation.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934, as amended, shall include a
reference to a comparable section, if any, of any successor federal statute.
EXERCISE FORM: an Exercise Form in the form annexed hereto as Exhibit A.
EXERCISE PRICE: the meaning specified on the cover of this Warrant, as
such price may be adjusted pursuant to Section 7 hereof.
NASDAQ: the meaning specified in Section 1.1(c)(ii).
RULE 415: Rule 415 under the Securities Act or any successor rule
providing for the offering of securities on a continuous basis.
SEC: the Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act or the Exchange Act, whichever is the
relevant statute for the particular purpose.
SECURITIES: the meaning specified in Section 7.1(d)(ii).
SECURITIES ACT: the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section
of the Securities Act of 1933, as amended, shall include a reference to the
comparable section, if any, of any successor federal statute.
WARRANTHOLDER: the meaning specified on the cover of this Warrant.
-15-
<PAGE>
WARRANT SHARES: the meaning specified on the cover of this Warrant,
subject to the provisions of Section 7.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to this Warrant.
11.2 BINDING EFFECTS; BENEFITS. This Warrant shall inure to the benefit
of and shall be binding upon the Company and the Warrantholder and their
respective heirs, legal representatives, successors and assigns. Nothing in
this Warrant, expressed or implied, is intended to or shall confer on any person
other than the Company and the Warrantholder, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant.
11.3 AMENDMENTS AND WAIVERS. This Warrant may not be modified or amended
except by an instrument or instruments in writing signed by the Company and the
holder of this Warrant. Either the Company or the holder of this Warrant may,
by an instrument in writing, waive compliance by the other party with any term
or provision of this Warrant on the part of such other party hereto to be
performed or complied with. The waiver by any such party of a breach of any
term or provision of this Warrant shall not be construed as a waiver of any
subsequent breach.
11.4 SECTION AND OTHER HEADINGS. The section and other headings contained
in this Warrant are for reference purposes only and shall not be deemed to be a
part of this Warrant or to affect the meaning or interpretation of this Warrant.
11.5 FURTHER ASSURANCES. Each of the Company and the Warrantholder shall
do and perform all such further acts and things and execute and deliver all such
other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
11.6 NOTICES. All notices and other communications required or permitted
to be given under this Warrant shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by United States mail, postage
prepaid, to the parties hereto at the following addresses or to such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
-16-
<PAGE>
(a) if to the Company, addressed to:
Genta Incorporated
3550 General Atomics Drive
San Diego, California 92121
Telecopier: (619) 455-2712
Attention: Chief Executive Officer
with a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, California 94101
Telecopier: (415) 983-7396
Attention: Thomas E. Sparks, Jr., Esq.
(b) if to the Warrantholder, addressed to the address of such
Warrantholder appearing on the books of the Company.
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
11.7 SEPARABILITY. Any term or provision of this Warrant which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
11.8 GOVERNING LAW. This Warrant shall be deemed to be a contract made
under the laws of the State of California and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
agreements made and to be performed entirely within such State.
11.9 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this
Warrant shall be determined as conferring upon the Warrantholder any rights as a
stockholder of the Company or as imposing any liabilities on the Warrantholder
to purchase any
-17-
<PAGE>
securities whether such liabilities are asserted by the Company or by creditors
or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated as of October 1, 1996.
GENTA INCORPORATED
By /S/ Thomas H. Adams
--------------------------------------
Thomas H. Adams, Chairman of
the Board and Chief Executive
Officer
-18-
<PAGE>
EXHIBIT A
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT.
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Shares and (check one):
/ / herewith tenders payment for _______ of the Warrant Shares to the
order of Genta Incorporated in the amount of $_________ in accordance
with the terms of this Warrant; or
/ / herewith tenders this Warrant for _______ Warrant Shares pursuant to
the Net Issue Exercise provisions of Section 1.1(b) of the Warrant.
The undersigned requests that a certificate (or certificates) for such Warrant
Shares be registered in the name of the undersigned and that such certificate
(or certificates) be delivered to the undersigned's address below.
The undersigned represents that it is acquiring such Warrant Shares for its
own account for investment and not with a view to or for sale in connection with
any distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control).
Dated: .
---------------------------
Signature
----------------------------------------
----------------------------------------
(Print Name)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ---------------------------------------
A-1
<PAGE>
EXHIBIT B
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT.
ASSIGNMENT FORM
(To be executed only upon transfer of this Warrant)
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ____________________ the right
represented by such Warrant to purchase __________ shares of Common Stock of
Genta Incorporated to which such Warrant relates and all other rights of the
Warrantholder under the within Warrant (including, without limitation, the
registration rights provided in Section 8 of the within Warrant), and appoints
_________________ as Attorney to make such transfer on the books of Genta
Incorporated maintained for such purpose, with full power of substitution in the
premises.
Dated: .
---------------------
Signature
----------------------------------------
----------------------------------------
(Print Name)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ---------------------------------------
B-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,726,985
<SECURITIES> 0
<RECEIVABLES> 594,580
<ALLOWANCES> 0
<INVENTORY> 1,051,866
<CURRENT-ASSETS> 3,534,520
<PP&E> 9,594,688
<DEPRECIATION> (5,888,541)
<TOTAL-ASSETS> 13,535,795
<CURRENT-LIABILITIES> 11,003,258
<BONDS> 1,644,720
0
529
<COMMON> 34,113
<OTHER-SE> 853,175
<TOTAL-LIABILITY-AND-EQUITY> 1,353,795
<SALES> 1,011,115
<TOTAL-REVENUES> 1,011,115
<CGS> 483,905
<TOTAL-COSTS> 3,813,191
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,009
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,496,599)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
