SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Genta Incorporated
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[Company Logo]
3550 GENERAL ATOMICS COURT
SAN DIEGO, CA 92121
(619) 455-2700
February __, 1997
Dear Stockholder:
You are cordially invited to attend the Meeting of Stockholders which
will be held on March ___, 1997, at 11:00 a.m., at the Sheraton Grande Hotel,
10950 North Torrey Pines Road, La Jolla, California.
The formal notice of the Meeting and the Proxy Statement have been made a
part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return, at
an early date, the enclosed proxy in the prepaid envelope addressed to First
Interstate Bank of California, our agent, to ensure that your shares will be
represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN
THE ENCLOSED PROXY OR ATTEND THE MEETING IN PERSON.
A copy of the Company's Form 10-K for the year ended December 31, 1995,
as amended by Form 10-K/A, is enclosed.
The Board of Directors and Management look forward to seeing you at the
meeting.
Sincerely yours,
Thomas H. Adams
Chairman of the Board and
Chief Executive Officer
<PAGE>
GENTA INCORPORATED
------------
NOTICE OF MEETING OF STOCKHOLDERS
TO BE HELD MARCH __, 1997
------------
The Meeting of Stockholders of Genta Incorporated (the "Company") will be
held at the Sheraton Grande Hotel, 10950 North Torrey Pines Road, La Jolla,
California, on March __, 1997 at 11:00 a.m., for the following purposes:
1. To elect ___ Class III directors.
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to effectuate a one for seven reverse
stock split (if approved each seven shares of outstanding Common
Stock will be converted into one share of Common Stock and the
conversion ratios of the outstanding shares of Preferred Stock will
be commensurately adjusted) while maintaining the authorized number
of shares of Common Stock of the Company at _______________.
3. To transact such other business as may properly come before the
Meeting and any adjournment of the Meeting.
The Board of Directors has fixed the close of business on February __,
1997 as the record date for determining the stockholders entitled to notice
of and to vote at the Meeting and any adjournment thereof. A complete list
of stockholders entitled to vote will be available at the Assistant
Secretary's office, 3550 General Atomics Court, San Diego, California, for
ten days before the meeting.
February __, 1997 By Order of the Board of Directors,
Thomas H. Adams
Chairman of the Board and
Chief Executive Officer
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN IF
YOU PLAN TO ATTEND IN PERSON, PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE
MEETING.
<PAGE>
GENTA INCORPORATED
------------
PROXY STATEMENT
------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Genta Incorporated, a Delaware corporation (the
"Company"), of proxies in the accompanying form to be used at the Meeting of
Stockholders to be held at the Sheraton Grande Hotel, 10950 North Torrey
Pines Road, La Jolla, California, on March __, 1997 and any adjournment
thereof (the "Stockholders' Meeting"). The shares represented by the proxies
received in response to this solicitation and not revoked will be voted at
the Stockholders' Meeting. A proxy may be revoked at any time before it is
exercised by filing with the Secretary of the Company a written revocation or
a duly executed proxy bearing a later date or by voting in person at the
Stockholders' Meeting. On the matters coming before the Stockholders'
Meeting for which a choice has been specified by a stockholder by means of
the ballot on the proxy, the shares will be voted accordingly. If no choice
is specified, the shares will be voted FOR the election of the ___ nominees
for Class III director listed in this Proxy Statement and FOR the approval of
Proposal 2 described in this Proxy Statement.
Stockholders of record of the Company's Common Stock (the "Common Stock")
at the close of business on February , 1997 are entitled to notice of and
to vote at the Stockholders' Meeting. As of the close of business on such
date, the Company had 39,991,626 shares of Common Stock outstanding and
entitled to vote. Each holder of Common Stock is entitled to one vote for
each share held as of the record date. As of the close of business on
February , 1997, the Company also had 528,100 shares of Series A
Convertible Preferred Stock (the "Series A Preferred Stock") and 1,424 shares
of Series C Convertible Preferred Stock ("the Series C Preferred Stock")
outstanding and entitled to notice of the Stockholders' Meeting. Holders of
the Series A and Series C Preferred Stock are not entitled to vote at the
Stockholders' Meeting.
Directors are elected by a plurality vote of shares present in person or
represented by proxy and entitled to vote on the election of directors.
Proposal 2 will be decided by the affirmative vote of a majority of shares of
outstanding Common Stock. Any other matters submitted for stockholder
approval at this Stockholders' Meeting will be decided by the affirmative
vote of a majority of shares present in person or represented by proxy and
entitled to vote on each such matter. Abstentions with respect to any matter
are treated as shares present or represented and entitled to vote on that
matter and thus have the same effect as negative votes. Broker non-votes and
other circumstances in which proxy authority has been withheld with respect
to any matter are not deemed to be present or represented for purposes of
determining whether stockholder approval of that matter has been obtained.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation
may be made by certain directors, officers and other employees of the Company
by personal interview, telephone or facsimile. No additional compensation
will be paid to such persons for such solicitation. The Company will
reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation materials to beneficial owners of the Company's
Common Stock and Series A and Series C Preferred Stock.
This Proxy Statement and the accompanying form of proxy are being mailed
to stockholders on or about __________, 1997.
IMPORTANT
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT,
WHETHER YOU INTEND TO BE PRESENT AT THE STOCKHOLDERS' MEETING OR NOT, YOUR
SHARES OF COMMON STOCK CAN BE VOTED. THIS WILL NOT LIMIT YOUR RIGHT TO
ATTEND OR VOTE AT THE STOCKHOLDERS' MEETING.
<PAGE>
ELECTION OF DIRECTORS
The Company has three classes of directors serving staggered three-year
terms. Class I and Class II consist of two directors and Class III consists
of three directors. Currently, there is one director vacancy in Class II and
two director vacancies in Class III. _____ Class III directors are to be
elected at the Stockholders' Meeting for a term of three years expiring at
the Stockholders' Meeting in 2000 or until each such directors' successors
shall have been elected and qualified. The other directors of the Company
will continue in office for their existing terms, which expire in 1998 and
1999 for Class I and Class II directors, respectively.
Unless authority to vote for directors is withheld, it is intended that
the shares represented by the enclosed proxy will be voted for the election
of Robert E. Klem, Ph.D, who is currently a member of the Board of Directors
of the Company, and __________ as Class III Directors. In the event such
nominee becomes unable or unwilling to accept nomination or election, the
shares represented by the enclosed proxy will be voted for the election of
such person as the Board of Directors may select. The Board of Directors has
no reason to believe that such nominee will be unable or unwilling to serve.
The Board of Directors has not nominated anyone to fill the ____ Class
____ Director vacancies, while the Company pursues various restructuring
options. Proxies cannot be voted for more than one Class III Director.
Set forth below is information regarding the nominees for Class III
directors and the continuing directors of Class I and Class II, including
information furnished by them as to their principal occupations at present
and for the past five years, certain directorships held by each, their ages
as of __________, 1997 and the year in which each became a director of the
Company.
Name Age
---- ---
CLASS III
Robert E. Klem, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Dr. Klem has been a director of the Company since February 1991 and a Vice
President of the Company since October 1991. Dr. Klem co-founded JBL
Scientific, Inc. ("JBL"), a wholly owned subsidiary of the Company, in 1973
and, since then, has been Chairman of the Board and Chief Technical Officer
of JBL with responsibility for research, development and marketing
activities. Previously, Dr. Klem was the Plant Manager for E.I. DuPont in
Victoria, Texas from 1970 to 1974. Dr. Klem received his Ph.D. in Organic
Chemistry from the University of California at Riverside.
CLASS I
Thomas H. Adams, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Dr. Adams was the founder of the Company and has been Chairman of the Board
and Chief Executive Officer of the Company since February 1989. He
previously served as Chairman of the Board and Chief Executive Officer of
Gen-Probe Incorporated ("Gen-Probe"), which he co-founded in 1984. Prior to
joining Gen-Probe, he held the positions of Senior Vice President of Research
& Development and Chief Technical Officer at Hybritech Incorporated
("Hybritech"), a leading monoclonal antibody products company which was
acquired by Eli Lilly and Company in 1986. He had previously held senior
scientific management positions with Technicon Instruments Corp., the Hyland
Laboratories Division of Baxter Travenol, and DuPont. Dr. Adams is a
director of Life Technologies, Inc., La Jolla Pharmaceutical Company and
three private biotechnology firms, all life science companies. He received
his Ph.D. in Biochemistry from the University of California at Riverside.
Sharon B. Webster, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . 59
Dr. Webster has been a director of the Company since February 1989. She has
been President, Chief Executive Officer, Chairman of the Board and Managing
Director of A. A. Global, Inc., a consulting firm, since 1989. From 1988 to
1989 she was a financial consultant at Shearson Lehman Hutton Inc. From 1983
to 1988 Dr. Webster was an investment banker and account executive at
Johnston, Lemen & Co. Inc. She received her Ph.D. in International Political
and Economic Relations from the University of Virginia.
-2-
<PAGE>
Name Age
---- ---
CLASS II
Paul O.P. Ts'o, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Dr. Ts'o has been a director of the Company since its inception in February
1988. Dr. Ts'o is currently Professor of Biophysics, Department of
Biochemistry at The Johns Hopkins University. Dr. Ts'o has been a professor
at Johns Hopkins since 1967, and was Director of the Division of Biophysics
from 1973 to 1990. He received his Ph.D. from the California Institute of
Technology.
The Board of Directors held ten meetings during the year ended December
31, 1995. All directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and of the committees on which such
directors serve.
The Board of Directors has appointed an Executive Committee, a
Compensation Committee, a Stock Plan Committee, and an Audit Committee. The
Company does not have a standing Nominating Committee.
The members of the Executive Committee are Thomas H. Adams and
____________. The Executive Committee held three meetings during 1995.
Subject to the ultimate direction and control of the Board of Directors, the
Executive Committee's function is to exercise, with certain exceptions, all
of the powers and authority of the Board in the management of the business
and affairs of the Company.
The member of the Stock Plan Committee is ____________. The Stock Plan
Committee held one meeting during 1995. The Stock Plan Committee's functions
are to supervise the administration of, and grant options under, the 1991
Stock Plan of Genta Incorporated (the "1991 Stock Plan").
The members of the Compensation Committee are Thomas H. Adams and
____________. The Compensation Committee did not hold any meetings during
1995. The Compensation Committee's functions are to assist in the
implementation of, and provide recommendations with respect to, general and
specific compensation policies and practices of the Company.
The members of the Audit Committee are Thomas H. Adams,
and . The Audit Committee did not hold any meetings during
1995. The Audit Committee's functions are to review the scope of the annual
audit, monitor the independent auditor's relationship with the Company,
advise and assist the Board of Directors in evaluating the auditor's review,
supervise the Company's financial and accounting organization and financial
reporting, and nominate for stockholder approval at the annual meeting, with
the approval of the Board of Directors, a firm of certified public
accountants whose duty it is to audit the financial records of the Company
for the fiscal year for which they are appointed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CLASS ____ NOMINEES
FOR DIRECTOR LISTED ABOVE.
-3-
<PAGE>
PROPOSAL 2
APPROVAL FOR A ONE FOR SEVEN REVERSE SPLIT OF THE
COMPANY'S OUTSTANDING COMMON STOCK
The Company's Board of Directors has unanimously approved and
recommended that the stockholders of the Company approve an amendment to the
Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation") to effect a one for seven reverse split of the Company's
outstanding Common Stock. Under the terms of the proposed amendment the
Company's authorized shares of Common Stock would remain at ___________.
The text of the proposed amendment to the Company's Certificate of
Incorporation to effect the reverse split is set forth in Exhibit A to this
Proxy Statement. As of February 12, 1997 there were (i) 39,991,626 shares of
Common Stock outstanding, with 2,459,850 shares reserved for issuance
pursuant to the Company's Stock Plans; (ii) 528,100 shares of Series A
Convertible Preferred Stock ("Series A Preferred Stock"), par value $.001 per
share; (iii) 1,424 shares of Series C Convertible Preferred Stock ("Series C
Preferred Stock"), par value $.001 per share; and (iv) warrants to purchase
1,557,685 shares of Common Stock, with 1,557,685 shares of Common Stock
reserved for issuance upon exercise of warrants. As of February 12, 1997,
there were 9,949,567 and 2,689,012 shares of Common Stock reserved for
issuance upon the conversion of the Company's Series A Preferred Stock and
Series C Preferred Stock, respectively. In addition, there were 8,517,742
shares of Common Stock reserved for issuance for payment of a dividend on the
Series A Preferred Stock, payable September 23, 1997, and 122,100 shares of
Common Stock reserved for issuance upon conversion of the 4% Convertible
Debentures due August 1, 1997. Further, there were 600,000 shares of Series
D Preferred Stock reserved for issuance upon conversion of a $3,000,000
Senior Secured Convertible Bridge Notes (the "Bridge Notes") and 20,000,000
shares of Common Stock reserved for issuance upon conversion of the Series D
Preferred Stock. The Bridge Notes issued by the Company to certain investors
are initially convertible (a) into Series D Preferred Stock, which is in turn
convertible into an aggregate of 20,000,000 shares of Common Stock, and (b)
upon an event of default into 300,000,000 shares of Common Stock, in both
instances subject to antidilution adjustments. Additionally, five-year
warrants issued in connection with the sale of the Bridge Notes are
exercisable immediately into an aggregate of 20,000,000 shares of Common
Stock, subject to antidilution adjustment.
Since _______________, 1996 the Company's Common Stock has ben trading
at less than $1.00 per share. Effective February 7, 1997 the Company's
Common Stock was removed from the Nasdaq National Market and began trading on
the Nasdaq Small Cap Market under a conditional exemption. In order to
maintain its listing on the Nasdaq Small Cap Market the Company has
committed, among other things, to accomplish a reverse split of its Common
Stock sufficient to achieve a minimum bid price of its Common Stock of $1.50
per share on or before April 7, 1997. The Company is also obligated to
maintain a minimum bid price of $1.50 per share for the ten consecutive
trading days following such reverse stock split. If the Company's Common
Stock does not achieve a minimum bid price of at least $1.50 per share by
April 7, 1997, or does not maintain a minimum bid price of at least $1.50 per
share for a period of ten consecutive days immediately following the reverse
stock split, the Nasdaq Stock Market has indicated that the Company's Common
Stock will be delisted from the Nasdaq Stock Market. In addition, the
proposed reverse split will enable the Company to reserve adequate amounts of
Common Stock to meet its dividend obligations with respect to the Series A
and Series C Preferred Stockholders, if the Company is permitted to pay
dividends on such shares under Delaware corporate law. Further to the above
described uses, the additional authorized shares could be used for any proper
corporate purpose approved by the Company as described below under
"Advantages." These shares of Common Stock, if the amendment is approved,
could be issued without further stockholder approval except as required by
Delaware law and the rules of the Nasdaq Stock Market. The Company's
stockholders do not have any preemptive rights to acquire Common Stock. The
Board of Directors does not intend to issue any Common Stock except on terms
which it deems to be in the best interest of the Company and its stockholders.
The Company is in discussions concerning various capital raising or
restructuring alternatives. Several of such alternatives would require the
issuance of additional shares of the Company's capital stock. If this
proposal is approved, it may facilitate the Company's ability to enter into
such a transaction.
If this proposal is approved, the Certificate of Incorporation will be
amended in the form attached hereto as Exhibit A.
-4-
<PAGE>
ADVANTAGES
The reverse split and consequent increase in the price of the Company's
Common Stock may allow the Company to meet one of the Nasdaq Stock Market's
listing requirements and thus may enable the company to maintain its listing
on the Nasdaq Small Cap Market. The increased available capital may also
potentially provide the Company with the flexibility to issue additional
shares in connection with future financings or restructurings. However,
there can be no assurance that the Company will be able to consummate any
such financing or restructuring. Additional shares could also be used for
employee benefit plans or in connection with acquisitions by the Company. In
addition, additional shares may permit the issuance of warrants by the
Company in special purpose financings.
DISADVANTAGES
Although a proposal to increase the authorized capital stock of a
company may be construed as having an anti-takeover effect, neither the Board
of Directors nor the management of the Company views this proposal in that
perspective. However, the Company could use the additional shares to
frustrate persons seeking to effect a takeover or otherwise gain control of
the Company by, for example, privately placing shares with purchasers who
might side with the Board of Directors in opposing a hostile takeover bid.
In addition, shares of Common Stock may be issued in the event that the
rights issued in connection with the Company's Stockholder Rights Plan are
exercised. Shares of Common Stock could also be issued to a holder that
would thereafter have sufficient voting power to assure that any proposal to
amend or repeal the By-Laws or certain provisions of the Certificate of
Incorporation would not receive the requisite vote required. Such uses of
the Common Stock, could render more difficult or discourage an attempt to
acquire control of the Company, if such transaction were opposed by the Board
of Directors. Further, subject to stockholder approval requirements of the
Nasdaq SmallCap Market and Delaware law, the additional authorized shares not
otherwise required to meet the Company's obligations under its Certificate of
Incorporation could be issued by the Company without further stockholder
approval which would result in further dilution to the holders of Common
Stock. The Bridge Notes issued by the Company to certain investors are
initially convertible (a) into Series D Preferred Stock, which is in turn
convertible into an aggregate of 20,000,000 shares of Common Stock, and (b)
upon an event of default into 300,000,000 shares of Common Stock, in both
instances subject to anti-dilution adjustments. Additionally, five-year
warrants issued in connection with the sale of the Bridge Notes are
exercisable immediately into an aggregate of 20,000,000 shares of Common
Stock, subject to antidilution adjustment, subject to antidilution
adjustments. Company has no agreements or commitments with respect to its
authorized but unissued shares, except in connection with the redemption and
conversion of the Company's Preferred Stock, the conversion of the Bridge
Notes and the issuance of Common Stock dividends to holders of Preferred
Stock and the issuance of Common Stock upon exercise of options and warrants.
REQUIRED VOTE
In order to be adopted, this proposal must receive the affirmative vote
of holders holding a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of _______________, 1996
as to shares of Common Stock beneficially owned by (i) the Company's
directors, (ii) the Company's executive officers named in the Summary
Compensation Table set forth herein, (iii) the directors and executive
officers of the Company as a group and (iv) each person known by the Company
to be the beneficial owner of more than five percent of the outstanding
shares of the Common Stock of the Company. As of _______________, 1997, each
share of Series A Preferred Stock was convertible at the option of the
holder, unless previously redeemed, into [_____] shares of Common Stock.
Each share of Series C Preferred Stock will be convertible into that number
of shares of Common Stock determined by dividing the sum of $1,000 plus
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 Stock Market for a specified period.
The number of shares of Common Stock issuable upon conversion of the Series
C Preferred Stock included
-5-
<PAGE>
in the table set forth below is based upon the Nasdaq Stock Market closing
bid price of the Company's Common Stock on _______________, 1997 which was
$_____. Except as required by law or with respect to the creation or
amendment of senior classes of preferred stock or creation of different
series or classes of Common Stock, and in certain other instances, the
holders of Series A and Series C Preferred Stock do not have voting rights
until conversion into Common Stock. Except as otherwise indicated and
subject to applicable community property laws, each person has sole
investment and voting power with respect to the shares shown. Ownership
information is based upon information furnished by the respective individuals
or entities, as the case may be.
Beneficial Ownership of
Common Stock
-----------------------
Number Percent
of Shares of Class
--------- ---------
Institutional Venture Partners IV. . . . . %
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, California 94025
Jago Finance Limited . . . . . . . . . . . (2)
Wellington House
17 Union Street
St. Helier, NJ 07016
Domain Partners II, L.P. . . . . . . . . . (3) %
One Palmer Square
Princeton, New Jersey 08542
Domain Partners, L.P.. . . . . . . . . . . (4) %
One Palmer Square
Princeton, New Jersey 08542
Desai Capital Management Incorporated. . . (5) %
540 Madison Avenue
New York, New York 10022
[Kempton Investments Ltd.. . . . . . . . . (6) %
1183 Finch Avenue West
North York, M3J262
Canada
Newsun Limited . . . . . . . . . . . . . . (7) %
c/o ABN AMRO Bank
80 Rue du Rhone
1204 Geneva
Switzerland
Paul O.P. Ts'o . . . . . . . . . . . . . . (8) %
Thomas H. Adams. . . . . . . . . . . . . . (9) %
Robert E. Klem . . . . . . . . . . . . . . (10) *
Guy Van de Winckel . . . . . . . . . . . . -- *
Donald Picker. . . . . . . . . . . . . . . -- *
Sharon B. Webster. . . . . . . . . . . . . (8) *
Zofia E. Dziewanowska. . . . . . . . . . . (11) *
-6-
<PAGE>
Beneficial Ownership of
Common Stock
-----------------------
Number Percent
of Shares of Class
--------- ---------
All directors and executive officers
as a group (____ persons). . . . . . . . (12) %
- ---------------
* Less than one percent
(1) Includes shares issuable upon conversion of Series C Preferred
Stock beneficially owned by Institutional Venture Partners IV. Also
includes shares of Common Stock beneficially owned by
Institutional Venture Management IV (including shares issuable
upon the conversion of Series C Preferred Stock and shares which
may be acquired within 60 days after November 30, 1996 pursuant to the
exercise of options).
(2) Does not include shares of Common Stock held by Jagotec AG and
shares of Common Stock held by an affiliate of Jagotec AG.
(3) Includes shares issuable upon conversion of Series C Preferred
Stock beneficially owned by Domain Partners II, L.P. ("Domain II").
Also includes shares of common stock currently issuable upon the
conversion of Series A Preferred Stock and shares issuable upon
the exercise of warrants beneficially owned by Domain II.
(4) Includes shares issuable upon conversion of Series C Preferred
Stock beneficially owned by Domain Partners, L.P. ("Domain").
(5) Desai Capital Management Incorporated ("DCMI") acts as an investment
advisor to Equity-Linked Investors, L.P. ("ELI") and Equity-Linked
Investors-II ("ELI-II"). Rohit M. Desai is the managing general partner
of Rohit M. Desai Associates and Rohit M. Desai Associates-II, the
general partners of ELI and ELI-II, respectively. Mr Desai is the sole
stockholder, Chairman of the Board and President of DCMI. Includes
shares of Common Stock currently issuable upon the conversion of
the Series A Preferred Stock and shares issuable upon the
exercise of warrants beneficially owned by ELI and ELI-II. Does not
include shares of Common Stock owned directly by DCMI and
shares of Common Stock owned by an individually managed account for
which DCMI provides investment advisory services. DCMI has the power to
vote and dispose of the securities held of record by ELI and ELI-II and
the individually managed account. DCMI and Mr. Desai each disclaim
beneficial ownership of the securities held by ELI and ELI-II and the
individually managed account.
[(6) Represents shares issuable upon conversion of Series C preferred stock
beneficially owned by the holder.]
[(7) ].
(8) Includes shares of Common Stock which Dr. Ts'o and Dr. Webster
may each acquire within 60 days after November 30, 1996 pursuant to the
exercise of options.
(9) Includes shares of Common Stock held in several trusts for Dr.
Adams' children, as to which Dr. Adams has shared voting and investment
power. Also includes shares of Common Stock which may be
acquired within 60 days after November 30, 1996 pursuant to the exercise
of options.
(10) Includes shares of Common Stock held by a trust for Dr. Klem's
children, as to which Dr. Klem has shared voting and investment power.
Includes shares of Common Stock owned by Dr. Klem's wife, as to
which he disclaims beneficial ownership. Also, includes shares
of Common Stock which may be acquired within 60 days after November 30,
1996 pursuant to the exercise of options.
-7-
<PAGE>
(11) These shares may be acquired within 60 days after November 30, 1996
pursuant to the exercise of options.
(12) Includes shares of Common Stock which may be acquired within 60
days after , 1997 pursuant to the exercise of options.
Includes shares of Common Stock (including shares
currently issuable upon conversion of such Series A Preferred Stock and
shares issuable upon the exercise of warrants) held by family
trusts for the benefit of family members of directors and officers as to
which such directors and officers have voting and investment power and
includes shares held by entities affiliated with certain directors as
described in the footnotes above.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth compensation for services in all
capacities to the Company, for the fiscal years ended December 31, 1993, 1994
and 1995 of those persons who were, respectively, at December 31, 1995 (i)
the Company's Chief Executive Officer and (ii) the other 4 most highly
compensated executive officers of the Company whose total annual salary and
bonus for fiscal year 1995 exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------------------- ------------
Awards
------
Securities
Name and Other Annual Underlying
Principal Position Year Salary($) Bonus($) Compensation($) Options(#)
- ------------------ ---- -------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. 1995 $285,000 $ -- 200,000(1)
Chairman of the 1994 283,542 -- -- --
Board and Chief 1993 248,333 -- -- 50,000
Executive Officer
Zofia E. Dziewanowska, 1995 235,000 -- 14,759(4) 120,000(1)
Ph.D., M.D., Senior Vice 1994 137,348(2) 10,000 14,362(4) 120,000
President, Global Clinical 1993 -- -- -- --
Affairs
Guy Van de Winckel 1995 170,000 -- -- 60,000(1)
Vice President, European 1994 170,000 -- 37,000(4) --
Operations and President 1993 150,000 -- -- --
of Genta Pharmaceuticals
Europe, S.A.
Robert E. Klem, Ph.D. 1995 161,458 -- 2,850(5) 45,000(1)
Vice President, Chairman 1994 154,292 -- 2,580(5) --
of the Board of JBL 1993 155,334 -- 6,811(5) --
Donald Picker, Ph.D. 1995 210,000 -- -- 125,000(1)
Senior Vice President, 1994 209,167 -- -- --
Research and Development(3) 1993 189,583 -- 136,057(4) 25,000
</TABLE>
- ---------------
(1) These options (the "New Options") were granted in exchange for
unexercised options granted prior to April 20, 1995 with an exercise
price above $2.25 per share (the "Old Options"). The New Options were
granted at fair market value at the date of grant and have the same
vesting schedule as the Old Options. However, the New Options are not
exercisable until after April 20, 1997, regardless of the Old Option's
vesting schedule, unless the holder is terminated involuntarily without
cause prior to April 20, 1997.
-8-
<PAGE>
(2) Ms. Dziewanowska joined the Company in May 1994. Dr. Dziewanowska's
salary for 1994 reflects a partial year of service.
(3) Dr. Picker resigned from his position as an executive officer on January
31, 1996.
(4) Represents payments for expenses incurred in connection with relocation
including applicable tax gross-ups.
(5) Represents payments for an insurance policy covering Dr. Klem.
COMPENSATION OF DIRECTORS
Directors of the Company receive no fees for their services as directors
or committee members. Non-employee directors are reimbursed by the Company
for their out-of-pocket expenses incurred in attending meetings of the Board
of Directors and its committees. In addition, non-employee directors are
eligible to receive automatic grants of nonstatutory stock options pursuant
to the 1991 Stock Plan of Genta Incorporated. See "Approval of the Amended
and Restated 1991 Stock Plan of Genta Incorporated -- Non-Employee Directors."
During 1995, Dr. Ts'o, an outside director, received $26,833 under a
consulting agreement between Dr. Ts'o and the Company. The agreement may be
terminated by either party upon giving written notice to that effect.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the Company's fiscal year ended December 31, 1995, Thomas H. Adams,
James C. Blair and David F. Hale were the members of the Company's
Compensation Committee. Mr. Blair resigned from the Board of Directors on
October 8, 1996. Mr. Hale resigned from the Board of Directors on January
28, 1997. Dr. Adams is Chairman of the Board of Directors and Chief
Executive Officer of the Company. None of the executive officers of the
Company had any "interlock" relationship to report during the Company's
fiscal year ended December 31, 1995.
RELATIONSHIP WITH JAGOTEC. In December 1992, the Company and Jagotec
formed Genta Jago, a 50/50 joint venture to develop and commercialize
products in six major therapeutic areas. Under the arrangement, Jagotec
granted Genta Jago an exclusive license to its GEOMATRIX-REGISTERED
TRADEMARK- oral controlled-release technology for the development and
commercialization of approximately 25 specified products. In May 1995, the
parties entered into an agreement to expand Genta Jago by adding the rights
to develop and commercialize an additional 35 products. With these
additional products, Genta Jago now maintains the rights to develop
controlled-release formulations of approximately 60 products using Jagotec's
GEOMATRIX technology. Under the agreement, Genta Jago also acquired certain
manufacturing rights with respect to such products. In connection with the
expansion of Genta Jago, the parties elected to focus Genta Jago's activities
exclusively on GEOMATRIX-based products and, as a result, Genta Jago returned
to Genta in May 1995 the right to develop six ANTICODE products licensed from
Genta in 1992.
In connection with the formation of Genta Jago, the Company made an
initial capital contribution of $4 million to Genta Jago and issued 1,200,000
unregistered shares of Genta's Common Stock to Jagotec and an affiliate. To
obtain the additional product and manufacturing rights during 1995, Genta
applied $5 million in option and related fees paid to Jagotec and its
affiliates, of which $3.85 million was paid during 1994 (including $1.85 of
non-refundable fees charged to expense during 1994) and $1.15 million was
paid during the first quarter of 1995. The Company also issued an additional
1,240,000 unregistered shares of Genta's Common Stock to an affiliate of
Jagotec in May 1995. The Company recorded a charge for acquired in-process
research and development of $4.8 million during 1995 consisting of the fair
value of the 1,240,000 shares of Common Stock issued ($1.6 million), $2
million of refundable option fees paid during 1994, and the $1.15 million in
fees paid during the first quarter of 1995. Genta Jago is required to pay
certain additional fees to Jagotec upon Genta Jago's receipt of revenues from
third parties, and pay manufacturing royalties to Jagotec.
The Company is also required to provide loans to Genta Jago pursuant to
a working capital agreement which expires in October 1998. The loans are
advanced up to a mutually agreed upon maximum commitment amount, which amount
is established by the parties on a periodic basis. In connection with Genta
Jago's return of the ANTICODE license rights to Genta in May 1995, the
working capital loan payable by Genta Jago to Genta was credited with a
principal reduction of approximately
-9-
<PAGE>
$4.4 million. As of December 31, 1995, the Company had advanced working
capital loans of approximately $13.8 million to Genta Jago, net of principal
repayments and the aforementioned credit, which amount fully satisfied the
loan commitment established by the parties through March 31, 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 the necessary
financial resources to repay such loans to Genta.
Under the terms of the joint venture, Genta Jago has contracted with the
Company to conduct research and development and provide certain other
services. Revenues associated with providing such services, totaling $2.7
million in 1995, $2.9 million in 1994 and $2.3 million in 1993, are recorded
by the Company as a reduction of the related research and development and
general and administrative expenses. Terms of the arrangement also grant the
Company an option to purchase Jagotec's interest in Genta Jago exercisable
from December 1998 through 2000.
Dr. Adams is a managing director of Genta Jago. In addition, Jagotec is
a beneficial owner of more than 5% of the Company's outstanding Common Stock.
[GENTA JAGO-GENSIA COLLABORATIVE AGREEMENT. In January 1993, Genta Jago
entered into a collaboration agreement with Gensia for the development and
commercialization of certain oral controlled-release pharmaceutical products
for treatment of cardiovascular disease. Under the agreement, Gensia provides
funding for formulation and preclinical development to be conducted by Genta
Jago and is responsible for clinical development, regulatory submissions and
marketing. Genta Jago received $1.9 million, $4.9 million and $2.0 million of
research and development funding in 1995, 1994 and 1993, respectively, pursuant
to the agreement. Terms of the agreement provide Gensia exclusive rights to
market and distribute the products in North America, Europe and certain other
countries.
In connection with the Gensia agreement and a collaboration between
Boehringer Mannheim Pharmaceuticals Corporation and Gensia to develop and
co-promote Genta Jago's potential nifedipine product, Genta Jago received
$1.1 million in revenues in November 1994 and may receive additional
milestone payments triggered upon regulatory submissions and approvals, as
well as royalties or profit sharing ranging from 10 to 21 percent of product
sales, if any.
Dr. Adams is a member of Gensia's Scientific Advisory Board. Mr. Hale,
a former outside director, is Chairman of the Board of Directors, President
and Chief Executive Officer of Gensia.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
-10-
<PAGE>
STOCK OPTIONS
The following tables summarize the option grants to and exercises by the
Company's Chief Executive Officer and the Named Officers and the value of
these options held by such persons at the end of fiscal 1995. The Company
does not grant Stock Appreciation Rights. The Company granted options to
purchase a total of 1,679,730 shares to employees in fiscal 1995.
OPTION GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
------------------------------------------------------ --------------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- -------------- ------------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. . . . . . . . . . 150,000 8.93% 2.25 4/20/05 212,252 537,888
50,000 2.98% 2.25 4/20/05 70,751 179,296
Zofia E. Dziewanowska, Ph.D., M.D. . . . 120,000 7.14% 2.25 4/20/05 169,802 430,310
Guy Van De Winckel . . . . . . . . . . . 60,000 3.57% 2.25 4/20/05 84,901 215,155
Robert E. Klem, Ph.D . . . . . . . . . . 20,000 1.19% 2.25 4/20/05 28,300 71,718
25,000 1.49% 2.25 4/20/05 35,375 89,648
Donald Picker, Ph.D(3) . . . . . . . . . 100,000 5.95% 2.25 4/20/05 141,501 358,592
25,000 1.49% 2.25 4/20/05 35,375 89,648
</TABLE>
- ---------------
(1) All options granted to the Named Officers represent options ("New
Options") granted in exchange for unexercised options granted prior to
April 20, 1995 with an exercise price above $2.25 per share (the "Old
Options"). The New Options were granted at fair market value at the
date of grant and have the same vesting schedule as the Old Options.
However, the new options granted to executive officers are not
exercisable until April 20, 1997, regardless of the Old Options's
vesting schedule, unless the holder is terminated involuntarily without
cause prior to April 20, 1997.
(2) The 5% and 10% assumed rates of appreciation are calculated pursuant to
the regulations promulgated by the Securities and Exchange Commission
and do not represent the Company's estimate or projection of the future
Common Stock price.
(3) Dr. Picker resigned from his position as an executive officer on
January 31, 1996.
-11-
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR END(#) FISCAL YEAR END($)(1)
------------------ ------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. -- -- 200,000 -- --
Zofia E. Dziewanowska, Ph.D., M.D. -- -- 120,000 -- --
Guy Van de Winckel -- -- 60,000 -- --
Robert E. Klem, Ph.D. -- -- 45,000 -- --
Donald Picker, Ph.D. -- -- 125,000 -- --
</TABLE>
- ---------------------
(1) Calculated on the basis of the fair market value of the underlying
securities as of December 29, 1995 ($2.25 per share), minus the exercise
price.
REPORT ON REPRICING OF OPTIONS
In April 1995, the Stock Plan Committee of the Board of Directors
approved a program authorizing the exchange of certain outstanding stock
options held by all existing employees, including executive officers, and
certain consultants of the Company on the terms described below. The primary
purpose of the Company's Stock Plan is to attract and retain the services of
the Company's employees and to provide incentives to these individuals to
exert exceptional efforts toward the Company's success. The Stock Plan
Committee believed that by providing all full-time employees, including
executive officers whom have responsibility for the management and growth of
the Company, with an opportunity to obtain an equity interest in the Company,
the best interests of stockholders and the Company's executive management
would be closely aligned. The Committee concluded that the decline in the
market value of the Company's common stock had diminished the value of the
Company's Stock Plan to serve the aforementioned purposes and to serve as an
element of the Company's compensation arrangement. Accordingly, the
Committee approved the exchange program described below:
All employees of the Company, including executive officers, and certain
consultants were provided the opportunity to exchange their unexercised
options ("Old Options") on a one-for-one basis for new options ("New
Options") priced at the market value ($2.25 per share) on April 20, 1995.
The New Options have the same vesting schedule as the Old Options. However,
the New Options held by executive officers of the Company are not exercisable
until April 20, 1997 and require the optionee to be employed by the Company
through such date. The New Options held by employees (excluding executive
officers) and certain other holders are not exercisable until April 20, 1996
and require the optionee to be employed by, or under contract to, the Company
through such date.
STOCK PLAN AND COMPENSATION COMMITTEE
COMPENSATION COMMITTEE STOCK PLAN COMMITTEE
Thomas H. Adams
-12-
<PAGE>
TEN-YEAR OPTION REPRICINGS
The following table sets forth certain information concerning repricing
during the last ten years of options to purchase the Company's Common Stock
held by executive officers of the Company.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF MARKET OPTION TERM
SECURITIES PRICE EXERCISE REMAINING
UNDERLYING OF STOCK PRICE AT NEW AT DATE OF
NAME AND OPTION AT TIME OF TIME OF EXERCISE REPRICING
POSITION DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) (MONTHS)
-------- ---- ----------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Adams. . . . . . . . . . . . . . . April 20, 1995 150,000 $2.25 $9.00 $2.25 92
Chairman of the Board and April 20, 1995 50,000 2.25 7.25 2.25 104
Chief Executive Officer
Lyle J. Arnold(1). . . . . . . . . . . . . . April 20, 1995 20,000 2.25 10.00 2.25 80
Vice President, Research April 20, 1995 50,000 2.25 7.25 2.25 104
and Development
William E. Bliss(1). . . . . . . . . . . . . April 20, 1995 50,000 2.25 9.00 2.25 92
President and Chief April 20, 1995 40,000 2.25 7.25 2.25 104
Operating Officer
Lauren R. Brown. . . . . . . . . . . . . . . April 20, 1995 20,000 2.25 10.00 2.25 80
Vice President and
President of JBL
Zofia E. Dziewanowska. . . . . . . . . . . . April 20, 1995 120,000 2.25 8.50 2.25 109
Sr. Vice President, Global
Clinical Affairs
Robert E. Klem . . . . . . . . . . . . . . . April 20, 1995 20,000 2.25 10.00 2.25 80
Vice President and April 20, 1995 25,000 2.25 7.25 2.25 104
Chairman of the Board of
JBL
Kameron W. Maxwell(1). . . . . . . . . . . . April 20, 1995 20,000 2.25 10.00 2.25 80
Sr. Vice President, April 20, 1995 20,000 2.25 9.00 2.25 92
Pharmaceutical Operations April 20, 1995 10,000 2.25 8.00 2.25 101
April 20, 1995 15,000 2.25 7.25 2.25 104
Donald Picker(1) . . . . . . . . . . . . . . April 20, 1995 100,000 2.25 4.00 2.25 78
Sr. Vice President, April 20, 1995 25,000 2.25 7.25 2.25 104
Research & Development
Howard Sampson(1). . . . . . . . . . . . . . April 20, 1995 25,000 2.25 7.25 2.25 104
Vice President and Chief
Financial Officer
Lionel N. Simon(1) . . . . . . . . . . . . . April 20, 1995 20,000 2.25 10.00 2.25 80
Vice President, April 20, 1995 20,000 2.25 7.25 2.25 104
Licensing & Technology
Acquisitions
Guy Van de Winckel . . . . . . . . . . . . . April 20, 1995 60,000 2.25 8.25 2.25 92
Vice President, European
Operations
Robert Wang. . . . . . . . . . . . . . . . . April 20, 1995 20,000 2.25 10.00 2.25 80
Vice President, April 20, 1995 20,000 2.25 7.25 2.25 104
Pharmaceutical Operations
</TABLE>
- ------------------------
(1) Mr. Arnold, Mr. Bliss, Mr. Sampson and Drs. Maxwell, Simon and Picker
are no longer employed by the Company.
-13-
<PAGE>
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
OVERVIEW
The primary functions of the Compensation Committee of the Board of
Directors (the "Committee") are to assist in the implementation of, and
provide recommendations with respect to, general and specific compensation
policies and practices of the Company. As part of these functions, the
Committee determines, on an annual basis, the compensation to be paid to the
Company's Chief Executive Officer as well as other executive officers of the
Company. The Committee has established a number of objectives which serve as
guidelines in making its compensation decisions including:
- Providing a total compensation package which is competitive and,
therefore, enables the Company to attract and retain, on a long-term
basis, high-caliber executive personnel;
- Integrating compensation programs with the Company's short-term and
long-term strategic plan and business objectives; and
- Encouraging achievement of business objectives and enhancement of
stockholder value by providing executive management long-term
incentive through equity ownership.
In making its compensation determinations, the Committee has relied, in
part, on independent surveys and analyses of management compensation of
companies in the biotechnology and pharmaceutical industries (including
companies in the Nasdaq Pharmaceutical Stock Index used in the Company's
Stock Price Performance Graph set forth in the Proxy Statement) and
recommendations of management. The Committee believes it has established
executive compensation levels which are competitive with companies in the
biotechnology and pharmaceutical industries when taking into account relative
company size, stage of development, individual responsibilities and
experience, individual and overall corporate performance and geographic
location.
COMPONENTS OF EXECUTIVE COMPENSATION
The Company's potential therapeutic products are in various stages of
research and development, and no revenues have as yet been generated from
therapeutic product sales. As a result, the use of traditional performance
standards, such as corporate profitability, are not believed to be
appropriate in the evaluation of the performance of the Company or its
individual executives. The compensation of the Company's executive officers
is based, in substantial part, on the achievement of individual and overall
corporate objectives. Such objectives are established at the beginning of
each calendar year and modified as necessary to reflect changes in market
conditions, and other factors. Individual and overall corporate performance
is measured by reviewing whether these corporate objectives have been
achieved.
The Company's compensation package for executive officers generally
consists of annual cash compensation and long-term compensation in the form
of stock options. In light of the Company's stage of development,
considerable emphasis is placed on equity-based compensation in an effort to
preserve cash to finance the Company's research and development efforts.
ANNUAL CASH COMPENSATION
Compensation levels for the Company's executive officers are determined, in
part, through comparisons with companies of a similar size, stage of
development and level of complexity in the biotechnology and pharmaceutical
industries, and other companies with which the Company competes for
personnel. In addition, the compensation level for each executive officer
reflects an evaluation of the responsibilities required for each respective
position, individual experience levels, and individual performance and
contributions toward achievement of the Company's business objectives. The
compensation levels for the Company's executive officers, including the Chief
Executive Officer, are designed to be competitive within a range that the
Committee determines to be reasonable in light of the aforementioned factors.
The Committee generally sets its compensation levels at the midrange of the
comparable companies in order to remain competitive and attract key
personnel. The Committee reviews the salary levels of each executive officer
on an annual basis and makes adjustments as deemed necessary.
-14-
<PAGE>
STOCK OPTIONS
The Company's 1991 Stock Plan is administered by the Company's Stock Plan
Committee, a committee composed of two outside directors of the Company. The
Stock Plan Committee believes that by providing all full-time employees,
including executive officers who have responsibility for the management and
growth of the Company, with an opportunity to obtain an equity interest in
the Company, the best interests of stockholders and executives will be
closely aligned. Accordingly, all full-time employees, including executive
officers, are eligible to receive stock option grants from time to time,
giving them the right to purchase shares of the Company's Common Stock at a
specified price. As with annual cash compensation, the number of stock
options granted to officers is largely based on competitive practices. Prior
grants are taken into consideration when determining stock grants.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In December 1994, the Compensation Committee held a meeting in which, among
other things, the Committee established the 1995 compensation for the
Company's Chief Executive Officer, Dr. Thomas H. Adams, following the
procedures outlined above. During the course of the meeting, the Committee
reviewed the leadership of Dr. Adams as it related to the Company's
achievement of specific objectives during 1994 and reviewed the Company's
financial position. The Committee noted the Company's completion of several
important objectives during 1994 including, most notably, the advancement of
several of Genta Jago's Geomatrix-based products through formulations
development and pilot human pharmacokinetic studies and the completion of
preclinical animal studies in the Genta's ANTICODE cancer program, helping to
position Genta for the initiation of a human clinical trial in non-Hodgkin's
lymphoma patients in 1995. Despite these important corporate
accomplishments, the Committee acknowledged the Company's weakened financial
condition during 1994 resulting from volatility and constraints in the
capital markets, the absence of corporate partner revenues and other factors.
After consideration of the Company's financial condition and the importance
of retaining the Company's cash funds to finance its development programs,
the Committee elected to freeze the salary level for Dr. Adams and all other
executive officers of the Company for 1995 at the levels established in
December 1993. Dr. Adams did not participate in setting his own compensation.
This Compensation Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this report by reference, and shall not otherwise
be deemed filed under such Acts.
COMPENSATION COMMITTEE STOCK PLAN COMMITTEE
Thomas H. Adams
-15-
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of the
Company's Common Stock with the CRSP Total Return Index for The Nasdaq
National Market (U.S. and Foreign) (the "Nasdaq Composite Index") and the
CRSP Total Return Index for Nasdaq Pharmaceutical Stocks (the "Nasdaq
Pharmaceutical Index")(1). Although such a graph would normally be for a
five-year period, the Company's Common Stock has been publicly traded only
since December 17, 1991 and, as a result, the following graph commences as of
such date. The comparisons in the graph are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Company's Common Stock.
<TABLE>
<CAPTION>
December 17, December 31, December 31, December 31, December 31, December 31,
1991 1991 1992 1993 1994 1995
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Genta Incorporated . . . . $100.00 $97.5 $90.00 $73.75 $51.25 $22.50
Nasdaq Composite . . . . . 100.00 108.67 126.47 145.18 141.91 200.73
Nasdaq Pharmaceutical. . . 100.00 112.20 93.37 83.22 62.63 114.80
</TABLE>
Assumes a $100 investment on December 17, 1991 in each of the Company's
Common Stock, the securities comprising the Nasdaq Composite Index, and the
securities comprising the Nasdaq Pharmaceutical Index.
- -------------------
1 The Nasdaq Pharmaceutical Index includes all companies on Nasdaq within
SIC code 283. A copy of the list of companies which comprise the Nasdaq
Pharmaceutical Index may be obtained upon request by contacting Genta
Incorporated, Investor Relations, 3550 General Atomics Court, San Diego,
California (619) 455-2700.
-16-
<PAGE>
CERTAIN TRANSACTIONS
In July 1991, a trust as to which Mr. Hale has shared voting and
investment power acquired 25,000 shares of convertible preferred stock of the
Company (which converted into 12,500 shares of the Company's common stock
upon the closing of the Company's initial public offering in December 1991)
at a purchase price of $50,000, including a promissory note of $49,975,
secured by the shares of stock. The note, which bears interest at the rate
of 8% per annum (compounded annually), had an outstanding balance including
accrued interest of approximately $76,380 at December 31, 1996, and, as
amended, was forgiven by the Board on December 30, 1996.
In February 1991, in connection with the acquisition of JBL, the Company
entered into employment agreements with each of Drs. Brown and Klem, for an
initial salary of $110,000 each to be reviewed annually. The employment
agreements were for a period of five years ending in February 1996. Dr.
Brown is currently Vice President of the Company and President of JBL and his
current annual salary is $131,000. Dr. Klem is Vice President of the Company
and Chairman of the Board of JBL and his current annual salary is $155,000.
At the time of the acquisition, each of Drs. Brown and Klem received 92,872
shares of Common Stock subject to certain vesting provisions.
In addition, the Company issued a $600,000 five-year note payable to
four principals of JBL. Two such principals, Drs. Brown and Klem, each held
a 30.83% interest in the note. The note provided for interest at 10% per
annum, and was secured by substantially all of the assets and stock of JBL.
The note had an outstanding principal balance of approximately $124,000 at
January 1, 1995 and was paid in full during 1995. In addition, the Company
assumed certain leases between JBL and Granada Associates and Sueldo
Associates, both of which are affiliates of Drs. Brown and Klem. The current
aggregate monthly payment under such leases is approximately $29,000. In
addition, Drs. Klem and Brown and others granted the Company an option to
purchase land adjacent to JBL's premises.
In December 1991, the Company made a $400,000 loan to Dr. Picker to
facilitate his relocation to San Diego. The loan provided for interest at
the rate of 7.22% per annum and was secured by a deed of trust on Dr.
Picker's residence. Terms of the loan, as amended, provided for a $300,000
principal payment received by the Company in March 1996. The remaining
principal balance plus accrued interest, aggregating approximately $247,000,
is payable to the Company on December 31, 1999, or earlier in certain
instances, through the net proceeds, if any, resulting from the exercise of
the stock options in Genta held by Dr. Picker.
In March 1995, the Company obtained an aggregate of $3 million in
financing from venture capital firms affiliated with Dr. Blair and Mr.
Colella, former directors of the Company, in exchange for short-term
promissory notes. The promissory notes provided for interest at the rate of
10% per annum. Upon the closing of the Company's private placement of Common
Stock in May 1995, holders of the promissory notes agreed to convert the
outstanding balances plus accrued interest into an aggregate of approximately
1,778,000 shares of the Company's Common Stock at the same price per share as
that obtained by the Company in the private placement.
In November 1995, the Company entered into promissory note agreements
with venture capital firms affiliated with Dr. Blair and Mr. Colella which
provided for up to $1 million in interim financing to the Company. As of
December 31, 1995, the Company had drawn down $760,000 under the agreements
and the remaining $240,000 was funded in February 1996. Outstanding
principal balances accrued interest at the rate of 20% per annum and were
secured by a lien on a portion of the equity of JBL. In March 1996, holders
of the promissory notes agreed to convert the outstanding principal balances
plus accrued interest into approximately 1,044 shares of the Company's Series
C Preferred Stock on the same terms and conditions as those issued by the
Company in the Company's private placement of Series C Preferred Stock
completed in March 1996.
Mr. Bliss entered into a severance agreement with the Company in 1995
which provided for (1) the continued payment of Mr. Bliss' salary at his then
current annual rate until December 31, 1995, or under certain conditions
March 31, 1996; (2) eligibility for coverage under the Company's health
insurance plan; and (3) a waiver of certain vesting requirement imposed in
connection with the Company's repricing of options. In 1995, Mr. Bliss
received an aggregate of $121,458 under his severance agreement.
Dr. Maxwell entered into a similar severance agreement with the Company
in 1995 which provided for (1) the continued payment of Dr. Maxwell's salary
at his then current annual rate until December 31, 1995, or under certain
conditions
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<PAGE>
March 31, 1996; (2) eligibility for coverage under the Company's health
insurance plan; and (3) a waiver of certain vesting requirement imposed in
connection with the Company's repricing of options. In 1995, Dr. Maxwell
received an aggregate of $87,083 under his severance agreement.
In 1996, Mr. Sampson also entered a severance agreement with the Company
which provided for (i) continued payment of Mr. Sampson's salary at his then
current rate until October 18, 1997; (ii) eligibility for coverage under the
Company's health insurance plan; and (iii) waiver of certain vesting
requirements imposed in connection with the Company's repricing options. In
1996, Mr. Sampson received an aggregate of $37,522 under his severance
agreement.
STOCKHOLDER PROPOSALS
To be considered for presentation at the Stockholders' Meeting to be
held in March 1997, a stockholder proposal must be received at the offices of
the Company, 3550 General Atomics Court, San Diego, California 92121, a
reasonable time before the solicitation of proxies for the Stockholders'
Meeting.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
at the Stockholders' Meeting. If any other business is properly brought
before the Stockholders' Meeting, it is intended that proxies in the enclosed
form will be voted in accordance with the judgment of the persons voting the
proxies.
Under the securities laws of the United States, the Company's directors,
executive officers and any persons holding more than 10% of the Company's
Common Stock are required to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the SEC.
Specific due dates for these reports have been established and the Company is
required to identify in this proxy statement those persons who failed to
timely file these reports. All of the filing requirements were satisfied.
In making this disclosure, the Company has relied solely on written
representations of its directors and executive officers and copies of the
reports that have been filed with the Commission.
Whether you intend to be present at the Stockholders' Meeting or not, we
urge you to return your signed proxy promptly.
By order of the Board of Directors,
Thomas H. Adams
Chairman of the Board and
Chief Executive Officer
Dated: February __, 1997
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<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
GENTA INCORPORATED
GENTA INCORPORATED, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Genta
Incorporated, resolutions were duly adopted setting forth a proposed
amendment of the Restated Certificate of Incorporation of the corporation,
and declaring that such amendment is advisable and that such amendment should
be submitted to the stockholders of the corporation for approval. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that the first paragraph of Section A of Article IV of
the Restated Certificate of Incorporation, as amended, of this corporation be
amended to substantially read as follows:
"A. CLASSES OF STOCK. The total number of shares of all classes
of capital stock which the corporation shall have authority to issue is
_______________, of which __________________ shares of the par value of
One Tenth of One Cent ($.001) each shall be Common Stock (the "Common
Stock") and Five Million (5,000,000) shares of the par value of One
Tenth of One Cent ($.001) each shall be Preferred Stock (the "Preferred
Stock"). At the time this amendment becomes effective, each seven
shares of the Common Stock, par value of One Tenth of One Cent ($.001)
per share, issued and outstanding at such time shall be, and hereby
are, reduced and converted into one fully paid and nonassessable share
of Common Stock, par value of One Tenth of One Cent ($.001) per share,
of the corporation as herein authorized. Each outstanding stock
certificate of this corporation which immediately prior to the time
this amendment becomes effective represented one or more shares of
Common Stock, par value of One Tenth of One Cent ($.001) per share,
shall thereafter represent the number of whole shares of Common Stock,
par value of One Tenth of One Cent ($.001) per share, determined by
dividing the number of shares represented by such certificate
immediately prior to the time this amendment becomes effective by seven
and rounding such number up to the nearest whole integer. The amount
of capital represented by the new shares in the aggregate at the time
this Certificate of Amendment becomes effective shall be adjusted by
the transfer of One Tenth of One Cent ($.001) from the capital account
of the Common Stock to the additional paid in capital account for each
new share issued (except for new shares issued as the result of
rounding up fractional shares in which case no capital adjustment shall
be made), such transfer to be made at such time. The corporation shall
not be required to issue or deliver any fractional shares of Common
Stock. There shall be designated as capital in respect of such new
shares an amount equal to the aggregate par value of such shares. Upon
surrender by a holder of Common Stock of a certificate or certificates
for Common Stock, par value of One Tenth of One Cent ($.001), duly
endorsed, at the office of the corporation, the corporation shall, as
soon as practicable thereafter, issue and deliver at such office to
such holder of Common Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of
Common Stock, par value of One Tenth of One Cent ($.001) per share, to
which such holder shall be entitled as aforesaid."
SECOND: Thereafter, pursuant to resolutions of the corporation's Board
of Directors, the amendment was submitted to the stockholders of the
corporation for approval at a Meeting of Stockholders, and such meeting was
called and held upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware. The necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: The said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
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<PAGE>
IN WITNESS WHEREOF, said corporation has caused this certificate to
be signed by Thomas H. Adams, its Chairman of the Board, and by Robert Wang,
its Vice President, as of this ____ day of March, 1997.
GENTA INCORPORATED
By
---------------------------
Thomas H. Adams
Chairman of the Board
Attest:
- ------------------------------
Robert Wang
Vice President
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<PAGE>
GENTA INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR STOCKHOLDERS' MEETING ON MARCH __, 1997.
The undersigned stockholder of Genta Incorporated (the "Company")
acknowledges receipt of Notice of the Stockholders' Proxy Statement each
dated February __, 1997 and the undersigned revokes all prior proxies and
appoints Thomas H. Adams and [_______________________], or each of them,
proxies for the undersigned to vote all shares of Common Stock of the Company
which the undersigned would be entitled to vote at the Meeting of
Stockholders to be held at the Sheraton Grande Hotel, 10950 North Torrey
Pines Road, La Jolla, California at 2:00 p.m. on March __, 1997 and any
postponement or adjournment thereof, and instructs said proxies to vote as
follows:
1. ELECTION OF DIRECTORS:
/ / FOR the Class III nominee listed below (except as marked to the
contrary below)
/ / WITHHOLD AUTHORITY to vote for all Class III nominees listed below
[Robert E. Klem, Ph.D.]
(Instruction: To withhold authority to vote for the nominee, write the
nominee's name in the space provided below.)
2. APPROVAL FOR A ONE FOR SEVEN REVERSE SPLIT OF THE COMPANY'S
OUTSTANDING COMMON STOCK.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
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<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
CLASS III NOMINEE FOR DIRECTOR AND FOR APPROVAL OF THE REVERSE STOCK SPLIT.
GENTA INCORPORATED
BOARD OF DIRECTORS PROXY
Meeting of Stockholders March __, 1997
Dated this ________ day of ________, 1997
-------------------------------------------
(Signature of Stockholder)
-------------------------------------------
(Signature of Stockholder)
Please sign exactly as your name or names
appear hereon. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If shares are
held jointly, each holder must sign.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
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