SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
Genta Incorporated
(Name of Issuer)
Common Stock, par value $.001 per share
(Title of Class of Securities)
372 45 M 20 7
(CUSIP Number)
Paramount Capital Asset Management, Inc.
c/o Lindsay A. Rosenwald, M.D.
787 Seventh Avenue
New York, NY 10019
(212) 554-4300
with a copy to:
David R. Walner, Esq. Monica C. Lord, Esq.
Paramount Capital Asset Kramer, Levin,
Management, Inc. Naftalis & Frankel
787 Seventh Avenue 919 Third Avenue
New York, NY 10019 New York, NY 10022
(212) 554-4372 (212) 715-9100
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
July 30, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following: [_]
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 13 Pages
<PAGE>
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CUSIP No. 372 45 M 20 7 13D Page 2 of 13 Pages
- -------------------------- -------------------------------
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1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paramount Capital Asset Management, Inc.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO (see Item 3)
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e)
[_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
None
NUMBER OF --------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 13,966,335
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH None
--------------------------------------------
10 SHARED DISPOSITIVE POWER
13,966,335
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,966,335
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[_]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
76.6% (40.2% of the outstanding voting power)**
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------------------
** The outstanding shares of Series D Preferred Stock of the Issuer are entitled
to vote together with the holders of Common Stock on all matters submitted to a
vote of stockholders of the Issuer. As of July 24, 1997, Paramount Captal Asset
Management, Inc. may be deemed beneficially to own (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended) 40.2% of the
aggregate voting power of the Common Stock and Series D Preferred Stock
outstanding.
<PAGE>
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CUSIP No. 372 45 M 20 7 13D Page 3 of 13 Pages
- -------------------------- -------------------------------
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Aries Domestic Fund, L.P.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO (see Item 3)
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e)
[_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
None
NUMBER OF --------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,883,643
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH None
--------------------------------------------
10 SHARED DISPOSITIVE POWER
4,883,643
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,883,643
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[_]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.8% (14.1% of the outstanding voting power)**
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- -------------------------------------------------------------------------------
** The outstanding shares of Series D Preferred Stock of the Issuer are entitled
to vote together with the holders of Common Stock on all matters submitted to a
vote of stockholders of the Issuer. As of July 24, 1997, the Aries Domestic
Fund, L.P. may be deemed beneficially to own (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) 14.1% of the aggregate
voting power of the Common Stock and Series D Preferred Stock outstanding.
<PAGE>
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CUSIP No. 372 45 M 20 7 13D Page 4 of 13 Pages
- -------------------------- -------------------------------
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1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Aries Trust
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO (see Item 3)
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e)
[_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
None
NUMBER OF --------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 9,082,692
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH None
--------------------------------------------
10 SHARED DISPOSITIVE POWER
9,082,692
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,082,692
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[_]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.8% (26.1% of the outstanding voting power)**
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO (see Item 2)
- -------------------------------------------------------------------------------
** The outstanding shares of Series D Preferred Stock of the Issuer are entitled
to vote together with the holders of Common Stock on all matters submitted to a
vote of stockholders of the Issuer. As of July 24, 1997, The Aries Trust may be
deemed beneficially to own (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) 26.1% of the aggregate voting power
of the Common Stock and Series D Preferred Stock outstanding.
<PAGE>
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CUSIP No. 372 45 M 20 7 13D Page 5 of 13 Pages
- -------------------------- -------------------------------
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lindsay A Rosenwald, M.D.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO (see Item 3)
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e)
[_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
None
NUMBER OF --------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 13,966,335
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH None
--------------------------------------------
10 SHARED DISPOSITIVE POWER
13,966,335
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,966,335
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[_]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
76.6% (40.2% of the outstanding voting power)**
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
** The outstanding shares of Series D Preferred Stock of the Issuer are entitled
to vote together with the holders of Common Stock on all matters submitted to a
vote of stockholders of the Issuer. As of July 24, 1997, Lindsay A. Rosenwald,
M.D. may be deemed beneficially to own (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) 40.2% of the aggregate voting
power of the Common Stock and Series D Preferred Stock outstanding.
<PAGE>
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CUSIP No. 372 45 M 20 7 13D Page 6 of 13 Pages
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1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Mr. Michael S. Weiss
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [x]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF (see Item 3)
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e)
[_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
16,644
NUMBER OF --------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY None
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 16,644
--------------------------------------------
10 SHARED DISPOSITIVE POWER
None
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,644
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
[_]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4% (less than 0.1% of the outstanding voting power)**
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
** The outstanding shares of Series D Preferred Stock of the Issuer are entitled
to vote together with the holders of Common Stock on all matters submitted to a
vote of stockholders of the Issuer. As of July 24, 1997, Mr. Michael S. Weiss
may be deemed beneficially to own (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) less than 0.1% of the aggregate
voting power of the Common Stock and Series D Preferred Stock outstanding.
<PAGE>
SCHEDULE 13D
This Amendment No. 1 amends and supplements the following Items of the
Reporting Persons' Statement on Schedule 13D, dated February 24, 1997, (the
"Schedule").
Item 2. Identity and Background.
The information contained in Item 2 to the Schedule is hereby amended
and supplemented to read in its entirety as follows:
(a) This statement is filed on behalf of Paramount Capital Asset
Management, Inc. ("Paramount Capital"), Aries Domestic Fund, L.P.
("Aries Domestic"), The Aries Trust ("Aries Trust"), Dr. Lindsay A.
Rosenwald (together with Paramount Capital, Aries Domestic and Aries
Trust, the "Aries Reporting Persons") and Mr. Michael S. Weiss
(together with the Aries Reporting Persons, the "Filing Persons"). See
attached Exhibit M which is a copy of their agreement in writing to
file this statement jointly on behalf of each of them. Mr. Weiss and
the Aries Reporting Persons have made, and will continue to make,
their own investment decisions. The investment decisions of Mr. Weiss
may or may not coincide with the decisions made by the Aries Reporting
Persons. Each Filing Person expressly disclaims Mr. Weiss' membership
in a "group" with the Aries Reporting Persons within the meaning of
Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended.
(b) The business address of Paramount Capital, Aries Domestic, Dr.
Rosenwald and Mr. Weiss is 787 Seventh Avenue, 48th Floor, New York,
New York, 10019. The business address for Aries Trust is c/o
MeesPierson (Cayman) Limited, P.O. Box 2003, British American Centre,
Phase 3, Dr. Roy's Drive, George Town, Grand Cayman.
(c) Dr. Rosenwald is an investment banker, venture capitalist, fund
manager and sole shareholder of Paramount Capital, 1/ a Subchapter S
corporation incorporated in the State of Delaware. Paramount Capital
is the General Partner of Aries Domestic, 2/ a limited partnership
incorporated in Delaware. Paramount Capital is the Invest-
- --------
1/ Please see attached Exhibit B indicating the
executive officers and directors of Paramount Capital
and providing information called for by Items 2-6 of
this statement as to said officers and directors.
Exhibit B is herein incorporated by reference.
2/ Please see attached Exhibit C indicating the general
partner of Aries Domestic and the general partner's
executive officers and directors and providing
information called for by Items 2-6 of this statement
as to said general partners, officers and directors.
Exhibit C is herein incorporated by reference.
Page 7 of 13 Pages
<PAGE>
ment Manager to Aries Trust, 3/ a Cayman Islands Trust. Mr. Weiss is a
Senior Managing Director of Paramount Capital, Inc. and also is a
Director and Interim Chairman of the Issuer's Board of Directors.
(d) Dr. Rosenwald, Mr. Weiss, Paramount Capital, Aries Domestic and Aries
Trust and their respective officers, directors, general partners,
investment managers, and trustees have not, during the five years
prior to the date hereof, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) Dr. Rosenwald, Mr. Weiss, Paramount Capital, Aries Domestic and Aries
Trust and their respective officers, directors, general partners,
investment managers, and trustees have not been, during the five years
prior to the date hereof, parties to a civil proceeding of a judicial
or administrative body of competent juris- diction, as a result of
which such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
(f) Dr. Rosenwald and Mr. Weiss are citizens of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
The information contained in Item 3 to the Schedule is hereby amended
by adding the following:
On May 29, 1997, Aries Trust and Aries Domestic each delivered to the
Issuer an Irrevocable Notice of Conversion pursuant to which Aries Trust and
Aries Domestic converted $422,500 and $227,500 principal amount of the Notes
into 8,450 and 4,550 shares of Series D Preferred Stock, respectively. Pursuant
to an Amended and Restated Amendment Agreement (the "Amendment Agreement") filed
herewith as Exhibit Q, Aries Trust, Aries Domestic and the Issuer, inter alia,
(i) agreed to postpone the maturity date of the Notes to the earlier of (x)
December 31, 1997 and (y) the date of any decision, order or other determination
adverse to the Issuer or any of its directors by any court or other tribunal in
any lawsuit or other proceeding against the Issuer and/or any of its directors
by any of the Issuer's preferred stockholders, (ii) agreed that if Aries Trust
and Aries Domestic purchased securities in the Private Placement (as defined
below), then Aries Trust and Aries Domestic would not vote or dispose of such
securities or convert any such securities into, or exercise any such securities
for, any shares of Common Stock of the Issuer, for a period of 90 days from the
date of such purchase, (iii) changed the stated value of the Series D Preferred
Stock from ten dollars ($10.00) per share to one hundred dollars ($100.00) per
share, and the
- --------
3/ Please see attached Exhibit D indicating the
investment manager of the Aries Trust and the
investment manager's executive officers and directors
and providing information called for by Items 2-6 of
this statement as to said investment manager and
officers and directors. Exhibit D is herein
incorporated by reference.
Page 8 of 13 Pages
<PAGE>
conversion rate of the Notes from five dollars ($5.00) to fifty dollars ($50.00)
per share, in each case subject to adjustment upon the occurrence of certain
events and (iv) exchanged the Class A and Class B Bridge Warrants for New
Warrants in the forms filed herewith as Exhibits T, U, V and W.
The shares of Series D Preferred Stock issued, or issuable, upon
conversion of the Notes (excluding the interest on the Notes) are convertible
into 6,357,616 shares of Common Stock of the Issuer at a conversion rate equal
to $0.94375 per share, subject to adjustment upon the occurrence of certain
events. The New Warrants are exerciseable for an aggregate of 6,357,616 shares
of Common Stock at an exercise price of $0.471875 per share, subject to
adjustment upon certain events.
On June 30, 1997, the Issuer concluded a private placement (the
"Private Placement") of its securities for which Paramount Capital, Inc. acted
as placement agent in consideration for certain cash success fees and warrants
(the "Placement Warrants") to purchase up to 80,790 Class D Warrants and 16,158
shares of Series D Preferred Stock, in each case subject to adjustment upon the
occurrence of certain events, for an aggregate of $1,777,380. Aries Domestic and
Aries Trust used $304,500 and $565,500 of their respective general funds to
purchase securities of the Issuer in such private placement consisting,
respectively, of 3,500 and 6,500 shares of Series D Preferred Stock and 17,500
and 32,500 Class D Warrants which are currently convertible for 370,861 and
688,742 and exerciseable for 17,500 and 32,500 shares of Common Stock of the
Issuer, respectively. Mr. Weiss used $15,000 of his personal funds to purchase
securities of the Issuer in such private placement consisting of 150 shares of
Series D Preferred Stock and 750 Class D Warrants which are currently
convertible and exerciseable for 15,894 and 750 shares of Common Stock of the
Issuer, respectively. Paramount Capital, Inc. and the Issuer have entered an
agreement, pursuant to which, in consideration of Paramount Capital, Inc.'s
services as a financial advisor, Paramount Capital, Inc.'s designees will
receive, inter alia, warrants (the "Advisory Warrants") to purchase up to an
aggregate of 121,185 Class D Warrants and 24,237 shares of Series D Preferred
Stock, in each case subject to adjustment upon the occurrence of certain events,
for an aggregate of $2,666,070. Both the Placement Warrants and the Advisory
Warrants are exerciseable between December 31, 1997 and June 30, 2002. The
Filing Persons disclaim beneficial ownership of all the Common Stock except the
Purchased Common Stock. Mr. Weiss and the Aries Reporting Persons each disclaim
beneficial ownership of all securities held by the other.
Item 4. Purpose of Transaction.
The information contained in Item 4 to the Schedule is hereby amended
by adding the following:
The Filing Persons acquired securities of the Issuer as an investment
in the Issuer. Except as indicated in this Schedule 13D, the Filing Persons
currently have no plans or proposals that relate to or would result in any of
the matters described in subparagraphs (a) through (j) of Item 4 of Schedule
13D. Thomas H. Adams resigned from the Board of Directors of the Issuer, on
which he had served as Chairman of the Board of Directors, and the Aries
Reporting Persons appointed Mr. Weiss as a Director and he was elected by the
Board as
Page 9 of 13 Pages
<PAGE>
Interim Chairman of the Issuer's Board of Directors. David R. Walner, an
Associate Director of Paramount Capital, Inc. and an Associate Director and
Secretary of Paramount Capital, has been appointed Secretary of the Issuer. The
Aries Reporting Persons are considering the exercise of the rights set forth in
Section 7.20 of the Note and Warrant Purchase Agreement and are in the process
of identifying potential director nominees. The Reporting Persons have also
discussed with management of the Issuer the hiring of an individual to fill the
present vacancy in the position of Chief Executive Officer for the Issuer. Aries
Trust and Aries Domestic entered into a Line of Credit Agreement with the Issuer
pursuant to which Aries Trust and Aries Domestic provided the Issuer with a line
of credit of up to $500,000, which subsequently was repaid, in consideration for
warrants (the "Line of Credit Warrants") in the forms filed herewith as Exhibits
N and O, to purchase 50,000 shares of Common Stock of the Issuer exerciseable at
$2.50 per share, subject to adjustment upon the occurrence of certain events. On
April 25, 1997, the Court rejected the Plaintiffs' challenge to the Transactions
and ruled in favor of the Issuer, the Issuer's directors, Aries Trust and Aries
Domestic, who were the defendants. The Court issued an opinion stating that it
will enter judgment in favor of the Issuer and its directors in the Suit. The
Filing Persons may from time to time acquire, or dispose of, Common Stock and/or
other securities of the Issuer if and when they deem it appropriate. The Filing
Persons may formulate other purposes, plans or proposals relating to any of such
securities of the Issuer to the extent deemed advisable in light of market
conditions, investment policies and other factors.
Item 5. Interest in Securities of Issuer.
The information contained in Item 5 to the Schedule is hereby amended
and supplemented to read in its entirety as follows:
(a) As of July 24, 1997, Dr. Rosenwald and Paramount Capital, through the
acquisitions of securities by Aries Trust and Aries Domestic, may be
deemed beneficially to own 14,333,054 shares or 76.6% of the Issuer's
Common Stock, and Aries Domestic, Aries Trust and Mr. Weiss may be
deemed beneficially to own the following number of shares of Common
Stock:
Aries Domestic 4,883,643
Aries Trust 9,082,692
Mr. Weiss 16,644
Pursuant to Rule 13d-4 promulgated under the Securities Exchange Act
of 1934, as amended, the Filing Persons disclaim beneficial ownership
of all the Common Stock except the Purchased Common Stock. Pursuant to
Rule 13d-4 promulgated under the Securities Exchange Act of 1934, as
amended, the Aries Reporting Persons and Mr. Weiss each disclaim
beneficial ownership of all securities held by the other.
The outstanding shares of Series D Preferred Stock of the Issuer are
entitled to vote together with the holders of Common Stock on all
matters submitted to a vote of stockholders of the Issuer. As of July
24, 1997, the Aries Reporting Persons may be deemed beneficially to
own (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934, as
Page 10 of 13 Pages
<PAGE>
amended) 40.2% of the aggregate voting power of the Common Stock and
Series D Preferred Stock outstanding.
(b) Dr. Rosenwald and Paramount Capital share the power to vote or to
direct the vote, to dispose or to direct the disposition of those
shares owned by each of Aries Domestic and Aries Trust. Mr. Weiss has
the sole power to direct the vote and to dispose or to direct the
disposition of the shares that he owns.
(c) Other than the partial conversion of the Notes, the exchange of the
Class A Warrants and Class B Warrants for New Warrants, the receipt of
the Line of Credit Warrants and the purchase of Series D Preferred
Stock and Class D Warrants in the private placement and the other
transactions described herein, the Reporting Persons have not engaged
in any transactions in the Common Stock of the Issuer in the past 60
days. See Item 3.
(d & (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
The information contained in Item 6 to the Schedule is hereby amended
and supplemented to read in its entirety as follows:
Paramount Capital is the investment manager of Aries Trust and the
General Partner of Aries Domestic and in such capacities has the authority to
make certain investment decisions on behalf of such entities, including
decisions relating to the securities of the Issuer. In connection with its
investment management duties, Paramount Capital receives certain management fees
and performance allocations from Aries Trust and Aries Domestic. Dr. Rosenwald
is the sole shareholder of Paramount Capital. Additionally, on January 28, 1997,
the Issuer entered into a Letter of Intent with Paramount Capital, Inc. pursuant
to which it was contemplated that Paramount Capital, Inc. would act as financial
advisor and investment banker for the Issuer in future capital raising and other
strategic transactions for the Issuer. Dr. Rosenwald is the sole shareholder of
Paramount Capital, Inc. On June 30, 1997, the Issuer concluded a private
placement of its securities for which Paramount Capital, Inc. acted as placement
agent in consideration for certain cash success fees and Placement Warrants (see
Item 3). In addition, Paramount Capital, Inc. and the Issuer have entered an
agreement, pursuant to which, in consideration of Paramount Capital, Inc.'s
services as a financial advisor, Paramount Capital, Inc.'s designees will
receive, inter alia, Advisory Warrants (see Item 3). On June 6, 1997, Aries
Trust and Aries Domestic entered into a Line of Credit Agreement with the Issuer
pursuant to which Aries Trust and Aries Domestic advanced a line of credit of up
to $500,000 in consideration of the Line of Credit Warrants (see Item 4).
Certain directors and officers of Paramount Capital and Paramount Capital, Inc.
are now also directors and/or officers of the Issuer (see Item 4).
Page 11 of 13 Pages
<PAGE>
Except as indicated in this 13D and the exhibits hereto, there is no
contract, arrangement, understanding or relationship between the Filing Persons
and any other person, with respect to any securities of the Issuer.
Item 7. Material to Be Filed as Exhibits
The information contained in Item 7 to the Schedule is hereby amended
by adding the following Exhibits:
Exhibit M: Agreement of Joint Filing of Schedule 13D.
Exhibit N: Warrant for the purchase of 32,500 shares
of Common Stock of the Issuer, issued to
Aries Trust pursuant to the Senior Secured
Line of Credit Agreement between the Issuer,
Aries Trust and Aries Domestic.
Exhibit O: Warrant for the purchase of 17,500 shares
of Common Stock of the Issuer, issued to
Aries Domestic pursuant to the Senior
Secured Line of Credit Agreement between the
Issuer, Aries Trust and Aries Domestic.
Exhibit P: Amended Certificate of Designation for
Series D Convertible Preferred Stock of
Genta Incorporated.
Exhibit Q: Amended and Restated Amendment Agreement
between the Issuer, Aries Trust and Aries
Domestic.
Exhibit R: Amended and Restated Senior Secured
Convertible Bridge Note for $1,050,000
issued to Aries Domestic.
Exhibit S: Amended and Restated Senior Secured
Convertible Bridge Note for $1,950,000
issued to Aries Trust.
Exhibit T: New Class A Bridge Warrant for the Purchase
of 350,000 shares of Common Stock issued to
Aries Domestic.
Exhibit U: New Class A Bridge Warrant for the Purchase
of 650,000 shares of Common Stock issued to
Aries Trust.
Exhibit V: New Class B Bridge Warrant for the Purchase
of 350,000 shares of Common Stock issued to
Aries Domestic.
Exhibit W: New Class B Bridge Warrant for the Purchase
of 650,000 shares of Common Stock issued to
Aries Trust.
Page 12 of 13 Pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
PARAMOUNT CAPITAL ASSET MANAGEMENT, INC.
Dated: July 24, 1997
New York, NY By: /s/ Lindsay A. Rosenwald
---------------------------------------
Lindsay A. Rosenwald, M.D.
President
ARIES DOMESTIC FUND, L.P.
By: Paramount Capital Asset Management, Inc.
General Partner
Dated: July 24, 1997
New York, NY By: /s/ Lindsay A. Rosenwald
---------------------------------------
Lindsay A. Rosenwald, M.D.
President
THE ARIES TRUST
By: Paramount Capital Asset Management, Inc.
General Partner
Dated: July 24, 1997
New York, NY By: /s/ Lindsay A. Rosenwald
---------------------------------------
Lindsay A. Rosenwald, M.D.
President
Dated: July 24, 1997
New York, NY By: /s/ Lindsay A. Rosenwald
---------------------------------------
Lindsay A. Rosenwald, M.D.
Dated: July 24, 1997
New York, NY By: /s/ Michael S. Weiss
---------------------------------------
Mr. Michael S. Weiss
Page 13 of 13 Pages
<PAGE>
EXHIBIT M
AGREEMENT
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agrees jointly to prepare and to file
with regulatory authorities a Schedule 13D and any future amendments thereto
reporting each of the undersigned's ownership of securities of Genta
Incorporated and hereby affirm that such Schedule 13D is being filed on behalf
of each of the undersigned.
PARAMOUNT CAPITAL ASSET MANAGEMENT, INC.
Dated: July 23, 1997
New York, NY By: /s/ Lindsay A. Rosenwald
---------------------------------
Lindsay A. Rosenwald, M.D.
President
ARIES DOMESTIC FUND, L.P.
By: Paramount Capital Asset Management, Inc.
General Partner
Dated: July 23, 1997
New York, NY By: /s/ Lindsay A. Rosenwald
--------------------------------
Lindsay A. Rosenwald, M.D.
President
THE ARIES TRUST
By: Paramount Capital Asset Management, Inc.
Investment Manager
Dated: July 23, 1997
New York, NY By: /s/ Lindsay A. Rosenwald
--------------------------------
Lindsay A. Rosenwald, M.D.
President
Dated: July 23, 1997
New York, NY /s/ Lindsay A. Rosenwald
--------------------------------
Lindsay A. Rosenwald, M.D.
Dated: July 23, 1997
New York, NY /s/ Michael S. Weiss
---------------------------------
Mr. Michael S. Weiss
<PAGE>
Exhibit N
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
GENTA INCORPORATED
WARRANT FOR THE PURCHASE OF SHARES OF
-------------------------------------
COMMON STOCK
------------
NO. 1 32,500 SHARES
FOR VALUE RECEIVED, GENTA INCORPORATED, a Delaware corporation
(the "Company"), hereby certifies that THE ARIES TRUST A CAYMAN ISLAND TRUST, or
its permitted assigns, is entitled to purchase from the Company, at any time or
from time to time commencing on June 6, 1997, and prior to 5:00 P.M., New York
City time, on June 6, 2002 (the "Termination Date"), thirty-two-thousand
five-hundred (32,500) fully paid and non-assessable shares of the Common Stock,
$.001 par value per share, of the Company at an exercise price equal two dollars
and fifty cents ($2.50) (Hereinafter, (i) said Common Stock, together with any
other equity securities which may be issued by the Company with respect thereto
or in substitution therefor, is referred to as the "Common Stock", (ii) the
shares of the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares", (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate Warrant Price", (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "Per Share Warrant Price", (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant
is referred to as the "Holder" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "Holders"). The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such adjustment, the number of Warrant Shares shall be adjusted
by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
<PAGE>
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on June 6, 1997 and prior to the Termination
Date, by the holder:
(i) by the surrender of this Warrant (with the subscription form
at the end hereof duly executed) at the address set forth in
Subsection 9(a) hereof, together with proper payment of the
Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part, with payment for Warrant Shares made
by certified or official bank check payable to the order of the
Company; or
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "Cashless Exercise") at
the address set forth in Subsection 9(a) hereof. Such presentation
and surrender shall be deemed a waiver of the Holder's obligation
to pay the Aggregate Warrant Price, or the proportionate part
thereof if this Warrant is exercised in part. In the event of a
Cashless Exercise, the Holder shall exchange its Warrant for that
number of Warrant Shares subject to such Cashless Exercise
multiplied by a fraction, the numerator of which shall be the
difference between the then current Market Price per share (as
hereinafter defined) of Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. The then current market
price per share of the Common Stock at any date (the "Market
Price") shall be deemed to be the last sale price of the Common
Stock on the business day prior to the date of the Cashless
Exercise or, in case no such reported sales take place on such
day, the average of the last reported bid and asked prices of the
Common Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on any
such exchange, the representative closing bid price of the Common
Stock as reported by the NASDAQ Bulletin Board ("NASDAQ"), or
other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price of the
Common Stock as determined in good faith by the Board of
Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, pay
to the Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
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<PAGE>
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, if any, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees
that, prior to the expiration of this Warrant, the Company will at all times (a)
have authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, except for the restrictions on sale or transfer set forth in the
Securities Act of 1933, as amended (the "Act"), and restrictions created by or
on behalf of the Holder, and free and clear of all preemptive rights and rights
of first refusal; and (b) when the Company prepares and files a registration
statement covering the shares of Common Stock issued or issuable upon exercise
of this Warrant with the Securities and Exchange Commission (the "SEC") which
registration statement is declared effective by the SEC under the Act and the
Company lists its Common Stock on any national securities exchange or other
quotation system, it will use its reasonable best efforts to cause the shares of
Common Stock subject to this Warrant to be listed on such exchange or quotation
system.
3. Protection Against Dilution.
(a) If, at any time or from time to time after the date of
this Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidence of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, which together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than five percent (5%)
of the Company's net worth) (any such non-excluded event being herein called a
"Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be the then current
Market Price of the Common Stock. An adjustment made pursuant to this Subsection
3(a) shall become effective immediately after the record date of any such
Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant
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<PAGE>
Price shall be adjusted to be equal to a fraction, the numerator of which shall
be the Aggregate Warrant Price and the denominator of which shall be the number
of shares of Common Stock or other capital stock of the Company which he would
have owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case
the Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock or any rights, options or warrants to purchase
Common Stock or securities convertible into Common Stock, in each case for a
price per share or entitling the holders thereof to purchase Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "Total Consideration") by (ii) the number of
additional shares of Common Stock issuable upon exercise or conversion of such
securities) less than either the then current Market Price of the Common Stock
or the current Per Share Warrant Price in effect on the date of such issuance or
sale, the Per Share Warrant Price shall be adjusted by multiplying the Per Share
Warrant Price then in effect by a fraction, the numerator of which shall be (x)
the sum of (A) the number of shares of Common Stock outstanding on the date of
such issuance or sale plus (B) the Total Consideration divided by either the
current Market Price of the Common Stock or the current Per Share Warrant Price,
whichever is greater, and the denominator of which shall be (y) the number of
shares of Common Stock outstanding on the date of such issuance or sale plus the
maximum number of additional shares of Common Stock issued, sold or issuable
upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be
required in the case of the issuance by the Company of (i) Common Stock pursuant
to the exercise or conversion of any Warrant or any other options, warrants or
any convertible securities currently outstanding or outstanding as a result of
securities issued in connection with the Company's current private placement
offering pursuant to the Confidential Term Sheet dated May 20, 1997 (as
hereafter supplemented and amended, the "Term Sheet") pursuant to a private
placement of the Company's securities (an "Offering"); provided, that the
exercise price or conversion price at which such options, warrants or
convertible securities are exercised or converted, as the case may be, is equal
to the exercise price or conversion price in effect as of the date of this
Warrant or as of the date of issuance with respect to securities issued pursuant
to an Offering (except for standard anti-dilution adjustments) and (ii) shares
of Common Stock issued or sold pursuant to stock purchase or stock option plans
or other similar arrangements that are approved by the Company's Board of
Directors.
(e) In case of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in case of any sale
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<PAGE>
or conveyance to another entity of the property of the Company as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange effected in
connection with a merger of a third corporation into the Company), the Holder of
this Warrant shall have the right thereafter to receive on the exercise of this
Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than thirty (30) days prior to such event. A sale of all or substantially all of
the assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any adjustments
which by reason of this Subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment; provided,
further, however, that adjustments shall be required and made in accordance with
the provisions of this Section 3 (other than this Subsection 3(g)) not later
than such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon
- 5 -
<PAGE>
the exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Chief Financial Officer of
the Company shall promptly prepare a certificate setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or the
effect of such modification and a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause copies
of such certificate to be mailed to the Holders of the Warrants. In the event of
a dispute with respect to any adjustment required pursuant to Section 3, the
Holder may appoint, at the Company's expense, an independent financial advisor
(e.g. an investment banking or accounting firm)reasonably acceptable to the
Company to calculate such adjustment. Such determination shall be binding upon
the Holder and the Company.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock, the Company
shall mail notice thereof to the Holders of the Warrants not less than 15 days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares
of the Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
5. Registration Under Securities Act of 1933.
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<PAGE>
(a) The Company shall include the Warrant Shares on the Shelf
Registration Statement (as defined in the Term Sheet) and the Holder shall
otherwise have the registration rights set forth in Section 5 of the
subscription agreement (the "Subscription Agreement") to be entered into between
the purchasers of units (as described in the Term Sheet) and the Company. By
acceptance of this Warrant, the Holder agrees that it shall have the same
obligations, and otherwise comply with, the provisions in such Section 5 of the
Subscription Agreement to same extent as if it were a party thereto. To the
extent that no Final Closing Date (as defined in the Subscription Agreement)
occurs or the Offering is terminated, the rights granted to Holder hereunder to
have its shares registered shall begin as of December 6, 1997 on the same terms
as provided in Section 5 of the Subscription Agreement.
(b) Until all Warrant Shares have been sold under a
Registration Statement or pursuant to Rule 144, the Company shall use its
reasonable best efforts to file with the Securities and Exchange Commission all
current reports and the information as may be necessary to enable the Holder to
effect sales of its shares in reliance upon Rule 144 promulgated under the Act.
6. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws.
The Company may treat the registered Holder of this Warrant as he or it appears
on the Company's books at any time as the Holder for all purposes. The Company
shall permit any Holder of a Warrant or his duly authorized attorney, upon
written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All warrants
issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of the holder thereof shall be identical to
those of the Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
8. Warrant Holder Not Shareholder. Except as otherwise
provided herein, this Warrant does not confer upon the Holder any right to vote
or to consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
9. Communication. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 3550 General Atomics Court, San Diego, CA
92121:
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President or other address as the Company has designated in writing to the
Holder, or
(b) the Holder at c/o Paramount Capital Asset Management,
Inc., 787 Seventh Avenue, New York, NY, 10019, Attn: Lindsay A. Rosenwald, M.D.
or other such address as the Holder has designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the principles of conflicts of law thereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be hereunto affixed and attested by its
Secretary this 6th day of June 1997.
GENTA INCORPORATED
By: ______________________________
Name:
Title:
ATTEST:
- -------------------------------
Secretary
[Corporate Seal]
<PAGE>
SUBSCRIPTION
-------------
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, par value $.001 per share, of
Genta Incorporated covered by said Warrant, and makes payment therefor in full
at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
-----------------
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, par value $.001 per share, of Genta
Incorporated pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of Genta
Incorporated.
Dated:_______________ Signature:____________________
ADDRESS:______________________
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, par value $.001 per share, of Genta Incorporated covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of Genta Incorporated.
Dated:_______________ Signature:____________________
ADDRESS:______________________
<PAGE>
Exhibit O
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
GENTA INCORPORATED
WARRANT FOR THE PURCHASE OF SHARES OF
-------------------------------------
COMMON STOCK
------------
NO. 1 17,500 SHARES
FOR VALUE RECEIVED, GENTA INCORPORATED, a Delaware corporation
(the "Company"), hereby certifies that ARIES DOMESTIC FUND, L.P., or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on June 6, 1997, and prior to 5:00 P.M., New York City
time, on June 6, 2002 (the "Termination Date"), seventeen-thousand five-hundred
(17,500) fully paid and non-assessable shares of the Common Stock, $.001 par
value per share, of the Company at an exercise price equal two dollars fifty
cents ($2.50) (Hereinafter, (i) said Common Stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock", (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares", (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate Warrant Price", (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "Per Share Warrant Price", (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant
is referred to as the "Holder" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "Holders"). The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such adjustment, the number of Warrant Shares shall be adjusted
by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
<PAGE>
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on June 6, 1997 and prior to the Termination
Date, by the holder:
(i) by the surrender of this Warrant (with the subscription form
at the end hereof duly executed) at the address set forth in
Subsection 9(a) hereof, together with proper payment of the
Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part, with payment for Warrant Shares made
by certified or official bank check payable to the order of the
Company; or
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "Cashless Exercise") at
the address set forth in Subsection 9(a) hereof. Such presentation
and surrender shall be deemed a waiver of the Holder's obligation
to pay the Aggregate Warrant Price, or the proportionate part
thereof if this Warrant is exercised in part. In the event of a
Cashless Exercise, the Holder shall exchange its Warrant for that
number of Warrant Shares subject to such Cashless Exercise
multiplied by a fraction, the numerator of which shall be the
difference between the then current Market Price per share (as
hereinafter defined) of Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. The then current market
price per share of the Common Stock at any date (the "Market
Price") shall be deemed to be the last sale price of the Common
Stock on the business day prior to the date of the Cashless
Exercise or, in case no such reported sales take place on such
day, the average of the last reported bid and asked prices of the
Common Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on any
such exchange, the representative closing bid price of the Common
Stock as reported by the NASDAQ Bulletin Board ("NASDAQ"), or
other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price of the
Common Stock as determined in good faith by the Board of
Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, pay
to the Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, if any, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of
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this Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees
that, prior to the expiration of this Warrant, the Company will at all times (a)
have authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, except for the restrictions on sale or transfer set forth in the
Securities Act of 1933, as amended (the "Act"), and restrictions created by or
on behalf of the Holder, and free and clear of all preemptive rights and rights
of first refusal; and (b) when the Company prepares and files a registration
statement covering the shares of Common Stock issued or issuable upon exercise
of this Warrant with the Securities and Exchange Commission (the "SEC") which
registration statement is declared effective by the SEC under the Act and the
Company lists its Common Stock on any national securities exchange or other
quotation system, it will use its reasonable best efforts to cause the shares of
Common Stock subject to this Warrant to be listed on such exchange or quotation
system.
3. Protection Against Dilution.
(a) If, at any time or from time to time after the date of
this Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidence of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, which together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than five percent (5%)
of the Company's net worth) (any such nonexcluded event being herein called a
"Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be the then current
Market Price of the Common Stock. An adjustment made pursuant to this Subsection
3(a) shall become effective immediately after the record date of any such
Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which he would have
owned immediately following
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<PAGE>
such action had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this Subsection 3(b) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case
the Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock or any rights, options or warrants to purchase
Common Stock or securities convertible into Common Stock, in each case for a
price per share or entitling the holders thereof to purchase Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "Total Consideration") by (ii) the number of
additional shares of Common Stock issuable upon exercise or conversion of such
securities) less than either the then current Market Price of the Common Stock
or the current Per Share Warrant Price in effect on the date of such issuance or
sale, the Per Share Warrant Price shall be adjusted by multiplying the Per Share
Warrant Price then in effect by a fraction, the numerator of which shall be (x)
the sum of (A) the number of shares of Common Stock outstanding on the date of
such issuance or sale plus (B) the Total Consideration divided by either the
current Market Price of the Common Stock or the current Per Share Warrant Price,
whichever is greater, and the denominator of which shall be (y) the number of
shares of Common Stock outstanding on the date of such issuance or sale plus the
maximum number of additional shares of Common Stock issued, sold or issuable
upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be
required in the case of the issuance by the Company of (i) Common Stock pursuant
to the exercise or conversion of any Warrant or any other options, warrants or
any convertible securities currently outstanding or outstanding as a result of
securities issued in connection with the Company's current private placement
offering pursuant to the Confidential Term Sheet dated May 20, 1997 (as
hereafter supplemented and amended, the "Term Sheet") pursuant to a private
placement of the Company's securities (an "Offering"); provided, that the
exercise price or conversion price at which such options, warrants or
convertible securities are exercised or converted, as the case may be, is equal
to the exercise price or conversion price in effect as of the date of this
Warrant or as of the date of issuance with respect to securities issued pursuant
to an Offering (except for standard anti-dilution adjustments) and (ii) shares
of Common Stock issued or sold pursuant to stock purchase or stock option plans
or other similar arrangements that are approved by the Company's Board of
Directors.
(e) In case of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Company), the Holder of this Warrant shall have the right thereafter to receive
on the
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<PAGE>
exercise of this Warrant the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(e) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than thirty (30) days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any adjustments
which by reason of this Subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment; provided,
further, however, that adjustments shall be required and made in accordance with
the provisions of this Section 3 (other than this Subsection 3(g)) not later
than such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall
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<PAGE>
deem to be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Chief Financial Officer of
the Company shall promptly prepare a certificate setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or the
effect of such modification and a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause copies
of such certificate to be mailed to the Holders of the Warrants. In the event of
a dispute with respect to any adjustment required pursuant to Section 3, the
Holder may appoint, at the Company's expense, an independent financial advisor
(e.g. an investment banking or accounting firm)reasonably acceptable to the
Company to calculate such adjustment. Such determination shall be binding upon
the Holder and the Company.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock, the Company
shall mail notice thereof to the Holders of the Warrants not less than 15 days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares
of the Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
5. Registration Under Securities Act of 1933.
(a) The Company shall include the Warrant Shares on the Shelf
Registration Statement (as defined in the Term Sheet) and the Holder shall
otherwise have the registration rights set forth in Section 5 of the
subscription agreement (the "Subscription Agreement") to be entered into between
the purchasers of units (as described in the Term
- 6 -
M
<PAGE>
Sheet) and the Company. By acceptance of this Warrant, the Holder agrees that it
shall have the same obligations, and otherwise comply with, the provisions in
such Section 5 of the Subscription Agreement to same extent as if it were a
party thereto. To the extent that no Final Closing Date (as defined in the
Subscription Agreement) occurs or the Offering is terminated, the rights granted
to Holder hereunder to have its shares registered shall begin as of December 6,
1997 on the same terms as provided in Section 5 of the Subscription Agreement.
(b) Until all Warrant Shares have been sold under a
Registration Statement or pursuant to Rule 144, the Company shall use its
reasonable best efforts to file with the Securities and Exchange Commission all
current reports and the information as may be necessary to enable the Holder to
effect sales of its shares in reliance upon Rule 144 promulgated under the Act.
6. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws.
The Company may treat the registered Holder of this Warrant as he or it appears
on the Company's books at any time as the Holder for all purposes. The Company
shall permit any Holder of a Warrant or his duly authorized attorney, upon
written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All warrants
issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of the holder thereof shall be identical to
those of the Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
8. Warrant Holder Not Shareholder. Except as otherwise
provided herein, this Warrant does not confer upon the Holder any right to vote
or to consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
9. Communication. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 3550 General Atomics Court, San Diego, CA
92121: President or other address as the Company has designated in writing to
the Holder, or
(b) the Holder at c/o Paramount Capital Asset Management,
Inc., 787 Seventh Avenue, New York, NY, 10019, Attn: Lindsay A. Rosenwald, M.D.
or other such address as the Holder has designated in writing to the Company.
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<PAGE>
10. Headings. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the principles of conflicts of law thereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be hereunto affixed and attested by its
Secretary this 6th day of June 1997.
GENTA INCORPORATED
By: _______________________
Name:
Title:
ATTEST:
- -------------------------------
Secretary
[Corporate Seal]
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<PAGE>
SUBSCRIPTION
------------
The undersigned, ___________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, par value $.001 per share, of
Genta Incorporated covered by said Warrant, and makes payment therefor in full
at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
-----------------
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Common Stock, par value $.001 per share, of Genta Incorporated
pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
-----------
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers
unto ____________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint _____________________,
attorney, to transfer said Warrant on the books of Genta Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________________ the right to purchase _______ shares of the Common Stock,
par value $.001 per share, of Genta Incorporated covered by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint ____________________,
attorney, to transfer that part of said Warrant on the books of Genta
Incorporated.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
EXHIBIT P
AMENDED
CERTIFICATE OF DESIGNATION
for
SERIES D CONVERTIBLE PREFERRED STOCK
of
GENTA INCORPORATED
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
GENTA INCORPORATED, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), does hereby certify that:
FIRST: Pursuant to a Certificate of Designation for Series D
Convertible Preferred Stock filed with the Secretary of State of the
State of Delaware on February 6, 1997 (the "Original Certificate of
Designation"), the Corporation established a series of its authorized
preferred stock, par value $.001 per share, designated "Series D
Convertible Preferred Stock" consisting of 3,750,000 shares.
SECOND: None of the authorized shares of the Corporation's
Series D Convertible Preferred Stock established pursuant to the
Original Certificate of Designation has been issued.
THIRD: In accordance with the provisions of Section 151(g) of
the General Corporation Law of the State of Delaware, at a duly held
meeting of the Board of Directors of the Corporation, resolutions were
adopted decreasing the number of shares designated in the Original
Certificate of Designation as Series D Preferred Stock and amending and
restating in their entirety the powers, preferences and relative
participating, optional and other special rights of, and the
qualifications, limitations and restrictions upon, the Series D
Convertible Preferred Stock, as set forth herein.
NOW, THEREFORE, IT IS RESOLVED, that the number of shares of
the Corporation's authorized preferred stock, par value $.001 per
share, designated in the Original Certificate of Designation as "Series
D Convertible Preferred Stock" shall be
<PAGE>
223,860 (hereinafter the "Series D Preferred Stock"), and the powers,
preferences and relative participating, optional and other special
rights of, and the qualifications, limitations and restrictions upon,
the Series D Preferred Stock are hereby amended in their entirety and
shall be, as follows:
Series D Convertible Preferred Stock
1. Designation and Amount and Definitions. (a) There shall be
a series of Preferred Stock designated as "Series D Convertible Preferred Stock"
and the number of shares constituting such series shall be 223,860. Such series
is referred to herein as the "Series D Preferred Stock". Notwithstanding any
other provision in the Certificate of Designation of the Series D Preferred
Stock, as amended hereby, (the "Certificate of Designation") to the contrary,
such series shall be on a parity with the Series A Preferred Stock and Series C
Preferred Stock of the Corporation with respect to dividends and the
distribution of assets upon liquidation, dissolution or winding up. Such number
of shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
D Preferred Stock to fewer than the number of shares then issued and
outstanding.
(b) As used in this Certificate of Designation, the following
terms shall have the following meanings:
(i) The "Closing Bid Price" for any security for each
trading day shall be the reported per share closing bid price
of such security regular way on the Stock Market on such
trading day, or, if there were no transactions on such trading
day, the average of the reported closing bid and asked prices,
regular way, of such security on the relevant Stock Market on
such trading day.
(ii) "Fair Market Value" of any asset (including any
security) means the fair market value thereof as mutually
determined by the Corporation and the holders of a majority of
the Series D Preferred Stock then outstanding. If the
Corporation and the holders of a majority of the Series D
Preferred Stock then outstanding are unable to reach agreement
on any valuation matter, such valuation shall be submitted to
and determined by a nationally recognized independent
investment bank selected by the Board of Directors and the
holders of a majority of the Series D Preferred Stock then
outstanding (or, if such selection cannot be agreed upon
promptly, or in any event within ten days, then such valuation
shall be made by a nationally recognized independent
investment banking firm selected by the American Arbitration
Association in New York City in accordance with its rules),
the costs of which valuation shall be paid for by the
Corporation.
(iii) "Market Price" shall mean the average Closing
Bid Price for twenty (20) consecutive trading days, ending
with the trading day prior to the date as of which the Market
Price is being determined (with appropriate adjustments
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<PAGE>
for subdivisions or combinations of shares effected during
such period), provided that if the prices referred to in the
definition of Closing Bid Price cannot be determined for such
period, "Market Price" shall mean Fair Market Value.
(iv) "Registered Holders" shall mean, at any time,
the holders of record of the Series D Preferred Stock.
(v) The "Stock Market" shall mean, with respect to
any security, the principal national securities exchange on
which such security is listed or admitted to trading or, if
such security is not listed or admitted to trading on any
national securities exchange, shall mean The Nasdaq National
Market System ("NNM") or The Nasdaq SmallCap Market ("SCM"
and, together with NNM, "Nasdaq") or, if such security is not
quoted on Nasdaq, shall mean the OTC Bulletin Board or, if
such security is not quoted on the OTC Bulletin Board, shall
mean the over-the-counter market as furnished by any NASD
member firm selected from time to time by the Corporation for
that purpose.
(vi) "Trading Price" shall mean the lower of (i) the
average Closing Bid Price of the Common Stock (with
appropriate adjustments for subdivisions or combinations of
shares effected during such period) for thirty (30)
consecutive trading days, ending with the trading day prior to
the date as of which the Trading Price is being determined,
and (ii) the average Closing Bid Price of the Common Stock
(with appropriate adjustments for subdivisions or combinations
of shares effected during such period) for five (5)
consecutive trading days, ending with the trading day prior to
the date as of which the Trading Price is being determined,
provided that if the prices referred to in the definition of
Closing Bid Price cannot be determined for any of such
periods, "Trading Price" shall mean Fair Market Value.
(vii) A "trading day" shall mean a day on which the
relevant Stock Market is open for the transaction of business.
2. Dividends and Distributions. (a) Commencing on the Reset
Date (as defined in Subsection 4(a)), the holders of the Series D Preferred
Stock shall be entitled to receive cumulative dividends on each share of Series
D Preferred Stock, payable in shares of Common Stock, at the rate of 10% per
annum (computed on the basis of a 360-day year of twelve 30 day months) of the
Dividend Base Amount (as defined below), payable semi-annually in arrears. Such
dividends shall be paid in duly authorized, fully paid and non assessable shares
of Common Stock. In calculating the number of shares of Common Stock to be paid
with respect to each dividend, each share of Common Stock shall be deemed to
have the value of the Conversion Price (as defined in Section 4(a) hereof) at
the time such dividend is paid. Such dividends shall accrue and accumulate
whether or not they have been declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment
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<PAGE>
of dividends. The "Dividend Base Amount" shall be $140.00 plus all accrued but
unpaid dividends (subject to appropriate adjustment to reflect any stock split,
combination, reclassification or reorganization of the Series D Preferred
Stock).
(b) In addition to the foregoing, subject to the rights of the
holders of any shares of any series or class of capital stock ranking prior, and
superior to, or pari passu with, the shares of Series D Preferred Stock with
respect to dividends, the holders of shares of Series D Preferred Stock shall be
entitled to receive, as, when and if declared by the Board of Directors, out of
assets legally available for that purpose, dividends or distributions in cash,
stock or otherwise.
(c) The Corporation shall not declare any dividend or
distribution on any Junior Stock (as defined below) of the Corporation unless
and until a special dividend or distribution of $140.00 per share (subject to
appropriate adjustment to reflect any stock split, combination, reclassification
or reorganization of the Series D Preferred Stock) has been declared and paid on
the Series D Preferred Stock. In the event that such special dividend or
distribution is declared and paid on the Series D Preferred Stock, an aggregate
per share dividend or distribution equal to (i) $140.00 divided by (ii) the
effective Conversion Rate (as defined below) at the time of such special
dividend or distribution on the Series D Preferred Stock may be declared and
paid on the Common Stock. Except as aforesaid, the Corporation shall not declare
any dividend or distribution on any Junior Stock or stock on a parity with the
Series D Preferred Stock, unless the Corporation shall, concurrently with the
declaration of such dividend or distribution on the Junior Stock or stock on a
parity with the Series D Preferred Stock, declare a like dividend or
distribution, as the case may be, on the Series D Preferred Stock.
(d) Any dividend or distribution (other than that referenced
in the first sentence of Subsection 2(c)) payable to the holders of the Series D
Preferred Stock pursuant to this Section 2 shall be paid to such holders at the
same time as the dividend or distribution on the Junior Stock or any other
capital stock of the Corporation by which it is measured is paid.
(e) All dividends or distributions declared upon the Series D
Preferred Stock shall be declared pro rata per share.
(f) Any reference to "distribution" contained in this Section
2 shall not be deemed to include any distribution made in connection with or in
lieu of any Liquidation Event (as defined below).
(g) No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series D Preferred
Stock which may be in arrears.
(h) So long as any shares of the Series D Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set
-4-
<PAGE>
apart for payment on any class or series of stock of the Corporation ranking, as
to dividends, on a parity with the Series D Preferred Stock, for any period
unless all dividends have been or contemporaneously are declared and paid, or
declared and a sum sufficient for the payment thereof set apart for such
payment, on the Series D Preferred Stock. When dividends are not paid in full or
a sum sufficient for such payment is not set apart, as aforesaid, upon the
shares of the Series D Preferred Stock and any other class or series of stock
ranking on a parity as to dividends with the Series D Preferred Stock, all
dividends declared upon such other stock shall be declared pro rata so that the
amounts of dividends per share declared on the Series D Preferred Stock and such
other stock shall in all cases bear to each other the same ratio that accrued
dividends per share on the shares of the Series D Preferred Stock and on such
other stock bear to each other.
(i) So long as any shares of the Series D Preferred Stock are
outstanding, no other stock of the Corporation ranking on a parity with the
Series D Preferred Stock as to dividends or upon liquidation, dissolution or
winding up shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation unless the dividends, if any, accrued on all outstanding shares of
the Series D Preferred Stock shall have been paid or set apart for payment.
(j) "Junior Stock" shall mean the Common Stock and any shares
of preferred stock of any series or class of the Corporation, whether presently
outstanding or hereafter issued, which are junior to the shares of Series D
Preferred Stock with respect to (i) the distribution of assets on any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, (ii)
dividends or (iii) voting, except that the Junior Stock shall not include the
Series A Preferred Stock nor the Series C Preferred Stock of the Corporation.
Notwithstanding the foregoing, this Section 2 shall only be effective insofar as
it does not conflict with any provision of the Certificate of Incorporation
relating to the rights of the Series A Preferred Stock, and does not cause the
Series D Preferred Stock to be senior to the Series A Preferred Stock with
respect to dividends.
3. Liquidation Preference. (a) In the event of a (i)
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, (ii) a sale or other disposition of all or substantially all of the
assets of the Corporation or (iii) any consolidation, merger, combination,
reorganization or other transaction in which the Corporation is not the
surviving entity or shares of Common Stock constituting in excess of 50% of the
voting power of the Corporation are exchanged for or changed into stock or
securities of another entity, cash and/or any other property (a "Merger
Transaction") (items (i), (ii) and (iii) of this sentence being collectively
referred to as a "Liquidation Event"), after payment or provision for payment of
debts and other liabilities of the Corporation and subject to the Corporation's
prior compliance with Article IV of the Certificate of Incorporation, the
holders of the Series D Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for
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distribution to its stockholders on a pari passu basis with the shares of Series
A Preferred Stock and Series C Preferred Stock of the Corporation, whether such
assets are capital, surplus, or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of any Junior
Stock of the Corporation, an amount equal to $140.00 per share plus an amount
equal to all declared and/or unpaid dividends thereon; provided, however, in the
case of a Merger Transaction, such $140.00 per share may be paid in cash,
property (valued as provided in Subsection 3(b)) and/or securities (valued as
provided in Subsection 3(b)) of the entity surviving such Merger Transaction. In
the case of property or in the event that any such securities are subject to an
investment letter or other similar restriction on transferability, the value of
such property or securities shall be determined by agreement between the
Corporation and the holders of a majority of the Series D Preferred Stock then
outstanding. If upon any Liquidation Event, whether voluntary or involuntary,
the assets to be distributed to the holders of the Series D Preferred Stock
shall be insufficient to permit the payment to such shareholders of the full
preferential amounts aforesaid, then all of the assets of the Corporation to be
distributed shall be so distributed ratably to the holders of the Series D
Preferred Stock on the basis of the number of shares of Series D Preferred Stock
held. Notwithstanding item (iii) of the first sentence of this Subsection 3(a),
any consolidation, merger, combination, reorganization or other transaction in
which the Corporation is not the surviving entity but the stockholders of the
Corporation immediately prior to such transaction own in excess of 50% of the
voting power of the corporation surviving such transaction and own such interest
in substantially the same proportions as prior to such transaction, shall not be
considered a Liquidation Event provided that the surviving corporation shall
make appropriate provisions to ensure that the terms of this Certificate of
Designation survive any such transaction as provided in Subsection 4(c)(ii). All
shares of Series D Preferred Stock shall rank as to payment upon the occurrence
of any Liquidation Event senior to the Common Stock as provided herein, on a
pari passu basis with the shares of Series A Preferred Stock and Series C
Preferred Stock of the Corporation, and unless the terms of such series shall
provide otherwise, senior to all other series of the Corporation's preferred
stock.
(b) Any securities or other property to be delivered to the
holders of the Series D Preferred Stock pursuant to Subsection 3(a) hereof shall
be valued as follows:
(i) Securities not subject to an investment
letter or other similar restriction on free marketability:
(A) If actively traded on a Stock Market,
the value shall be deemed to be the Market Price as
of the third day prior to the date of valuation.
(B) If not actively traded on a Stock
Market, the value shall be the Fair Market Value.
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(ii) For securities for which there is an active
public market but which are subject to an investment letter or
other restrictions on free marketability, the value shall be
the Fair Market Value thereof, determined by discounting
appropriately the Market Price thereof.
(iii) For all other securities, the value shall be
the Fair Market Value thereof.
4. Conversion.
(a) Right of Conversion. The shares of Series D Preferred
Stock shall be convertible, in whole or in part, at the option of the holder
thereof and upon notice to the Corporation as set forth in Subsection 4(b), into
fully paid and nonassessable shares of Common Stock and such other securities
and property as hereinafter provided. The initial conversion price per share of
Common Stock shall be equal to $3.00 (the "Conversion Price") and shall be
subject to adjustment as provided herein. The rate at which each share Series D
Preferred Stock is convertible at any time into Common Stock (the "Conversion
Rate") shall be determined by dividing the then existing Conversion Price into
$100.00.
Subject to adjustment pursuant to the provisions of Subsection
4(c) below, in the event that the Conversion Price in effect at the time of the
Initial Closing Date (as defined below), any Interim Closing Date (as defined
below) or the Final Closing Date (as defined below) is greater than 50% of the
Trading Price of the Common Stock as of (x) the initial closing date of the
issuance and sale of units (the "Premium Preferred Units") consisting of Series
D Preferred Stock and Class D Warrants pursuant to a confidential term sheet
dated May 20, 1997 (the "Initial Closing Date"), (y) any interim closing date of
the issuance and sale of the Premium Preferred Units (each an "Interim Closing
Date") or (z) the final closing date of the issuance and sale of the Premium
Preferred Units (the "Final Closing Date") pursuant to the subscription
agreements entered into in connection therewith, then the Conversion Price shall
be adjusted to equal 50% of the lesser of any such Trading Price. If there is
any change in Conversion Price as a result of the preceding sentence, then the
Conversion Rate shall be changed accordingly as set forth above. In the event
that there is no Initial, Interim nor Final Closing Date (as defined above), or
the above referenced offering of Premium Preferred Units is otherwise
terminated, then "Initial Closing Date", "Interim Closing Date" and "Final
Closing Date" as used herein shall refer to the initial, interim and final
closing date, respectively, in the next offering or series of related offerings)
of equity securities of the Corporation (or any securities convertible into
equity securities)("Qualified Offering Securities") with gross proceeds in
excess of $2,000,000.
The Board of Directors, or a committee designated by it for
such purpose, may specify an initial conversion price applicable to the shares
of Series D Preferred Stock issued at any closing lower than the initial
conversion price that would otherwise obtain pursuant to the
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preceding paragraphs of this Subsection 4(a) and, in the event an initial
conversion price is so specified, it shall be applicable to all shares of the
Series D Preferred Stock.
The Corporation shall prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Corporation setting forth the
Conversion Rate as of the Final Closing Date, showing in reasonable detail the
facts upon which such adjusted Conversion Rate is based, and such certificate
shall forthwith be filed with the transfer agent of the Series D Preferred
Stock. A notice stating that the Conversion Rate has been adjusted pursuant to
the second preceding paragraph of this Subsection 4(a), or that no adjustment is
necessary, and setting forth the Conversion Rate in effect as of the Final
Closing Date shall be mailed as promptly as practicable after the Final Closing
Date by the Corporation to all record holders of the Series D Preferred Stock at
their last addresses as they shall appear in the stock transfer books of the
Corporation.
The Conversion Price (subject to adjustment pursuant to the
provisions of Subsection 4(c)) in effect immediately prior to the date that is
12 months after the Final Closing Date (the "Reset Date") shall be adjusted and
reset effective as of the Reset Date if the Market Price as of the Reset Date
(the "12-Month Trading Price") is less than 140% of the then applicable
Conversion Price (a "Reset Event"). Upon the occurrence of a Reset Event, the
Conversion Price shall be reduced to be equal to the greater of (A) the 12-Month
Trading Price divided by 1.40, and (B) 25% of the then applicable Conversion
Price. If there is any change in the Conversion Price as a result of the
preceding sentence, then the Conversion Rate shall be changed accordingly as set
forth above. The Corporation shall prepare a certificate signed by the principal
financial officer of the Corporation setting forth the Conversion Rate as of the
Reset Date, showing in reasonable detail the facts upon which such Conversion
Rate is based, and such certificate shall forthwith be filed with the transfer
agent of the Series D Preferred Stock. A notice stating that the Conversion Rate
has been adjusted pursuant to this paragraph, or that no adjustment is
necessary, and setting forth the Conversion Rate in effect as of the Reset Date
shall be mailed as promptly as practicable after the Reset Date by the
Corporation to all record holders of the Series D Preferred Stock at their last
addresses as they shall appear in the stock transfer books of the Corporation.
(b) Conversion Procedures. Any holder of shares of Series D
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Series D
Preferred Stock at the office of the transfer agent for the Series D Preferred
Stock, which certificate or certificates, if the Corporation shall so require,
shall be duly endorsed to the Corporation or in blank, or accompanied by proper
instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects so to
convert such shares of Series D Preferred Stock and specifying the name or names
(with address) in which a certificate or certificates evidencing shares of
Common Stock are to be issued. The Corporation need not deem a notice of
conversion to be received unless the holder complies with all the provisions
hereof. The Corporation will instruct the transfer agent (which may be the
Corporation) to make a notation
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of the date that a notice of conversion is received, which date shall be deemed
to be the date of receipt for purposes hereof.
The Corporation shall, as soon as practicable after such
deposit of certificates evidencing shares of Series D Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Series D Preferred Stock were so surrendered,
or to the nominee or nominees of such person, certificates evidencing the number
of full shares of Common Stock to which such person shall be entitled as
aforesaid, together with a cash adjustment of any fraction of a share as
hereinafter provided. Subject to the following provisions of this paragraph,
such conversion shall be deemed to have been made as of the date of such
surrender of the shares of Series D Preferred Stock to be converted, and the
person or persons entitled to receive the Common Stock deliverable upon
conversion of such Series D Preferred Stock shall be treated for all purposes as
the record holder or holders of such Common Stock on such date; provided,
however, that the Corporation shall not be required to convert any shares of
Series D Preferred Stock while the stock transfer books of the Corporation are
closed for any purpose, but the surrender of Series D Preferred Stock for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books as if the
surrender had been made on the date of such reopening, and the conversion shall
be at the conversion rate in effect on such date. No adjustments in respect of
any dividends on shares surrendered for conversion or any dividend on the Common
Stock issued upon conversion shall be made upon the conversion of any shares of
Series D Preferred Stock.
The Corporation shall at all times, reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Series D Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series D Preferred
Stock.
All notices of conversion shall be irrevocable; provided,
however, that if the Corporation has sent notice of an event pursuant to
Subsection 4(g) hereof, a holder of Series D Preferred Stock may, at its
election, provide in its notice of conversion that the conversion of its shares
of Series D Preferred Stock shall be contingent upon the occurrence of the
record date or effectiveness of such event (as specified by such holder),
provided that such notice of conversion is received by the Corporation prior to
such record date or effective date, as the case may be.
(c) Adjustment of Conversion Rate and Conversion Price.
(i) Except as otherwise provided herein, in the
event the Corporation shall, at any time or from time to time after the date
hereof, (1) sell or issue any shares of Common Stock for a consideration per
share less than either (i) the Conversion Price in effect
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on the date of such sale or issuance or (ii) the Market Price of the Common
Stock as of the date of the sale or issuance, (2) issue any shares of Common
Stock as a stock dividend to the holders of Common Stock, or (3) subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such sale, issuance, subdivision or combination being herein
called a "Change of Shares"), then, and thereafter upon each further Change of
Shares, the Conversion Price in effect immediately prior to such Change of
Shares shall be changed to a price (rounded to the nearest cent) determined by
multiplying the Conversion Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the sale or issuance of such
additional shares or such subdivision or combination and the number of shares of
Common Stock which the aggregate consideration received (determined as provided
in Subparagraph 4(c)(v)(F)) for the issuance of such additional shares would
purchase at the greater of (i) the Conversion Price in effect on the date of
such issuance or (ii) the Market Price of the Common Stock as of such date, and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after the sale or issuance of such additional shares or
such subdivision or combination. Such adjustment shall be made successively
whenever such an issuance is made.
(ii) In case of any reclassification, capital
reorganization or other change of outstanding shares of Common Stock, or in case
of any consolidation or merger of the Corporation with or into another entity
(other than a consolidation or merger in which the Corporation is the continuing
entity and which does not result in any reclassification, capital reorganization
or other change of outstanding shares of Common Stock other than the number
thereof), or in case of any sale or conveyance to another entity of the property
of the Corporation as, or substantially as, an entirety (other than a
sale/leaseback, mortgage or other financing transaction), the Corporation shall
cause effective provision to be made so that each holder of a share of Series D
Preferred Stock shall be entitled to receive, upon conversion of such share of
Series D Preferred Stock, the kind and number of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock into which such
share of Series D Preferred Stock was convertible immediately prior to such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance. Any such provision shall include provision for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Subsection 4(c). The Corporation shall not effect any such
consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor (if other than the Corporation) resulting
from such consolidation or merger or the entity purchasing assets or other
appropriate entity shall assume, by written instrument executed and delivered to
the transfer agent for the Series D Preferred Stock (the "Transfer Agent"), the
obligation to deliver to the holder of each share of Series D Preferred Stock
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holders may be entitled to receive and the other obligations
under this Agreement. The foregoing provisions shall similarly apply to
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successive reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(iii) [Reserved]
(iv) After each adjustment of the Conversion
Price pursuant to this Subsection 4(c), the Corporation will promptly prepare a
certificate signed by the Chairman or President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, of the
Corporation setting forth: (i) the Conversion Price as so adjusted, (ii) the
Conversion Rate corresponding to such Conversion and (iii) a brief statement of
the facts accounting for such adjustment. The Corporation will promptly file
such certificate with the Transfer Agent and cause a brief summary thereof to be
sent by ordinary first class mail to each registered holder of Series D
Preferred Stock at his or her last address as it shall appear on the registry
books of the Transfer Agent. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity of such adjustment.
The affidavit of an officer of the Transfer Agent or the Secretary or an
Assistant Secretary of the Corporation that such notice has been mailed shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
The Transfer Agent may rely on the information in the certificate as true and
correct and has no duty or obligation to independently verify the amounts or
calculations set forth therein.
(v) For purposes of Subsection 4(c)(i) hereof,
the following provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock
deemed outstanding at any given time shall include
all shares of capital stock convertible into, or
exchangeable for, Common Stock (on an as converted
basis) as well as all shares of Common Stock issuable
upon the exercise of (x) any convertible debt, (y)
warrants outstanding on the date hereof and (z)
options outstanding on the date hereof.
(B) No adjustment of the Conversion Price
shall be made unless such adjustment would require an
increase or decrease of at least $.01 in such price;
provided that any adjustments which by reason of this
Subparagraph (B) are not required to be made shall be
carried forward and shall be made at the time of and
together with the next subsequent adjustment which,
together with adjustments so carried forward, shall
require an increase or decrease of at least $.01 in
the Conversion Price then in effect hereunder.
(C) In case of (1) the sale or other
issuance by the Corporation (including as a component
of a unit) of any rights or warrants to subscribe for
or purchase, or any options for the purchase of,
Common Stock or any
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securities convertible into or exchangeable for
Common Stock (such securities convertible,
exercisable or exchangeable into Common Stock being
herein called "Convertible Securities"), or (2) the
issuance by the Corporation, without the receipt by
the Corporation of any consideration therefor, of any
rights or warrants to subscribe for or purchase, or
any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights,
warrants or options, or the right to convert or
exchange such Convertible Securities, are immediately
exercisable, and the consideration per share for
which Common Stock is issuable upon the exercise of
such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities
(determined by dividing (x) the minimum aggregate
consideration, as set forth in the instrument
relating thereto without regard to any antidilution
or similar provisions contained therein for a
subsequent adjustment of such amount, payable to the
Corporation upon the exercise of such rights,
warrants or options, plus the consideration received
by the Corporation for the issuance or sale of such
rights, warrants or options, plus, in the case of
such Convertible Securities, the minimum aggregate
amount, as set forth in the instrument relating
thereto without regard to any antidilution or similar
provisions contained therein for a subsequent
adjustment of such amount, of additional
consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number, as set
forth in the instrument relating thereto without
regard to any antidilution or similar provisions
contained therein for a subsequent adjustment of such
amount, of shares of Common Stock issuable upon the
exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible
Securities issuable upon the exercise of such rights,
warrants or options) is less than either the
Conversion Price or the Market Price of the Common
Stock as of the date of the issuance or sale of such
rights, warrants or options, then such total maximum
number of shares of Common Stock issuable upon the
exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible
Securities (as of the date of the issuance or sale of
such rights, warrants or options) shall be deemed to
be "Common Stock" for purposes of Subsection 4(c)(i)
and shall be deemed to have been sold for an amount
equal to such consideration per share and shall cause
an adjustment to be made in accordance with
Subsection 4(c)(i).
(D) In case of the sale by the Corporation
of any Convertible Securities, whether or not the
right of conversion or exchange thereunder is
immediately exercisable, and the price per share for
which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined
by dividing (x) the total amount of consideration
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received by the Corporation for the sale of such
Convertible Securities, plus the minimum aggregate
amount, as set forth in the instrument relating
thereto without regard to any antidilution or similar
provisions contained therein for a subsequent
adjustment of such amount, of additional
consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number, as set
forth in the instrument relating thereto without
regard to any antidilution or similar provisions
contained therein for a subsequent adjustment of such
amount, of shares of Common Stock issuable upon the
conversion or exchange of such Convertible
Securities) is less than either the Conversion Price
or the Market Price of the Common Stock as of the
date of the sale of such Convertible Securities, then
such total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such
Convertible Securities (as of the date of the sale of
such Convertible Securities) shall be deemed to be
"Common Stock" for purposes of Subsection 4(c)(i) and
shall be deemed to have been sold for an amount equal
to such consideration per share and shall cause an
adjustment to be made in accordance with Subsection
4(c)(i).
(E) In case the Corporation shall modify the
rights of conversion, exchange or exercise of any of
the securities referred to in (C) and (D) above or
any other securities of the Corporation convertible,
exchangeable or exercisable for shares of Common
Stock, for any reason other than an event that would
require adjustment to prevent dilution, so that the
consideration per share received by the Corporation
after such modification is less than either the
Conversion Price or the Market Price as of the date
prior to such modification, then such securities, to
the extent not theretofore exercised, converted or
exchanged, shall be deemed to have expired or
terminated immediately prior to the date of such
modification and the Corporation shall be deemed for
purposes of calculating any adjustments pursuant to
this Subsection 4(c) to have issued such new
securities upon such new terms on the date of
modification. Such adjustment shall become effective
as of the date upon which such modification shall
take effect. On the expiration or cancellation of any
such right, warrant or option or the termination or
cancellation of any such right to convert or exchange
any such Convertible Securities, the Conversion Price
then in effect hereunder shall forthwith be
readjusted to such Conversion Price as would have
obtained (a) had the adjustments made upon the
issuance or sale of such rights, warrants, options or
Convertible Securities been made upon the basis of
the issuance of only the number of shares of Common
Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of
such rights, warrants or options or upon the
conversion or exchange of such
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Convertible Securities and (b) had adjustments been
made on the basis of the Conversion Price as adjusted
under clause (a) of this sentence for all
transactions (which would have affected such adjusted
Conversion Price) made after the issuance or sale of
such rights, warrants, options or Convertible
Securities.
(F) In case of the sale of any shares of
Common Stock, any Convertible Securities, any rights
or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or
Convertible Securities, the consideration received by
the Corporation therefor shall be deemed to be the
gross sales price therefor without deducting
therefrom any expense paid or incurred by the
Corporation or any underwriting discounts or
commissions or concessions paid or allowed by the
Corporation in connection therewith. In the event
that any securities shall be issued in connection
with any other securities of the Corporation,
together comprising one integral transaction in which
no specific consideration is allocated among the
securities, then each of such securities shall be
deemed to have been issued for such consideration as
the Board of Directors of the Corporation determines
in good faith; provided, however that if the
Registered Holders of in excess of 25% of the then
outstanding Series D Preferred Stock disagree with
such determination, the Corporation shall retain, at
its own expense, an independent investment banking
firm for the purpose of obtaining an appraisal.
(vi) Notwithstanding any other provision hereof,
no adjustment to the Conversion Price will be made:
(A) upon the exercise of any of the options
outstanding on the date hereof under the
Corporation's existing stock option plans; or
(B) upon the issuance or exercise of options
which may hereafter be granted with the approval of
the Board of Directors, or exercised, under any
employee benefit plan of the Corporation to officers,
directors, consultants or employees, but only with
respect to such options as are exercisable at prices
no lower than the Closing Bid Price (or, if the price
referenced in the definition of Closing Bid Price
cannot be determined, the Fair Market Value) of the
Common Stock as of the date of grant thereof; or
(C) upon issuance or exercise of the
Placement Warrants, or the Advisory Warrants,
(as defined in the Placement Agency Agreement
between the Corporation and Paramount Capital,
Inc. (the "Placement
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Agent") dated as of May 1, 1997 (the "Placement
Agency Agreement")) (collectively, the "Paramount
Warrants"), upon the conversion of the Series D
Preferred Stock underlying the Bridge Notes (as
defined in the Note and Warrant Purchase Agreement
dated as of January 28, 1997 (the "Note and Warrant
Purchase Agreement")), upon the exercise of the Class
A and Class B Bridge Warrants (as defined in the Note
and Warrant Purchase Agreement) or upon the issuance,
conversion or exercise of the Series D Preferred
Stock or the Class D Warrants included in the Premium
Preferred Units of the Corporation issued (i) on or
prior to the Final Closing Date or (ii) pursuant to
the exercise of the Paramount Warrants, or upon the
issuance, conversion or exercise of any Series D
Preferred Stock or Class D Warrants approved by the
Placement Agent or upon the issuance of any other
equity securities of the Corporation to the extent
that such issuance causes an adjustment to the
Conversion Price pursuant to the second paragraph of
Subsection 4(a); or
(D) upon the issuance or sale of Common
Stock or Convertible Securities pursuant to the
exercise of any rights, options or warrants to
receive, subscribe for or purchase, or any options
for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants or
options were outstanding on the date of the original
issuance of the Series D Preferred Stock or were
thereafter issued or sold, provided that an
adjustment was either made or not required to be made
in accordance with Subsection 4(c)(i) in connection
with the issuance or sale of such securities or any
modification of the terms thereof; or
(E) upon the issuance or sale of Common
Stock upon conversion or exchange of any Convertible
Securities, provided that any adjustments required to
be made upon the issuance or sale of such Convertible
Securities or any modification of the terms thereof
were so made, and whether or not such Convertible
Securities were outstanding on the date of the
original sale of the Series D Preferred Stock or were
thereafter issued or sold; or upon the issuance of
Common Stock upon conversion of principal and
interest in respect of $350,000 principal amount of
the Company's 4% Convertible Debentures due August 1,
1997 outstanding on February 6, 1997 or upon the
conversion of 1,424 shares of the Company's Series C
Preferred Stock outstanding on February 6, 1997,
provided that any such conversion occurs at a
conversion price in excess of the Conversion Price at
such time.
Subparagraph 4(c)(v)(E) shall nevertheless apply to any modification of the
rights of conversion, exchange or exercise of any of the securities referred to
in Subparagraphs (A), (B) and (C) of this Subsection 4(c)(vi).
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(vii) As used in this Subsection 4(c), the term
"Common Stock" shall mean and include the Corporation's Common Stock authorized
on the date of the original issue of the Series D Preferred Stock and shall also
include any capital stock of any class of the Corporation thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution or winding up of the
Corporation; provided, however, that the shares issuable upon conversion of the
Series D Preferred Stock shall include only shares of such class designated in
the Certificate of Incorporation as Common Stock on the date of the original
issue of the Series D Preferred Stock or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Subsection 4(c)(ii) hereof, the stock, securities or
property provided for in such section or (ii), in the case of any
reclassification or change in the outstanding shares of Common Stock issuable
upon conversion of the Series D Preferred Stock as a result of a subdivision or
combination or consisting of a change in par value, or from par value to no par
value, or from no par value to par value, such shares of Common Stock as so
reclassified or changed.
(viii) Any determination as to whether an
adjustment in the Conversion Price in effect hereunder is required pursuant to
Subsection 4(a) or 4(c), or as to the amount of any such adjustment, if
required, shall be binding upon the holders of the Series D Preferred Stock and
the Corporation if made in good faith by the Board of Directors of the
Corporation.
(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Series D Preferred Stock. If more than one certificate evidencing shares of
Series D Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series D Preferred
Stock so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any shares of Series D Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the Market Price as of the
close of business on the day of conversion.
(e) Concurrent Grant. If the Corporation shall fix a record
date for the making of a Distribution on Common Stock to holders of its Common
Stock (other than any distribution referred to in Subsection 4(c) hereof and
cash dividends paid out of retained earnings of the Corporation determined under
generally accepted accounting principals consistently applied), the Corporation
shall set aside in an escrow reasonably acceptable to the holders of the Series
D Preferred Stock, the Distribution on Common Stock (as defined below) to which
they would have been entitled if they had converted all of the Series D
Preferred Stock held by them for the Corporation's Common Stock immediately
prior to the record date for the purpose of determining stockholders entitled to
receive such Distribution on Common Stock and any such Distribution on Common
Stock shall thereafter be distributed from time to time out of such escrow to
persons converting the Series D Preferred Stock (immediately upon conversion) to
the extent such Distribution on Common Stock relates to the shares of Series D
Preferred Stock then
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being converted. As used herein, the term "Distribution on Common Stock" means a
distribution to holders of the Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Corporation is
the continuing corporation) of (i) assets (including any cash dividends or
distributions), (ii) evidences of indebtedness or other securities of the
Corporation or of any entity other than the Corporation or (iii) subscription
rights, options or warrants to purchase any of the foregoing assets or
securities, whether or not such rights, options or warrants are immediately
exercisable.
(f) Reservation of Shares; Transfer Taxes, Etc. The
Corporation shall at all times reserve and keep available, out of its authorized
and unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series D Preferred Stock, such number of shares of its Common
Stock free of preemptive rights as shall be sufficient to effect the conversion
of all shares of Series D Preferred Stock from time to time outstanding
(including, without limitation, shares of Common Stock issuable upon conversion
of the Series D Preferred Stock in the case of a Reset Event. The Corporation
shall use its best efforts from time to time, in accordance with the laws of the
State of Delaware to increase the authorized number of shares of Common Stock if
at any time the number of shares of authorized, unissued and unreserved Common
Stock shall not be sufficient to permit the conversion of all the
then-outstanding shares of Series D Preferred Stock.
The Corporation shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of the Series D Preferred Stock. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock (or other securities
or assets) in a name other than that in which the shares of Series D Preferred
Stock so converted were registered. and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Corporation
the amount of such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or
any other distribution); or
(ii) the Corporation shall authorize the granting to
the holders of Common Stock of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any
other rights or warrants; or
(iii) of any reclassification of Common Stock (other
than a subdivision or combination of the outstanding Common
Stock, or a change in par value, or from par value to no par
value, or from no par value to par value); or
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(iv) of any consolidation or merger (including,
without limitation, a Merger Transaction) to which the
Corporation is a party and for which approval of any
stockholders of the Corporation shall be required, or of the
sale or transfer of all or substantially all of the assets of
the Corporation or of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
other property; or
(v) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation (including,
without limitation, a Liquidation Event);
then the Corporation shall cause to be filed with the transfer agent for the
Series D Preferred Stock, and shall cause to be mailed to the Registered
Holders, at their last addresses as they shall appear upon the stock transfer
books of the Corporation, at least 20 days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record (if any)
is to be taken for the purpose of such dividend. distribution or granting of
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined and a description of the cash,
securities or other property to be received by such holders upon such dividend,
distribution or granting of rights or warrants or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up or other Liquidation Event is expected to
become effective, the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such exchange, dissolution,
liquidation or winding up or other Liquidation Event and the consideration,
including securities or other property, to be received by such holders upon such
exchange; provided, however, that no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the corporate
action required to be specified in such notice.
(h) Other Changes in Conversion Rate. The Corporation from
time to time may increase the Conversion Rate by any amount for any period of
time if the period is at least 20 days and if the increase is irrevocable during
the period. Whenever the Conversion Rate is so increased, the Corporation shall
mail to the Registered Holders a notice of the increase at least 15 days before
the date the increased Conversion Rate takes effect, and such notice shall state
the increased Conversion Rate and the period it will be in effect.
The Corporation may make such increases in the Conversion
Rate, in addition to those required or allowed by this Section 4, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.
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<PAGE>
Notwithstanding anything to the contrary herein, in no case
shall the Conversion Price be adjusted to an amount less than $.001 per share,
the current par value of the Common Stock into which the Series D Preferred
Stock is convertible.
(i) Ambiguities/Errors. The Board of Directors of the
Corporation shall have the power to resolve any ambiguity or correct any error
in the provisions relating to the convertibility of the Series D Preferred
Stock, and its actions in so doing shall be final and conclusive.
5. Mandatory Conversion. At any time on or after the Reset
Date, the Corporation at its option, may cause the Series D Preferred Stock to
be converted in whole or in part, on a pro rata basis, into fully paid and
nonassessable shares of Common Stock at the then effective Conversion Rate if
the Closing Bid Price (or, if the price referenced in the definition of Closing
Bid Price cannot be determined, the Fair Market Value) of the Common Stock shall
have exceeded 300% of the then applicable Conversion Price for at least 20
trading days in any 30 consecutive trading day period ending three days prior to
the date of notice of conversion. Any shares of Series D Preferred Stock so
converted shall be treated as having been surrendered by the holder thereof for
conversion pursuant to Section 4 on the date of such mandatory conversion
(unless previously converted at the option of the holder).
No greater than 60 nor fewer than 20 days prior to the date of
any such mandatory conversion, notice by first class mail, postage prepaid,
shall be given to the holders of record of the Series D Preferred Stock to be
converted, addressed to such holders at their last addresses as shown on the
stock transfer books of the Corporation. Each such notice shall specify the date
fixed for conversion, the place or places for surrender of shares of Series D
Preferred Stock, and the then effective Conversion Rate pursuant to Section 4.
Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given by the Corporation on the date
deposited in the mail, whether or not the holder of the Series D Preferred Stock
receives such notice; and failure properly to give such notice by mail, or any
defect in such notice, to the holders of the shares to be converted shall not
affect the validity of the proceedings for the conversion of any other shares of
Series D Preferred Stock. On or after the date fixed for conversion as stated in
such notice, each holder of shares called to be converted shall surrender the
certificate evidencing such shares to the Corporation at the place designated in
such notice for conversion. Notwithstanding that the certificates evidencing any
shares properly called for conversion shall not have been surrendered, the
shares shall no longer be deemed outstanding and all rights whatsoever with
respect to the shares so called for conversion (except the right of the holders
to convert such shares upon surrender of their certificates therefor) shall
terminate.
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6. Voting Rights.
(a) General. Except as otherwise provided herein, in the
Certificate of Incorporation or the By-laws of the Corporation or as required by
applicable law, the holders of shares of Series D Preferred Stock, the holders
of shares of Common Stock and the holders of any other class or series of shares
entitled to vote with the Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation. In any such
vote, each share of Series D Preferred Stock shall entitle the holder thereof to
cast the number of votes equal to the number of votes which could be cast in
such vote by a holder of the Common Stock into which such share of Series D
Preferred Stock is convertible on the record date for such vote, or if no record
date has been established, on the date such vote is taken. Any shares of Series
D Preferred Stock held by the Corporation or any entity controlled by the
Corporation shall not have voting rights hereunder and shall not be counted in
determining the presence of a quorum.
(b) Class Voting Rights. In addition to any vote specified in
Section 6(a), so long as at least 50% of the shares of Series D Preferred Stock
(including those shares of Series D Preferred Stock issued or issuable upon the
conversion of the Bridge Notes, the exercise of the warrants issued to Paramount
Capital, Inc., the placement agent in connection with the offer and sale of the
Series D Preferred Stock or any other warrants or options for the purchase of
Series D Preferred Stock) shall be outstanding, the Corporation shall not,
without the affirmative vote or consent of the holders of at least 50% of all
outstanding Series D Preferred Stock, voting separately as a class, (i) amend,
alter or repeal any provision of the Certificate of Incorporation or the Bylaws
of the Corporation so as adversely to affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series D Preferred Stock,
(ii) approve the alteration or change to the rights, preferences or privileges
of the Series D Preferred Stock, (iii) incur or voluntarily repay prior to the
maturity thereof any indebtedness (other than the Bridge Notes) in excess of
$2,000,000 or (iv) authorize or issue, or increase the authorized amount of, any
equity security ranking prior to, or on a parity with, the Series D Preferred
Stock (other than additional Series D Preferred Stock approved in writing by the
Placement Agent) (A) upon a Liquidation Event, (B) with respect to the payment
of any dividends or distributions or (C) with respect to voting rights (except
for class voting rights required by law).
7. Outstanding Shares. For purposes of this Certificate of
Designation, a share of Series D Preferred Stock, when issued, shall be deemed
outstanding except (i) from the date, or the deemed date, of surrender of
certificates evidencing shares of Series D Preferred Stock, all shares of Series
D Preferred Stock converted into Common Stock and (ii) from the date of
registration of transfer, all shares of Series D Preferred Stock held of record
by the Corporation or any subsidiary of the Corporation.
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<PAGE>
8. Status of Acquired Shares. Shares of Series D Preferred
Stock received upon conversion pursuant to Section 4 or Section 5 or otherwise
acquired by the Corporation will be restored to the status of authorized but
unissued shares of Preferred Stock, without designation as to class, and may
thereafter be issued, but not as shares of Series D Preferred Stock.
9. Preemptive Rights. The Series D Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
10. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such changes as
shall be necessary to render the provision in question effective and valid under
applicable law.
11. No Amendment or Impairment. The Corporation shall not
amend its Certificate of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or seeking
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the rights of the holders of the Series D
Preferred Stock against impairment.
12. Redemption Parity. (a) If the Corporation is required to
repurchase, redeem or otherwise acquire (collectively, "Redeem") shares of
Series A Preferred Stock representing more than 5% of the aggregate stated value
of the Series A Preferred Stock, then the Corporation shall, subject to its
prior compliance with Article IV of the Certificate of Incorporation, offer to
Redeem the shares of Series D Preferred Stock, on a pari passu basis with the
Series A Preferred Stock based on the relative liquidation preferences of each
such series of Preferred Stock. The Corporation shall Redeem the shares of
Series D Preferred Stock with the same type of consideration that is paid to
Redeem the Series A Preferred Stock, and the Corporation shall Redeem the shares
of Series D Preferred Stock in the same manner, on the same schedule, and upon
the same notice (the "Company Notice"), as it Redeems the Series A Preferred
Stock.
(b) If the Corporation Redeems any Series D Preferred Stock,
the redemption price shall be $140.00 per share of Series D Preferred Stock,
subject to appropriate adjustment for stock splits, combinations and the like
(the "Redemption Price").
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<PAGE>
(c) If the Corporation Redeems any Series D Preferred Stock,
the Registered Holders shall be given the opportunity to elect to convert their
shares of Series D Preferred Stock at the then applicable Conversion Price in
lieu of having such shares Redeemed. If the Corporation uses Common Stock to
Redeem any Series D Preferred Stock, then such Common Stock will be valued at
its Market Price.
(d) The Corporation's obligation to provide moneys to Redeem
any Series D Preferred Stock shall be deemed fulfilled if, on or before the
redemption date, the Corporation shall deposit with a bank or trust company
having an office or agency in the Borough of Manhattan, City of New York, and
having a capital and surplus of at least $50,000,000, the principal amount of
funds necessary to so Redeem, in trust for the account of the Registered Holders
of the shares to be Redeemed (and so as to be and continue to be available
therefor), with irrevocable instructions and authority to such bank or trust
company that such funds be applied to Redeem the shares of Series D Preferred
Stock so called to be Redeemed. Any interest accrued on such funds shall be paid
to the Corporation from time to time. Any funds so deposited and unclaimed at
the end of three years from such redemption date shall be released or repaid to
the Corporation, after which, subject to any applicable laws relating to escheat
or unclaimed property, any Registered Holders of such shares of Series D
Preferred Stock so called to be Redeemed shall look only to the Corporation for
payment of the Redemption Price.
(e) Upon surrender of the certificates for any shares of
Series D Preferred Stock to be Redeemed by the Corporation (properly endorsed or
assigned for transfer, if the Board of Directors shall so require and the
Company Notice shall so state), such shares shall be Redeemed by the Corporation
at the Redemption Price.
[Signature page follows]
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<PAGE>
IN WITNESS WHEREOF, David R. Walner, Secretary of the
Corporation, acting for and on behalf of the Corporation, has hereunto
subscribed his name this 29th day of May, 1997.
GENTA INCORPORATED
By:
------------------------
Name: David. R. Walner
Title: Secretary
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<PAGE>
Exhibit Q
AMENDED AND RESTATED AMENDMENT AGREEMENT
The undersigned, intending legally to be bound, hereby agree that the
Amendment Agreement between the undersigned, dated May 20, 1997, as previously
amended, and all the exhibits thereto, shall be amended and restated to read in
their entirety as follows and otherwise agree as follows:
1. The Certificate of Designations for the Series D Convertible
Preferred Stock of Genta Incorporated (the "Company") shall be amended,
effective as of May 20, 1997, to read as set forth in Exhibit A hereto.
2. The Senior Secured Convertible Bridge Notes issued on February 13,
1997 shall be amended, effective as of the date hereof, to read as set forth in
Exhibits B-1 and B-2 hereto.
3. The Company's Class A and Class B Bridge Warrants for the Purchase
of Shares of Common Stock (numbers CA-1, CA-2, CB-1 and CB-2) (the "Old Bridge
Warrants") shall be exchanged, effective as of the date hereof, for New Warrants
(the "New Bridge Warrants") which, notwithstanding the provisions of Section 9
of the Bridge Warrants, shall read in their entirety as set forth in Exhibits
CA-1, CA-2, CB-1 and CB-2 hereto, and the Old Bridge Warrants shall be
cancelled.
4. If Aries Domestic Fund, L.P. and The Aries Trust (collectively, the
"Aries Funds") purchase securities in the Company's private placement commenced
on May 20, 1997, then the Aries Funds will not vote or dispose of such
securities or convert any such securities into, or exercise any such securities
for, any shares of Common Stock of the Company, for a period of 90 days from the
date of such purchase.
5. Except as amended hereby and except for the exchange of the New
Bridge Warrants for Old Bridge Warrants, the instruments and securities referred
to herein shall continue in full force and effect.
6. This agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Amendment Agreement as of June 23, 1997.
GENTA INCORPORATED
-------------------------------------
By:
THE ARIES TRUST, A CAYMAN ISLAND TRUST
By: its Investment Manager, PARAMOUNT
CAPITAL ASSET MANAGEMENT, INC.
By: /s/ Lindsay A. Rosenwald
----------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: President
THE ARIES DOMESTIC FUND, L.P.
By: its General Partner, PARAMOUNT
CAPITAL ASSET MANAGEMENT, INC.
By: /s/ Lindsay A. Rosenwald
----------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: President
<PAGE>
EXHIBIT R
THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF GENTA
INCORPORATED, (THE "COMPANY"). THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY
SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
GENTA INCORPORATED
No. B-1
AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE BRIDGE NOTE
$1,050,000 New York, New York
January 28, 1997, as
amended and restated
on June 23, 1997
Genta Incorporated, a Delaware corporation, (the "Company"),
for value received, hereby promises to pay to THE ARIES DOMESTIC FUND, LP (the
"Holder"), or registered assigns, the principal sum of ONE MILLION FIFTY
THOUSAND DOLLARS ($1,050,000), with interest from the date of original issuance
of this Senior Secured Convertible Bridge Note on the unpaid principal balance
at a rate equal to twelve percent (12%) per annum, on the earlier of (a)
December 31, 1997, (b) September 30, 1997 if on or prior to such date the
Company has not received gross proceeds of at least $2,000,000 in respect of its
offering of Premium Preferred Units which was commenced in May, 1997 and (c) the
date of any decision, order or other determination adverse to the Company or any
of its directors by any court or other tribunal in any lawsuit or other
proceeding against the Company and/or any of its directors by any of the
Company's preferred stockholders, including, without limitation, any adverse
result or other determination in connection with an appeal of the decision
rendered by the Delaware Court of Chancery in May, 1997 in respect of the suit
described in Item 3 of the Company's Form 10-K for the year ended December 31,
1996 (such earliest date, the "Maturity Date"). Payment shall be made at such
place as designated by the Holder upon surrender of this Senior Secured
Convertible Bridge Note, and shall be in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months. This Senior Secured Convertible Bridge
Note is one of a duly authorized issue of Genta Incorporated 12% Senior
Convertible Bridge Notes in an aggregate principal amount of $3,000,000
(individually a "Note"
<PAGE>
and collectively the "Notes") issued pursuant to a Note and Warrant Purchase
Agreement dated January 28, 1997 between the Company and the Holder (the
"Purchase Agreement"). The Senior Secured Convertible Bridge Notes shall be
senior to all other indebtedness of the Company ("Other Indebtedness") and all
Other Indebtedness shall be subordinated to the Senior Bridge Notes. These Notes
are secured pursuant to the Security Agreement dated as of January 28, 1997 by
and between the Company, Paramount Capital, Inc. and the Purchasers.
SECTION 1. PREPAYMENT.
This Note (including interest accrued on the principal hereof)
may be prepaid by the Company, at any time without penalty or premium provided
that the Company shall provide the holders of the Notes with at least 30 days
prior written notice of prepayment, and prior to such prepayment, the holders of
the Notes shall have the opportunity to exercise their optional conversion
rights pursuant to Section 2 hereof.
SECTION 2. OPTIONAL CONVERSION
(a) Right of Conversion. (i) Immediately, or, (ii) if the
rules of the Nasdaq National Market or any other law or regulation, require the
approval of the shareholders of the Company to permit convertibility of the
Notes, then upon the receipt of such approvals, the Notes shall be convertible,
in whole or in part, at the option of the holder thereof and upon notice to the
Corporation as set forth in paragraph 2(b) below, into the number of shares of
Series D Preferred Stock of the Company (the "Preferred Stock") equal to the
Conversion Amount divided by the then current Conversion Price (as defined
below). The Conversion Amount shall be the Liquidation Amount, or in the case of
a partial conversion, such lesser amount as designated by the converting holder.
The Liquidation Amount shall be the aggregate principal value of the Notes held
by such Holder plus any accrued and unpaid interest. The Conversion Price shall
initially be $50.00, subject to adjustment as provided below, representing an
initial conversion rate (subject to adjustment) of 200 shares of Preferred Stock
per $10,000 of Conversion Amount. Notwithstanding anything to the contrary
contained in this Note, no right of conversion shall exist if and only to the
extent that such conversion would result in the occurrence of a "Fundamental
Change" under Article IV of the Corporation's Restated Certificate of
Incorporation.
(b) Conversion Procedures. Any holder of Notes desiring to
convert such Notes into Preferred Stock shall surrender the Notes at the offices
of the Company, which Notes shall be accompanied by irrevocable written notice
to the Corporation that the holder elects so to convert such Notes and
specifying the name or names (with address) in which a certificate or
certificates evidencing shares of Preferred Stock are to be issued. The
Corporation will make a notation of the date that a notice of conversion is
received, which date shall be deemed to be the date of receipt for purposes
hereof.
The Corporation shall deliver to the holder converting the
Notes, or to the nominee or nominees of such person, certificates evidencing the
number of full shares of
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<PAGE>
Preferred Stock to which such person shall be entitled as aforesaid, together
with a cash adjustment of any fraction of a share as hereinafter provided.
Subject to the following provisions of this paragraph, such conversion shall be
deemed to have been made as of the date of such surrender of the Notes and the
person or persons entitled to receive the Preferred Stock deliverable upon
conversion of such Notes shall be treated for all purposes as the record holder
or holders of such Preferred Stock on such date; provided, however, that the
Corporation shall not be required to convert any Notes while the stock transfer
books of the Corporation are closed for any purpose, but the surrender of Notes
for conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books as if the
surrender had been made on the date of such reopening, and the conversion shall
be at the conversion rate in effect on such date.
All notices of conversion shall be irrevocable; provided,
however, that if the Corporation has sent notice of an event pursuant to
paragraph 2(e) hereof, a holder of Notes may, at its election, provide in its
notice of conversion that the conversion of its Notes shall be contingent upon
the occurrence of the record date or effectiveness of such event (as specified
by such holder), provided that such notice of conversion is received by the
Corporation prior to such record date or effective date, as the case may be.
(c) Protection From Dilution. (i) If, at any time or from time
to time after the date of this Note, the Company shall issue or distribute to
the holders of shares of Preferred Stock evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable solely to holders of Preferred Stock in shares of Preferred Stock,
referred to in Subsection (c)(ii), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof (any such non-excluded event being herein called a "SPECIAL
DIVIDEND"), the Conversion Price shall be adjusted by multiplying the Conversion
Price then in effect by a fraction, the numerator of which shall be the then
Current Market Price Per Share of Preferred Stock in effect on the record date
of such issuance or distribution less the fair market value (as determined in
good faith by the Company's Board of Directors) of the evidence of indebtedness,
cash, securities or property, or other assets issued or distributed in such
Special Dividend applicable to one share of Preferred Stock and the denominator
of which shall be the then Current Market Price Per Share of Preferred Stock in
effect on the record date of such issuance or distribution. An adjustment made
pursuant to this Subsection 2(a) shall become effective immediately after the
record date of any such Special Dividend. The then "CURRENT MARKET PRICE PER
SHARE OF PREFERRED STOCK" shall equal the then Current Market Price multiplied
by the then effective "Conversion Rate" (as defined and used in the Certificate
of Designation for the Preferred Stock).
The then Current Market Price per share (the "CURRENT MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
3
<PAGE>
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or, if the Common Stock is not reported on
NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined in good faith by the Board of Directors.
(ii) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Preferred Stock, (ii)
subdivide its outstanding shares of Preferred Stock into a greater number of
shares, (iii) combine its outstanding shares of Preferred Stock into a smaller
number of shares or (iv) issue by reclassification of its Preferred Stock any
shares of capital stock of the Company (other than the Conversion Shares), the
Conversion Price shall be proportionately adjusted so that the Notes shall be
convertible into a number and kind of securities which the holders would have
been entitled to receive after any such event had they converted the Notes
immediately prior thereto. An adjustment made pursuant to this Subsection
2(c)(ii) shall become effective immediately after the record date in the case of
a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(iii) Except as provided in Subsections (c)(i) and (c)(iv), in
case the Company shall hereafter issue or sell any Preferred Stock, any
securities convertible into Preferred Stock, any rights, options or warrants to
purchase Preferred Stock or any securities convertible into Preferred Stock, in
each case for a price per share or entitling the holders thereof to purchase
Preferred Stock at a price per share (determined by dividing (i) the total
amount, if any, received or receivable by the Company in consideration of the
issuance or sale of such securities plus the total consideration, if any,
payable to the Company upon exercise or conversion thereof (the "TOTAL
CONSIDERATION") by (ii) the number of additional shares of Preferred Stock
issuable upon exercise or conversion of such securities) which is less than
either the then Current Market Price Per Share of Preferred Stock in effect on
the date of such issuance or sale or the Conversion Price, the Conversion Price
shall be adjusted as of the date of such issuance or sale by multiplying the
Conversion Price then in effect by a fraction, the numerator of which shall be
(x) the sum of (A) the number of shares of Preferred Stock outstanding on the
record date of such issuance or sale plus (B) the Total Consideration divided by
the Current Market Price Per Share of Preferred Stock or the current Conversion
Price, whichever is greater, and the denominator of which shall be (y) the
number of shares of Preferred Stock outstanding on the record date of such
issuance or sale plus the maximum number of additional shares of Preferred Stock
issued, sold or issuable upon exercise or conversion of such securities.
(iv) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as a entirety, or in the
case of any statutory exchange of securities with another corporation (including
any exchange effected in
4
<PAGE>
connection with a merger of a third corporation into the Company), the Holder of
this Note shall have the right thereafter to receive on the conversion of this
Note the kind and amount of securities, cash or other property which the Holder
would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Note been converted immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 2 with respect to the rights and interests thereafter of
the Holder of this Note to the end that the provisions set forth in this Section
2 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the Note. The above provisions of this
Subsection (c)(iv) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The Company shall require the issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this Note
to be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Notes not less than
30 days prior to such event. A sale of all or substantially all of the assets of
the Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
(v) In case any event shall occur as to which the other
provisions of this Section 2 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the conversion rights
represented by this Note in accordance with the essential intent and principles
hereof then, in each such case, the Holders of Notes may appoint a firm of
independent public accountants of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to the adjustment,
if any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the conversion rights. Upon receipt of
such opinion, the Company will promptly mail a copy thereof to the Holder of
this Note and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
(vi) For purposes of the anti-dilution protection contained in
this Section (c), at all times following the conversion of all shares of
Preferred Stock into shares of Common Stock, the term Preferred Stock shall be
read to be Common Stock, context permitting, so that the anti-dilution
provisions will continue to protect the conversion rights represented by this
Note after the conversion of all the Preferred Stock into the Common Stock in
accordance with the essential intent and principles of this Section 3 (it being
understood that prior to such conversion, the anti-dilution provisions of the
Preferred Stock underlying this Note shall be applicable to any dilutive events
with respect to the Common Stock and protect the Holder from dilution of the
Common Stock).
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(d) Reservation of Shares; Transfer Taxes; Etc. The
Corporation shall at all times reserve and keep available, out of its authorized
and unissued shares of Preferred Stock, solely for the purpose of effecting the
conversion of the Notes, such number of shares of its Preferred Stock free of
preemptive rights as shall be sufficient to effect the conversion of all Notes
from time to time outstanding. The Corporation shall use its best efforts from
time to time, in accordance with the laws of the State of Delaware, to increase
the authorized number of shares of Preferred Stock if at any time the number of
shares of Preferred Stock not outstanding shall not be sufficient to permit the
conversion of all the then-outstanding Notes.
The Corporation shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of shares of Preferred
Stock on conversion of the Notes. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Preferred Stock (or other securities or assets) in a
name other than that in which the Notes so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid.
(e) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or any
other distribution); or
(ii) the Corporation shall authorize the granting to the
holders of Preferred Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or
warrants; or
(iii) of any reclassification of Preferred Stock (other than
a subdivision or combination of the outstanding Preferred Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value); or
(iv) of any consolidation or merger to which the Corporation
is a party and for which approval of any stockholders of the
Corporation shall be required, or of the sale or transfer of all or
substantially all of the assets of the Corporation or of any compulsory
share exchange whereby the Preferred Stock is converted into other
securities, cash or other property; or
(v) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be mailed to the holders of Notes, at their
last addresses as they shall appear upon the books of the Corporation, at least
20 days prior to the applicable record date hereinafter specified, a notice
stating (x) the date on which a record (if any) is to be taken for the purpose
of such dividend, distribution or granting of rights or warrants or, if a record
is not to be taken, the date as of which the holders of Preferred Stock of
record to be
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entitled to such dividend, distribution, rights or warrants are to be determined
and a description of the cash, securities or other property to be received by
such holders upon such dividend, distribution or granting of rights or warrants
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up or other
liquidation event is expected to become effective, the date as of which it is
expected that holders of Preferred Stock of record shall be entitled to exchange
their shares of Preferred Stock for securities or other property deliverable
upon such exchange, dissolution, liquidation or winding up or other liquidation
event and the consideration, including securities or other property, to be
received by such holders upon such exchange; provided, however, that no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice.
(f) Other Changes in Conversion Rate. The Corporation from
time to time may increase the Conversion Rate by any amount for any period of
time if the period is at least 20 days and if the increase is irrevocable during
the period. Whenever the Conversion Rate is so increased, the Corporation shall
mail to holders of record of Notes a notice of the increase at least 15 days
before the date the increased Conversion Rate takes effect, and such notice
shall state the increased Conversion Rate and the period it will be in effect.
The Corporation may make such increases in the Conversion
Rate, in addition to those required or allowed by this paragraph 4, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.
SECTION 3. DEFAULT CONVERSION.
(a) If this Note and all accrued interest shall not have been
paid in full on or before the Maturity Date or upon the occurrence of an Event
of Default (as defined in Section 7 hereof), the Holder shall have the right
(the "Default Conversion Right"), in addition to any other available remedies
set forth in Section 8 hereof or at law or in equity, to convert up to the
lesser of (i) the then outstanding principal amount of this Note or (ii) 10% of
the original principal amount of this Note, into the number of shares of Common
Stock of the Company ("Common Stock"), equal to the amount converted by the
Noteholder upon such Event of Default (the "Default Conversion Amount") divided
by $.001 (the "Default Conversion Price"). Upon conversion, the Company shall
pay all accrued and unpaid interest on the Default Conversion Amount.
(b) To exercise the Default Conversion Right, the Holder, on
or before the 60th day after the Maturity Date, but before payment in full of
the then outstanding principal and interest under this Note, shall deliver to
the Company, at its office at as set forth in section 11, or at such other place
as is designated in writing by the Company, a notice (the "Conversion Notice")
stating that the Holder is exercising the Default Conversion Right, the Default
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Conversion Amount and the name or names in which the Holder wishes the
certificates for shares of Common Stock to be issued.
(c) To the extent permitted by applicable law, upon exercise
of the Default Conversion Right, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise (the
"Conversion Shares"), notwithstanding that the transfer books of the Company
shall then be closed or certificates representing such Conversion Shares shall
not then have been actually delivered to the Holder. As soon as practicable and
in any event within five (5) days after exercise of the Default Conversion
Right, the Company shall issue and deliver to the Holder a certificate or
certificates evidencing the Conversion Shares registered in the name of the
Holder or its designee, provided that the Company may require the holder, by
notice given to the Holder promptly after receipt of the Conversion Notice, as a
condition to the delivery of such certificate or certificates, to present this
Note to the Company for the placement hereon of a legend indicating that the
Default Conversion Right has been exercised to the extent of the Default
Conversion Amount, and this Note (unless thereby paid in full) shall be
immediately returned to the Holder.
(d) The issuance of any shares or other securities upon the
exercise of the Default Conversion Right, and the delivery of certificates or
other instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
(e) The Holder shall not have, solely on account of such
status as a Holder of this Note, any rights of a stockholder of the Company,
either at law or in equity, or any notice of meetings of stockholders or of any
other proceedings of the Company except as provided in this Note.
(f) The Company shall at all times following the Issuance
Date, reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of providing for the exercise of the
Default Conversion Right, such number of shares of Common Stock as shall, from
time to time, be sufficient for the exercise of the Default Conversion Right in
full. The Company covenants that all shares of Common Stock issuable upon
exercise of the Default Conversion Right shall be validly issued, fully paid and
nonassessable.
(g) The anti-dilution protections set forth in Section 2(c)
hereof shall apply as well to the Default Conversion Right and the adjustment of
the Default Conversion Price hereunder, provided, however, that for purposes of
such application all appropriate references to Preferred Stock shall be read as
references to Common Stock and all references to the Conversion Price shall be
read as references to the Default Conversion Price, so as to give the Default
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Conversion Rights, as nearly as practicable, the anti-dilution and other
protections provided for in section 2(c) with respect to the Optional Conversion
Right.
SECTION 4. FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Optional and Default Conversion Right. If any fraction of a share would
be issuable on any exercise of the Optional or Default Conversion Right (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the closing price for the Common
Stock on the trading date immediately preceding the date of exercise of the
Optional or Default Conversion Right.
SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company covenants and agrees that until the payment in
full of this Note, the Company shall:
(a) Existence; Business. (i) Preserve, renew and keep in
full force and effect its legal existence and (ii) obtain, preserve, renew,
extend and keep in full force and effect the licenses, permits, authorizations,
patents, trademarks and trade names material to its business.
(b) Use of Proceeds. Use the proceeds of the Notes of this
issue solely as set forth in Section 7.7 of the Note and Warrant Purchase
Agreement between the Company and various purchasers dated the date hereof (the
"Purchase Agreement")
(c) Reports. Furnish to the Holder, at the time furnished to
the Company's stockholders, reports furnished generally to the Company's
stockholders, and copies of Current Reports on Form 8-K.
(d) Notice of Events of Default. Furnish to the Holder prompt
written notice of any Event of Default, specifying the nature and extent thereof
and corrective action, if any, proposed to be taken with respect thereto.
(e) Authorization of Stock Issuable Upon Conversion. No later
than the Maturity Date, authorize and reserve a sufficient number of its shares
for exercise of the Default Conversion Right.
SECTION 6. NEGATIVE COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Holder that until
the payment in full of this Note, the Company shall not:
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(a) Indebtedness. Incur, create, assume or permit to exist any
indebtedness except (i) indebtedness represented by the Notes, (ii) indebtedness
which by its terms is subordinated to the Notes in an amount less than $25,000
in the aggregate (iii) indebtedness in an amount less than fifty thousand
dollars ($50,000) incurred in the ordinary course of business, and (iv)
indebtedness for borrowed money existing on the date hereof and disclosed in
writing to the Holder on or prior to the date hereof, but not any extensions,
renewals or replacements of such indebtedness;
(b) Liens. Create, incur, assume or permit to exist any lien
on any property or assets (including stock or other securities of any person)
now owned or hereafter acquired by the Company, except (i) liens for taxes not
yet due or which are being contested by appropriate proceedings; (ii) carriers',
warehousemen's, mechanic's, materialmen's, repairmen's or other like liens
arising in the ordinary course of business and securing obligations that are not
due or which are being contested; or (iii) liens of attachments, judgments or
awards against the Company (X) which could not reasonably be expected to have an
adverse material effect on the Company or (Y) with respect to which an appeal or
proceeding for review shall be pending or a stay of execution shall have been
obtained, or which are otherwise being contested in good faith and by
appropriate proceedings, or (iv) purchase money liens, equipment leases and
financings incurred in the ordinary course of business.
(c) Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent (including intellectual
property), lease or license such property or other property which it intends to
use for substantially the same purpose or purposes as the property being sold or
transferred.
(d) Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or a substantial part
of its assets (whether now owned or hereafter acquired) or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or a
substantial part of the assets of any other person.
(e) Dividends and Distributions. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock or directly or indirectly
redeem, purchase, retire or otherwise acquire for value any shares of any class
of its capital stock or set aside any amount for any such purpose, except as
permitted by Section 7.15 of the Note and Warrant Agreement.
(f) No Impairment. By amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as
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may be necessary or appropriate in order to protect the rights of the Holder of
this Note against impairment.
SECTION 7. EVENTS OF DEFAULT DEFINED.
The following shall each constitute an "Event of Default"
hereunder:
(a) the failure of the Company to make any payment of
principal of or interest on this Note when due and payable;
(b) the failure of the Company to observe or perform any
covenant in this Note or in the Purchase Agreement, and such failure shall have
continued unremedied for a period of five (5) days;
(c) if the Company shall:
(1) admit in writing its inability to pay its
debts generally as they become due,
(2) file a petition in bankruptcy or a petition
to take advantage of any insolvency act,
(3) make an assignment for the benefit of its
creditors,
(4) consent to the appointment of a receiver of
itself or of the whole or any substantial
part of its property,
(5) on a petition in bankruptcy filed against,
be adjudicated a bankrupt, or
(6) file a petition or answer seeking
reorganization or arrangement under the
federal bankruptcy laws or any other
applicable law or statute of the United
States of America or any state thereof;
(d) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent of the Company, a receiver of
the Company or of the whole or any substantial part of its property, or
approving a petition filed against it seeking reorganization or arrangement of
the Company under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State thereof, and such order,
judgment or decree shall not be vacated or set aside or stayed within thirty
(30) days from the date of entry thereof;
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(e) if, under the provisions of any other law for the relief
or aid of debtors, any court of competent jurisdiction shall assume custody or
control of the Company or the whole or any substantial part of its property and
such custody or control shall not be terminated or stayed within thirty (30)
days from the date of assumption of such custody or control;
(f) the liquidation, dissolution or winding up of the Company;
(g) the failure of the shareholders to authorize and approve
the issuance of these Notes or the issuance of the shares of Preferred Stock
underlying these Notes, the Bridge Warrants or the New Warrants (as such terms
are defined in the Purchase Agreement), or any Common Stock underlying the
foregoing to the extent such authorization is necessary pursuant to the rules of
the Nasdaq National Market or any other applicable law, rule or regulation.
(h) A default or event of default which remains uncured
following any applicable cure period under the Security Agreement; or
(i) A final judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction against
the Company and the same shall not be discharged (or provision shall not be made
for such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Company shall not, within
such 30-day period, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
SECTION 8. REMEDIES UPON EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default, (i) the entire
principal amount of, and all accrued and unpaid interest on, this Note shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company and (ii) additional interest shall begin to accrue, and
shall be considered immediately due and payable, on the unpaid principal amount
of this Note at the rate of eighteen percent (18%) per annum and shall continue
to accrue until the initial interest and additional interest is paid. In
addition, the Holder may take any action available to it under the Purchase
Agreement or at law or in equity or by statute or otherwise.
(b) No remedy herein conferred upon the Holder of this Note is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
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SECTION 9. NOTE REGISTER.
(a) The Company shall keep at its principal executive office a
register (herein sometimes referred to as the "Note Register"), in which,
subject to such reasonable regulations as it may prescribe, but at its expense
(other than transfer taxes, if any), the Company shall provide for the
registration and transfer of this Note.
(b) Whenever this Note shall be surrendered at the principal
executive office of the Company for transfer or exchange, accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the Holder hereof or his attorney duly authorized in writing,
the Company shall execute and deliver in exchange therefor a new Note or Notes,
as may be requested by such Holder, in the same aggregate unpaid principal
amount and payable on the same date as the principal amount of the Note or Notes
so surrendered; each such new Note shall be dated as of the date to which
interest has been paid on the unpaid principal amount of the Note or Notes so
surrendered and shall be in such principal amount and registered in such name or
names as such Holder may designate in writing.
(c) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note
and of indemnity reasonably satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note (in case of mutilation) the Company will make and
deliver in lieu of this Note a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on the unpaid
principal amount of this Note in lieu of which such new Note is made and
delivered.
SECTION 10. REGISTRATION UNDER SECURITIES ACT OF 1933.
The Holder of this Note shall have registration rights as
provided in Section 8 of the Purchase Agreement, with respect to the shares of
Common Stock underlying the Preferred Stock issuable upon conversion of the
Notes pursuant to the Optional and Default Conversion Right. If the Holder is
not a party to the Purchase Agreement, by acceptance of this Note, the Holder
agrees to comply with provisions of Section 8 of the Purchase Agreement to the
same extent as if it were a party thereto.
SECTION 11. MISCELLANEOUS.
(a) Amendments and Waivers. The holders of sixty-six and
two-thirds percent (66 2/3%) or more in principal amount of outstanding Notes of
this issue may waive or otherwise consent to the amendment of any of the
provisions hereof, provided that no such waiver or amendment may reduce the
principal amount of or interest on any of the Notes of this issue or change the
stated maturity of the principal or reduce the percentage of holders of Notes of
this issue necessary to waive or amend the provisions of this Note, without the
consent of each holder of any Note affected thereby.
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(b) Restrictions on Transferability. In addition to the
restrictions set forth in Section 9(a) of this Note, the securities represented
by this Note have been acquired for investment and have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state or other jurisdiction. Without such registration, such securities may not
be sold, pledged, hypothecated or otherwise transferred, except pursuant to
exemptions from the Securities Act of 1933, and the securities laws of any state
or other jurisdiction. Notwithstanding the above, the holder of this Note has
been provided the registration rights contained in Section 8 of the Purchase
Agreement with respect to the shares of the Company's Common Stock which may be
acquired upon exercise of the Optional and Default Conversion Right.
(c) Forbearance from Suit. No holder of Notes of this issue
shall institute any suit or proceeding for the enforcement of the payment of
principal or interest unless the holders of at least fifty-one percent (51%) in
principal amount of all of the outstanding Notes of this issue join in such suit
or proceeding.
(d) Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York, excluding the
body of law relating to conflict of laws. Notwithstanding anything to the
contrary contained herein, in no event may the effective rate of interest
collected or received by the Holder exceed that which may be charged, collected
or received by the Holder under applicable law.
(e) Interpretation. If any term or provision of this Note
shall be held invalid, illegal or unenforceable, the validity of all other terms
and provisions hereof shall in no way be affected thereby.
(f) Successors and Assigns. This Note shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of the
Holder and its successors and assigns.
(g) Notices. All notices, requests, consents and demands shall
be made in writing and shall be mailed postage prepaid, or delivered by hand, to
the Company or to the Holder thereof at their respective addresses set forth
below or to such other address as may be furnished in writing to the other party
hereto:
If to the Holder: At the address shown on Schedule A attached
hereto.
with a copy to: Paramount Capital, Inc.
787 Seventh Avenue
New York, NY 10019
Attn: David R. Walner
If to the Company: Genta Incorporated
3350 General Atomics Court
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San Diego, CA 92121
Attention: Chief Executive Officer
(h) Saturdays, Sundays, Holidays. If any date that may at any
time be specified in this Note as a date for the making of any payment of
principal or interest under this Note shall fall on Saturday, Sunday or on a day
which in New York shall be a legal holiday, then the date for the making of that
payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
(i) Purchase Agreement. This Note is subject to the terms
contained in the Purchase Agreement dated the date hereof between the Company
and certain purchasers of the Senior Secured Convertible Bridge Notes and the
holder of this Note is entitled to the benefits of such Purchase Agreement and
may, in addition to any rights hereunder, enforce the agreements of the Company
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof.
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IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument on the date first above written by the duly authorized
representative of the Company.
ATTEST: GENTA INCORPORATED
_______________________ By: ________________________________
Name:
Its:
(Corporate Seal)
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<PAGE>
EXHIBIT S
THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF GENTA
INCORPORATED, (THE "COMPANY"). THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY
SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
GENTA INCORPORATED
No. B-2
AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE BRIDGE NOTE
$1,950,000 New York, New York
January 28, 1997, as
amended and restated
on June 23, 1997
Genta Incorporated, a Delaware corporation, (the "Company"),
for value received, hereby promises to pay to THE ARIES TRUST (the "Holder"), or
registered assigns, the principal sum of ONE MILLION NINE HUNDRED FIFTY THOUSAND
DOLLARS ($1,950,000), with interest from the date of original issuance of this
Senior Secured Convertible Bridge Note on the unpaid principal balance at a rate
equal to twelve percent (12%) per annum, on the earlier of (a) December 31,
1997, (b) September 30, 1997 if on or prior to such date the Company has not
received gross proceeds of at least $2,000,000 in respect of its offering of
Premium Preferred Units which was commenced in May, 1997 and (c) the date of any
decision, order or other determination adverse to the Company or any of its
directors by any court or other tribunal in any lawsuit or other proceeding
against the Company and/or any of its directors by any of the Company's
preferred stockholders, including, without limitation, any adverse result or
other determination in connection with an appeal of the decision rendered by the
Delaware Court of Chancery in May, 1997 in respect of the suit described in Item
3 of the Company's Form 10-K for the year ended December 31, 1996 (such earliest
date, the "Maturity Date"). Payment shall be made at such place as designated by
the Holder upon surrender of this Senior Secured Convertible Bridge Note, and
shall be in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months. This Senior Secured Convertible Bridge Note is one of a duly authorized
issue of Genta Incorporated 12% Senior Convertible Bridge Notes in an aggregate
principal amount of $3,000,000 (individually a "Note"
<PAGE>
and collectively the "Notes") issued pursuant to a Note and Warrant Purchase
Agreement dated January 28, 1997 between the Company and the Holder (the
"Purchase Agreement"). The Senior Secured Convertible Bridge Notes shall be
senior to all other indebtedness of the Company ("Other Indebtedness") and all
Other Indebtedness shall be subordinated to the Senior Bridge Notes. These Notes
are secured pursuant to the Security Agreement dated as of January 28, 1997 by
and between the Company, Paramount Capital, Inc. and the Purchasers.
SECTION 1. PREPAYMENT.
This Note (including interest accrued on the principal hereof)
may be prepaid by the Company, at any time without penalty or premium provided
that the Company shall provide the holders of the Notes with at least 30 days
prior written notice of prepayment, and prior to such prepayment, the holders of
the Notes shall have the opportunity to exercise their optional conversion
rights pursuant to Section 2 hereof.
SECTION 2. OPTIONAL CONVERSION
(a) Right of Conversion. (i) Immediately, or, (ii) if the
rules of the Nasdaq National Market or any other law or regulation, require the
approval of the shareholders of the Company to permit convertibility of the
Notes, then upon the receipt of such approvals, the Notes shall be convertible,
in whole or in part, at the option of the holder thereof and upon notice to the
Corporation as set forth in paragraph 2(b) below, into the number of shares of
Series D Preferred Stock of the Company (the "Preferred Stock") equal to the
Conversion Amount divided by the then current Conversion Price (as defined
below). The Conversion Amount shall be the Liquidation Amount, or in the case of
a partial conversion, such lesser amount as designated by the converting holder.
The Liquidation Amount shall be the aggregate principal value of the Notes held
by such Holder plus any accrued and unpaid interest. The Conversion Price shall
initially be $50.00, subject to adjustment as provided below, representing an
initial conversion rate (subject to adjustment) of 200 shares of Preferred Stock
per $10,000 of Conversion Amount. Notwithstanding anything to the contrary
contained in this Note, no right of conversion shall exist if and only to the
extent that such conversion would result in the occurrence of a "Fundamental
Change" under Article IV of the Corporation's Restated Certificate of
Incorporation.
(b) Conversion Procedures. Any holder of Notes desiring to
convert such Notes into Preferred Stock shall surrender the Notes at the offices
of the Company, which Notes shall be accompanied by irrevocable written notice
to the Corporation that the holder elects so to convert such Notes and
specifying the name or names (with address) in which a certificate or
certificates evidencing shares of Preferred Stock are to be issued. The
Corporation will make a notation of the date that a notice of conversion is
received, which date shall be deemed to be the date of receipt for purposes
hereof.
The Corporation shall deliver to the holder converting the
Notes, or to the nominee or nominees of such person, certificates evidencing the
number of full shares of
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Preferred Stock to which such person shall be entitled as aforesaid, together
with a cash adjustment of any fraction of a share as hereinafter provided.
Subject to the following provisions of this paragraph, such conversion shall be
deemed to have been made as of the date of such surrender of the Notes and the
person or persons entitled to receive the Preferred Stock deliverable upon
conversion of such Notes shall be treated for all purposes as the record holder
or holders of such Preferred Stock on such date; provided, however, that the
Corporation shall not be required to convert any Notes while the stock transfer
books of the Corporation are closed for any purpose, but the surrender of Notes
for conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books as if the
surrender had been made on the date of such reopening, and the conversion shall
be at the conversion rate in effect on such date.
All notices of conversion shall be irrevocable; provided,
however, that if the Corporation has sent notice of an event pursuant to
paragraph 2(e) hereof, a holder of Notes may, at its election, provide in its
notice of conversion that the conversion of its Notes shall be contingent upon
the occurrence of the record date or effectiveness of such event (as specified
by such holder), provided that such notice of conversion is received by the
Corporation prior to such record date or effective date, as the case may be.
(c) Protection From Dilution. (i) If, at any time or from time
to time after the date of this Note, the Company shall issue or distribute to
the holders of shares of Preferred Stock evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable solely to holders of Preferred Stock in shares of Preferred Stock,
referred to in Subsection (c)(ii), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof (any such non-excluded event being herein called a "SPECIAL
DIVIDEND"), the Conversion Price shall be adjusted by multiplying the Conversion
Price then in effect by a fraction, the numerator of which shall be the then
Current Market Price Per Share of Preferred Stock in effect on the record date
of such issuance or distribution less the fair market value (as determined in
good faith by the Company's Board of Directors) of the evidence of indebtedness,
cash, securities or property, or other assets issued or distributed in such
Special Dividend applicable to one share of Preferred Stock and the denominator
of which shall be the then Current Market Price Per Share of Preferred Stock in
effect on the record date of such issuance or distribution. An adjustment made
pursuant to this Subsection 2(a) shall become effective immediately after the
record date of any such Special Dividend. The then "CURRENT MARKET PRICE PER
SHARE OF PREFERRED STOCK" shall equal the then Current Market Price multiplied
by the then effective "conversion rate" (as defined and used in the Certificate
of Designation for the Preferred Stock).
The then Current Market Price per share (the "CURRENT MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
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on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or, if the Common Stock is not reported on
NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined in good faith by the Board of Directors.
(ii) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Preferred Stock, (ii)
subdivide its outstanding shares of Preferred Stock into a greater number of
shares, (iii) combine its outstanding shares of Preferred Stock into a smaller
number of shares or (iv) issue by reclassification of its Preferred Stock any
shares of capital stock of the Company (other than the Conversion Shares), the
Conversion Price shall be proportionately adjusted so that the Notes shall be
convertible into a number and kind of securities which the holders would have
been entitled to receive after any such event had they converted the Notes
immediately prior thereto. An adjustment made pursuant to this Subsection
2(c)(ii) shall become effective immediately after the record date in the case of
a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(iii) Except as provided in Subsections (c)(i) and (c)(iv), in
case the Company shall hereafter issue or sell any Preferred Stock, any
securities convertible into Preferred Stock, any rights, options or warrants to
purchase Preferred Stock or any securities convertible into Preferred Stock, in
each case for a price per share or entitling the holders thereof to purchase
Preferred Stock at a price per share (determined by dividing (i) the total
amount, if any, received or receivable by the Company in consideration of the
issuance or sale of such securities plus the total consideration, if any,
payable to the Company upon exercise or conversion thereof (the "TOTAL
CONSIDERATION") by (ii) the number of additional shares of Preferred Stock
issuable upon exercise or conversion of such securities) which is less than
either the then Current Market Price Per Share of Preferred Stock in effect on
the date of such issuance or sale or the Conversion Price, the Conversion Price
shall be adjusted as of the date of such issuance or sale by multiplying the
Conversion Price then in effect by a fraction, the numerator of which shall be
(x) the sum of (A) the number of shares of Preferred Stock outstanding on the
record date of such issuance or sale plus (B) the Total Consideration divided by
the Current Market Price Per Share of Preferred Stock or the current Conversion
Price, whichever is greater, and the denominator of which shall be (y) the
number of shares of Preferred Stock outstanding on the record date of such
issuance or sale plus the maximum number of additional shares of Preferred Stock
issued, sold or issuable upon exercise or conversion of such securities.
(iv) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as a entirety, or in the
case of any statutory exchange of securities with another corporation (including
any exchange effected in
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connection with a merger of a third corporation into the Company), the Holder of
this Note shall have the right thereafter to receive on the conversion of this
Note the kind and amount of securities, cash or other property which the Holder
would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Note been converted immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 2 with respect to the rights and interests thereafter of
the Holder of this Note to the end that the provisions set forth in this Section
2 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the Note. The above provisions of this
Subsection (c)(iv) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The Company shall require the issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this Note
to be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Notes not less than
30 days prior to such event. A sale of all or substantially all of the assets of
the Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
(v) In case any event shall occur as to which the other
provisions of this Section 2 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the conversion rights
represented by this Note in accordance with the essential intent and principles
hereof then, in each such case, the Holders of Notes may appoint a firm of
independent public accountants of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to the adjustment,
if any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the conversion rights. Upon receipt of
such opinion, the Company will promptly mail a copy thereof to the Holder of
this Note and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
(vi) For purposes of the anti-dilution protection contained in
this Section (c), at all times following the conversion of all shares of
Preferred Stock into shares of Common Stock, the term Preferred Stock shall be
read to be Common Stock, context permitting, so that the anti-dilution
provisions will continue to protect the conversion rights represented by this
Note after the conversion of all the Preferred Stock into the Common Stock in
accordance with the essential intent and principles of this Section 3 (it being
understood that prior to such conversion, the anti-dilution provisions of the
Preferred Stock underlying this Note shall be applicable to any dilutive events
with respect to the Common Stock and protect the Holder from dilution of the
Common Stock).
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(d) Reservation of Shares; Transfer Taxes; Etc. The
Corporation shall at all times reserve and keep available, out of its authorized
and unissued shares of Preferred Stock, solely for the purpose of effecting the
conversion of the Notes, such number of shares of its Preferred Stock free of
preemptive rights as shall be sufficient to effect the conversion of all Notes
from time to time outstanding. The Corporation shall use its best efforts from
time to time, in accordance with the laws of the State of Delaware, to increase
the authorized number of shares of Preferred Stock if at any time the number of
shares of Preferred Stock not outstanding shall not be sufficient to permit the
conversion of all the then-outstanding Notes.
The Corporation shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of shares of Preferred
Stock on conversion of the Notes. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Preferred Stock (or other securities or assets) in a
name other than that in which the Notes so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid.
(e) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or any
other distribution); or
(ii) the Corporation shall authorize the granting to
the holders of Preferred Stock of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any other
rights or warrants; or
(iii) of any reclassification of Preferred Stock (other than
a subdivision or combination of the outstanding Preferred Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value); or
(iv) of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of
the Corporation shall be required, or of the sale or transfer of all
or substantially all of the assets of the Corporation or of any
compulsory share exchange whereby the Preferred Stock is converted
into other securities, cash or other property; or
(v) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be mailed to the holders of Notes, at their
last addresses as they shall appear upon the books of the Corporation, at least
20 days prior to the applicable record date hereinafter specified, a notice
stating (x) the date on which a record (if any) is to be taken for the purpose
of such dividend, distribution or granting of rights or warrants or, if a record
is not to be taken, the date as of which the holders of Preferred Stock of
record to be
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entitled to such dividend, distribution, rights or warrants are to be determined
and a description of the cash, securities or other property to be received by
such holders upon such dividend, distribution or granting of rights or warrants
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up or other
liquidation event is expected to become effective, the date as of which it is
expected that holders of Preferred Stock of record shall be entitled to exchange
their shares of Preferred Stock for securities or other property deliverable
upon such exchange, dissolution, liquidation or winding up or other liquidation
event and the consideration, including securities or other property, to be
received by such holders upon such exchange; provided, however, that no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice.
(f) Other Changes in Conversion Rate. The Corporation from
time to time may increase the Conversion Rate by any amount for any period of
time if the period is at least 20 days and if the increase is irrevocable during
the period. Whenever the Conversion Rate is so increased, the Corporation shall
mail to holders of record of Notes a notice of the increase at least 15 days
before the date the increased Conversion Rate takes effect, and such notice
shall state the increased Conversion Rate and the period it will be in effect.
The Corporation may make such increases in the Conversion
Rate, in addition to those required or allowed by this paragraph 4, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.
SECTION 3. DEFAULT CONVERSION.
(a) If this Note and all accrued interest shall not have been
paid in full on or before the Maturity Date or upon the occurrence of an Event
of Default (as defined in Section 7 hereof), the Holder shall have the right
(the "Default Conversion Right"), in addition to any other available remedies
set forth in Section 8 hereof or at law or in equity, to convert up to the
lesser of (i) the then outstanding principal amount of this Note or (ii) 10% of
the original principal amount of this Note, into the number of shares of Common
Stock of the Company ("Common Stock"), equal to the amount converted by the
Noteholder upon such Event of Default (the "Default Conversion Amount") divided
by $.001 (the "Default Conversion Price"). Upon conversion, the Company shall
pay all accrued and unpaid interest on the Default Conversion Amount.
(b) To exercise the Default Conversion Right, the Holder, on
or before the 60th day after the Maturity Date, but before payment in full of
the then outstanding principal and interest under this Note, shall deliver to
the Company, at its office at as set forth in section 11, or at such other place
as is designated in writing by the Company, a notice (the "Conversion Notice")
stating that the Holder is exercising the Default Conversion Right, the Default
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Conversion Amount and the name or names in which the Holder wishes the
certificates for shares of Common Stock to be issued.
(c) To the extent permitted by applicable law, upon exercise
of the Default Conversion Right, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise (the
"Conversion Shares"), notwithstanding that the transfer books of the Company
shall then be closed or certificates representing such Conversion Shares shall
not then have been actually delivered to the Holder. As soon as practicable and
in any event within five (5) days after exercise of the Default Conversion
Right, the Company shall issue and deliver to the Holder a certificate or
certificates evidencing the Conversion Shares registered in the name of the
Holder or its designee, provided that the Company may require the holder, by
notice given to the Holder promptly after receipt of the Conversion Notice, as a
condition to the delivery of such certificate or certificates, to present this
Note to the Company for the placement hereon of a legend indicating that the
Default Conversion Right has been exercised to the extent of the Default
Conversion Amount, and this Note (unless thereby paid in full) shall be
immediately returned to the Holder.
(d) The issuance of any shares or other securities upon the
exercise of the Default Conversion Right, and the delivery of certificates or
other instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
(e) The Holder shall not have, solely on account of such
status as a Holder of this Note, any rights of a stockholder of the Company,
either at law or in equity, or any notice of meetings of stockholders or of any
other proceedings of the Company except as provided in this Note.
(f) The Company shall at all times following the Issuance
Date, reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of providing for the exercise of the
Default Conversion Right, such number of shares of Common Stock as shall, from
time to time, be sufficient for the exercise of the Default Conversion Right in
full. The Company covenants that all shares of Common Stock issuable upon
exercise of the Default Conversion Right shall be validly issued, fully paid and
nonassessable.
(g) The anti-dilution protections set forth in Section 2(c)
hereof shall apply as well to the Default Conversion Right and the adjustment of
the Default Conversion Price hereunder, provided, however, that for purposes of
such application all appropriate references to Preferred Stock shall be read as
references to Common Stock and all references to the Conversion Price shall be
read as references to the Default Conversion Price, so as to give the Default
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Conversion Rights, as nearly as practicable, the anti-dilution and other
protections provided for in section 2(c) with respect to the Optional Conversion
Right.
SECTION 4. FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Optional and Default Conversion Right. If any fraction of a share would
be issuable on any exercise of the Optional or Default Conversion Right (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the closing price for the Common
Stock on the trading date immediately preceding the date of exercise of the
Optional or Default Conversion Right.
SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company covenants and agrees that until the payment in
full of this Note, the Company shall:
(a) Existence; Business. (i) Preserve, renew and keep in full
force and effect its legal existence and (ii) obtain, preserve, renew, extend
and keep in full force and effect the licenses, permits, authorizations,
patents, trademarks and trade names material to its business.
(b) Use of Proceeds. Use the proceeds of the Notes of this
issue solely as set forth in Section 7.7 of the Note and Warrant Purchase
Agreement between the Company and various purchasers dated the date hereof (the
"Purchase Agreement")
(c) Reports. Furnish to the Holder, at the time furnished to
the Company's stockholders, reports furnished generally to the Company's
stockholders, and copies of Current Reports on Form 8-K.
(d) Notice of Events of Default. Furnish to the Holder prompt
written notice of any Event of Default, specifying the nature and extent thereof
and corrective action, if any, proposed to be taken with respect thereto.
(e) Authorization of Stock Issuable Upon Conversion. No later
than the Maturity Date, authorize and reserve a sufficient number of its shares
for exercise of the Default Conversion Right.
SECTION 6. NEGATIVE COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Holder that until
the payment in full of this Note, the Company shall not:
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(a) Indebtedness. Incur, create, assume or permit to exist any
indebtedness except (i) indebtedness represented by the Notes, (ii) indebtedness
which by its terms is subordinated to the Notes in an amount less than $25,000
in the aggregate (iii) indebtedness in an amount less than fifty thousand
dollars ($50,000) incurred in the ordinary course of business, and (iv)
indebtedness for borrowed money existing on the date hereof and disclosed in
writing to the Holder on or prior to the date hereof, but not any extensions,
renewals or replacements of such indebtedness;
(b) Liens. Create, incur, assume or permit to exist any lien
on any property or assets (including stock or other securities of any person)
now owned or hereafter acquired by the Company, except (i) liens for taxes not
yet due or which are being contested by appropriate proceedings; (ii) carriers',
warehousemen's, mechanic's, materialmen's, repairmen's or other like liens
arising in the ordinary course of business and securing obligations that are not
due or which are being contested; or (iii) liens of attachments, judgments or
awards against the Company (X) which could not reasonably be expected to have an
adverse material effect on the Company or (Y) with respect to which an appeal or
proceeding for review shall be pending or a stay of execution shall have been
obtained, or which are otherwise being contested in good faith and by
appropriate proceedings, or (iv) purchase money liens, equipment leases and
financings incurred in the ordinary course of business.
(c) Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent (including intellectual
property), lease or license such property or other property which it intends to
use for substantially the same purpose or purposes as the property being sold or
transferred.
(d) Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or a substantial part
of its assets (whether now owned or hereafter acquired) or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or a
substantial part of the assets of any other person.
(e) Dividends and Distributions. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock or directly or indirectly
redeem, purchase, retire or otherwise acquire for value any shares of any class
of its capital stock or set aside any amount for any such purpose, except as
permitted by Section 7.15 of the Note and Warrant Agreement.
(f) No Impairment. By amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as
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may be necessary or appropriate in order to protect the rights of the Holder of
this Note against impairment.
SECTION 7. EVENTS OF DEFAULT DEFINED.
The following shall each constitute an "Event of Default"
hereunder:
(a) the failure of the Company to make any payment of
principal of or interest on this Note when due and payable;
(b) the failure of the Company to observe or perform any
covenant in this Note or in the Purchase Agreement, and such failure shall have
continued unremedied for a period of five (5) days;
(c) if the Company shall:
(1) admit in writing its inability to pay its
debts generally as they become due,
(2) file a petition in bankruptcy or a petition
to take advantage of any insolvency act,
(3) make an assignment for the benefit of its
creditors,
(4) consent to the appointment of a receiver of
itself or of the whole or any substantial
part of its property,
(5) on a petition in bankruptcy filed against,
be adjudicated a bankrupt, or
(6) file a petition or answer seeking
reorganization or arrangement under the
federal bankruptcy laws or any other
applicable law or statute of the United
States of America or any state thereof;
(d) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent of the Company, a receiver of
the Company or of the whole or any substantial part of its property, or
approving a petition filed against it seeking reorganization or arrangement of
the Company under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State thereof, and such order,
judgment or decree shall not be vacated or set aside or stayed within thirty
(30) days from the date of entry thereof;
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(e) if, under the provisions of any other law for the relief
or aid of debtors, any court of competent jurisdiction shall assume custody or
control of the Company or the whole or any substantial part of its property and
such custody or control shall not be terminated or stayed within thirty (30)
days from the date of assumption of such custody or control;
(f) the liquidation, dissolution or winding up of the Company;
(g) the failure of the shareholders to authorize and approve
the issuance of these Notes or the issuance of the shares of Preferred Stock
underlying these Notes, the Bridge Warrants or the New Warrants (as such terms
are defined in the Purchase Agreement), or any Common Stock underlying the
foregoing to the extent such authorization is necessary pursuant to the rules of
the Nasdaq National Market or any other applicable law, rule or regulation.
(h) A default or event of default which remains uncured
following any applicable cure period under the Security Agreement; or
(i) A final judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction against
the Company and the same shall not be discharged (or provision shall not be made
for such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Company shall not, within
such 30-day period, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
SECTION 8. REMEDIES UPON EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default, (i) the entire
principal amount of, and all accrued and unpaid interest on, this Note shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company and (ii) additional interest shall begin to accrue, and
shall be considered immediately due and payable, on the unpaid principal amount
of this Note at the rate of eighteen percent (18%) per annum and shall continue
to accrue until the initial interest and additional interest is paid. In
addition, the Holder may take any action available to it under the Purchase
Agreement or at law or in equity or by statute or otherwise.
(b) No remedy herein conferred upon the Holder of this Note is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
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SECTION 9. NOTE REGISTER.
(a) The Company shall keep at its principal executive office a
register (herein sometimes referred to as the "Note Register"), in which,
subject to such reasonable regulations as it may prescribe, but at its expense
(other than transfer taxes, if any), the Company shall provide for the
registration and transfer of this Note.
(b) Whenever this Note shall be surrendered at the principal
executive office of the Company for transfer or exchange, accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the Holder hereof or his attorney duly authorized in writing,
the Company shall execute and deliver in exchange therefor a new Note or Notes,
as may be requested by such Holder, in the same aggregate unpaid principal
amount and payable on the same date as the principal amount of the Note or Notes
so surrendered; each such new Note shall be dated as of the date to which
interest has been paid on the unpaid principal amount of the Note or Notes so
surrendered and shall be in such principal amount and registered in such name or
names as such Holder may designate in writing.
(c) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note
and of indemnity reasonably satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note (in case of mutilation) the Company will make and
deliver in lieu of this Note a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on the unpaid
principal amount of this Note in lieu of which such new Note is made and
delivered.
SECTION 10. REGISTRATION UNDER SECURITIES ACT OF 1933.
The Holder of this Note shall have registration rights as
provided in Section 8 of the Purchase Agreement, with respect to the shares of
Common Stock underlying the Preferred Stock issuable upon conversion of the
Notes pursuant to the Optional and Default Conversion Right. If the Holder is
not a party to the Purchase Agreement, by acceptance of this Note, the Holder
agrees to comply with provisions of Section 8 of the Purchase Agreement to the
same extent as if it were a party thereto.
SECTION 11. MISCELLANEOUS.
(a) Amendments and Waivers. The holders of sixty-six and
two-thirds percent (66 2/3%) or more in principal amount of outstanding Notes of
this issue may waive or otherwise consent to the amendment of any of the
provisions hereof, provided that no such waiver or amendment may reduce the
principal amount of or interest on any of the Notes of this issue or change the
stated maturity of the principal or reduce the percentage of holders of Notes of
this issue necessary to waive or amend the provisions of this Note, without the
consent of each holder of any Note affected thereby.
13
<PAGE>
(b) Restrictions on Transferability. In addition to the
restrictions set forth in Section 9(a) of this Note, the securities represented
by this Note have been acquired for investment and have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state or other jurisdiction. Without such registration, such securities may not
be sold, pledged, hypothecated or otherwise transferred, except pursuant to
exemptions from the Securities Act of 1933, and the securities laws of any state
or other jurisdiction. Notwithstanding the above, the holder of this Note has
been provided the registration rights contained in Section 8 of the Purchase
Agreement with respect to the shares of the Company's Common Stock which may be
acquired upon exercise of the Optional and Default Conversion Right.
(c) Forbearance from Suit. No holder of Notes of this issue
shall institute any suit or proceeding for the enforcement of the payment of
principal or interest unless the holders of at least fifty-one percent (51%) in
principal amount of all of the outstanding Notes of this issue join in such suit
or proceeding.
(d) Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York, excluding the
body of law relating to conflict of laws. Notwithstanding anything to the
contrary contained herein, in no event may the effective rate of interest
collected or received by the Holder exceed that which may be charged, collected
or received by the Holder under applicable law.
(e) Interpretation. If any term or provision of this Note
shall be held invalid, illegal or unenforceable, the validity of all other terms
and provisions hereof shall in no way be affected thereby.
(f) Successors and Assigns. This Note shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of the
Holder and its successors and assigns.
(g) Notices. All notices, requests, consents and demands shall
be made in writing and shall be mailed postage prepaid, or delivered by hand, to
the Company or to the Holder thereof at their respective addresses set forth
below or to such other address as may be furnished in writing to the other party
hereto:
If to the Holder: At the address shown on Schedule A
attached hereto.
with a copy to: Paramount Capital, Inc.
787 Seventh Avenue
New York, NY 10019
Attn: David R. Walner
If to the Company: Genta Incorporated
3350 General Atomics Court
14
<PAGE>
San Diego, CA 92121
Attention: Chief Executive Officer
(h) Saturdays, Sundays, Holidays. If any date that may at any
time be specified in this Note as a date for the making of any payment of
principal or interest under this Note shall fall on Saturday, Sunday or on a day
which in New York shall be a legal holiday, then the date for the making of that
payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
(i) Purchase Agreement. This Note is subject to the terms
contained in the Purchase Agreement dated the date hereof between the Company
and certain purchasers of the Senior Secured Convertible Bridge Notes and the
holder of this Note is entitled to the benefits of such Purchase Agreement and
may, in addition to any rights hereunder, enforce the agreements of the Company
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof.
15
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument on the date first above written by the duly authorized
representative of the Company.
ATTEST: GENTA INCORPORATED
_______________________ By: ________________________________
Name:
Its:
(Corporate Seal)
16
<PAGE>
EXHIBIT T
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE
STATE SECURITIES LAWS.
GENTA INCORPORATED
New Class A Bridge Warrant for the Purchase of Shares of
--------------------------------------------------------
Common Stock
------------
No. CA-1 350,000 Shares
FOR VALUE RECEIVED, GENTA INCORPORATED., a Delaware corporation (the
"COMPANY"), hereby certifies that THE ARIES DOMESTIC FUND, LP or its registered
assigns (the "Holder") is entitled to purchase from the Company, subject to the
provisions of this Warrant (the "Warrant"), at any time on or after the date
hereof (the "INITIAL EXERCISE DATE"), and prior to 5:00 P.M., New York City
time, on January 27, 2002 (the "TERMINATION DATE"), 350,000 fully paid and
non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock"), at an exercise price of $1.50 per share of Common Stock for an
aggregate exercise price of FIVE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($525,000.00) (the aggregate purchase price payable for the Warrant Shares
hereunder is hereinafter sometimes referred to as the "AGGREGATE EXERCISE
PRICE"). The number of shares of Common Stock to be received upon exercise of
this Warrant and the price to be paid for each share of Common Stock are subject
to possible adjustment from time to time as hereinafter set forth. The shares of
Common Stock or other securities or property deliverable upon such exercise as
adjusted from time to time is hereinafter sometimes referred to as the "WARRANT
SHARES." The exercise price of a share of Common Stock in effect at any time and
as adjusted from time to time is hereinafter sometimes referred to as the "PER
SHARE EXERCISE PRICE." The Per Share Exercise Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of Warrant
Shares shall also be adjusted, by dividing the Aggregate Exercise Price by the
Per Share Exercise Price in effect immediately after such adjustment. The
Aggregate Exercise Price is not subject to adjustment.
<PAGE>
1. EXERCISE OF WARRANT.
--------------------
(a) This Warrant may be exercised in whole or in part, at any
time by its holder commencing on the Initial Exercise Date and prior to the
Termination Date, by presentation and surrender of this Warrant, together with
the duly executed subscription form attached at the end hereof, at the address
set forth in subsection 8(a) hereof, together with payment, by certified or
official bank check or wire transfer payable to the order of the Company, of the
Aggregate Exercise Price or the proportionate part thereof if exercised in part.
(b) If this Warrant is exercised in part only, the Company
shall, upon presentation of this Warrant upon such exercise, execute and deliver
(along with the certificate for the Warrant Shares purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon proper exercise of this Warrant, the Company promptly
shall deliver certificates for the Warrant Shares to the Holder duly legended as
authorized by the subscription form. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Warrant; provided that
the Company shall pay to the holders of the Warrant cash in lieu of such
fractional shares.
2. RESERVATION OF WARRANT SHARES; FULLY PAID SHARES; TAXES.
The Company hereby represents that it has, and until expiration of this Warrant
agrees that it shall, reserve for issuance or delivery upon exercise of this
Warrant, such number of shares of the Common Stock as shall be required for
issuance and/or delivery upon exercise of this Warrant in full, and agrees that
all Warrant Shares so issued and/or delivered will be validly issued, fully paid
and non-assessable, and further agrees to pay all taxes and charges that may be
imposed upon such issuance and/or delivery.
3. PROTECTION AGAINST DILUTION.
---------------------------
(a) In the event the Company shall, at any time or from time
to time after the date of issuance of this Warrant, issue or distribute to all
of the holders of its shares of Common Stock evidence of its indebtedness, any
other securities of the Company or any cash, property or other assets (any such
event being herein called a "SPECIAL DIVIDEND"), the Per Share Exercise Price
shall be adjusted by multiplying the Per Share Exercise Price then in effect by
a fraction, the numerator of which shall be the then Current Market Price (as
defined in paragraph 3(k) below) of the Common Stock, less the Current Market
Price of the Special Dividend issued or distributed in respect of one share of
Common Stock, and the denominator of which shall be the Current Market Price of
the Common Stock. Such adjustment shall be made successively whenever such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding
2
<PAGE>
shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares or (iv) issue
by reclassification of its Common Stock any shares of capital stock of the
Company, the Per Share Exercise Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Exercise Price and the
denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company issuable upon exercise of this Warrant assuming
this Warrant had been exercised immediately prior to such action. An adjustment
made pursuant to this subsection 3(b) shall become effective immediately after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c)(i) Except as provided in subsections 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the consideration, if any, payable to the Company upon
exercise or conversion thereof (collectively, the "TOTAL CONSIDERATION") by (ii)
the number of additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities) which is less than the then Current
Market Price of the Common Stock (as defined below) but not below the current
Per Share Exercise Price (which event is governed by subsection 3(c)(ii)), the
Per Share Exercise Price shall be adjusted as of the date of such issuance or
sale by multiplying the Per Share Exercise Price then in effect by a fraction,
the numerator of which shall be (x) the sum of (A) the number of shares of
Common Stock outstanding on the record date of such issuance or sale plus (B)
the Total Consideration divided by the Current Market Price of the Common Stock,
and the denominator of which shall be (y) the number of shares of Common Stock
outstanding on the record date of such issuance or sale plus the maximum number
of additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities.
(c)(ii) Except as provided in subsection 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (the "ISSUE PRICE"), (determined by dividing (i) the Total
Consideration by (ii) the number of additional shares of Common Stock issuable
upon exercise or conversion of such securities) which is less than the then
current Per Share Exercise Price in effect on the record date of such issuance,
the Per Share Exercise Price shall be adjusted to equal the Issue Price.
(d) In the event of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
3
<PAGE>
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior to
such event. A sale of all or substantially all of the assets of the Company for
a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(e) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(f) Whenever the Per Share Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to this Section 3, the number of
shares of Common Stock underlying a Warrant shall simultaneously be adjusted to
equal the number obtained by dividing the Aggregate Exercise Price by the
adjusted Per Share Exercise Price.
(g) No adjustment in the Per Share Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.01 per share of Common Stock; provided, however, that any adjustments
which by reason of this subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3 shall be made to the nearest
4
<PAGE>
cent or to the nearest 1/100th of a share, as the case may be. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Per Share Exercise Price, in addition to those required
by this Section 3, as it in its discretion shall deem to be advisable in order
that any stock dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Exercise Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Company shall promptly
obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Exercise
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock, the Company
shall mail notice thereof to the Holders of the Warrants not less than 30 days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Exercise Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
(k) For the purpose of any computation under Section 3 above,
the then Current Market Price per share (the "CURRENT MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or, if the Common Stock is not reported on
NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined by agreement between the Company's Board of Directors, on the one
part, and the Holders of Warrants representing the right to purchase a majority
of the Warrant Shares subject to all outstanding Warrants, on the second part.
If the Board of
5
<PAGE>
Directors and such Holders fail to agree on the Current Market Price within 60
days of the date of the action giving rise to any adjustment pursuant to this
Section 3, such Holders shall be entitled to appoint a firm of independent
public accountants or appraisers of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to such Current
Market Price on a basis consistent with the essential intent and principles
established herein. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder of this Warrant and shall make the adjustments
described therein. The fees and expenses of such independent public accountants
or appraisers shall be borne by the Company.
4. REGISTRATION UNDER SECURITIES ACT OF 1933. The resale of
the Warrant Shares shall be registered on the Shelf Registration Statement (as
defined in Article 8 of the Note and Warrant Purchase Agreement (the "Purchase
Agreement") dated as of January 28, 1997, by and among the Company, The Aries
Trust, a Cayman Island Trust, and The Aries Domestic Fund, L.P., a Delaware
limited partnership) and certain purchasers and the Holder of this Warrant shall
have the registration rights as provided in Article 8 of the Purchase Agreement.
If the Holder is not a party to the Purchase Agreement, by acceptance of this
Warrant the Holder agrees to comply with provisions of Article 8 of the Purchase
Agreement to the same extent as if it were a party thereto.
5. LIMITED TRANSFERABILITY. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All Warrants issued upon the transfer or assignment of this
Warrant will be dated the same date as this Warrant, and all rights of the
holder thereof shall be identical to those of the Holder.
6. LOSS, ETC., OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
7. STATUS OF HOLDER. This Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.
8. NOTICES. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
6
<PAGE>
(a) the Company at 3550 General Atomic Corporation, San
Diego, California 92121, Attention: Thomas H. Adams, or such other
address as the Company has designated in writing to the Holder; or
(b) the Holder at the address indicated in the notice
provisions to the Purchase Agreement, or other such address as the
Holder has designated in writing to the Company.
9. SPECIAL EXERCISE PRICE ADJUSTMENT. The Per Share Exercise
Price shall be adjusted at the time of the Final Closing Date (as that term is
defined in the Letter between Genta and Paramount Capital Inc., dated January
28, 1997) if the exercise price of the Offering Warrants (as defined below) is
less than the exercise price of the Warrants. In such event the Per Share
Exercise Price shall be reduced to equal 50% of the then current exercise price
of the Offering Warrants (as hereafter defined). "Offering Warrants" shall mean
the warrants described in paragraph 7 of the Letter between the Company and
Paramount Capital, Inc. dated January 28, 1997.
10. HEADINGS. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to principles of conflicts of law thereof.
IN WITNESS WHEREOF, Dr. Robert E. Klem, acting for and on
behalf of the Company, has executed this Warrant and caused the Company's
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary as of June 23, 1997.
GENTA INCORPORATED
By: _______________________
Name: Dr. Robert E. Klem
Title: Vice President
ATTEST:
- --------------------------------
Secretary or Assistant Secretary
[Corporate Seal]
7
<PAGE>
SUBSCRIPTION
------------
The undersigned, ____________________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing _____________________ shares of Common Stock
thereunder and hereby makes payment of $_______________ by certified or official
bank check in payment of the exercise price therefor.
Dated:_______________ Signature:_____________________________
Address:_______________________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________________________________ hereby
sells, assigns and transfers unto _____________________________________ the
foregoing Warrant and all rights evidenced thereby, and does irrevocably
constitute and appoint _____________________________, attorney, to transfer said
Warrant on the books of Genta, Inc.
Dated:_______________ Signature:_____________________________
Address:_______________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED __________________________ hereby assigns and
transfers unto _________________________ the right to purchase __________ shares
of the Common Stock, no par value per share, of Genta, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
__________________________, attorney, to transfer that part of said Warrant on
the books of Genta, Inc.
Dated:_______________ Signature:___________________________
Address:_____________________________
8
<PAGE>
EXHIBIT U
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE
STATE SECURITIES LAWS.
GENTA INCORPORATED
New Class A Bridge Warrant for the Purchase of Shares of
--------------------------------------------------------
Common Stock
------------
No. CA-2 650,000 Shares
FOR VALUE RECEIVED, GENTA INCORPORATED., a Delaware
corporation (the "COMPANY"), hereby certifies that THE ARIES TRUST or its
registered assigns (the "Holder") is entitled to purchase from the Company,
subject to the provisions of this Warrant (the "Warrant"), at any time on or
after the date hereof (the "INITIAL EXERCISE DATE"), and prior to 5:00 P.M., New
York City time, on January 27, 2002 (the "TERMINATION DATE"), 650,000 fully paid
and non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock"), at an exercise price of $1.50 per share of Common Stock for an
aggregate exercise price of NINE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($975,000.00) (the aggregate purchase price payable for the Warrant Shares
hereunder is hereinafter sometimes referred to as the "AGGREGATE EXERCISE
PRICE"). The number of shares of Common Stock to be received upon exercise of
this Warrant and the price to be paid for each share of Common Stock are subject
to possible adjustment from time to time as hereinafter set forth. The shares of
Common Stock or other securities or property deliverable upon such exercise as
adjusted from time to time is hereinafter sometimes referred to as the "WARRANT
SHARES." The exercise price of a share of Common Stock in effect at any time and
as adjusted from time to time is hereinafter sometimes referred to as the "PER
SHARE EXERCISE PRICE." The Per Share Exercise Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of Warrant
Shares shall also be adjusted, by dividing the Aggregate Exercise Price by the
Per Share Exercise Price in effect immediately after such adjustment. The
Aggregate Exercise Price is not subject to adjustment.
<PAGE>
1. EXERCISE OF WARRANT.
--------------------
(a) This Warrant may be exercised in whole or in part, at any
time by its holder commencing on the Initial Exercise Date and prior to the
Termination Date, by presentation and surrender of this Warrant, together with
the duly executed subscription form attached at the end hereof, at the address
set forth in subsection 8(a) hereof, together with payment, by certified or
official bank check or wire transfer payable to the order of the Company, of the
Aggregate Exercise Price or the proportionate part thereof if exercised in part.
(b) If this Warrant is exercised in part only, the Company
shall, upon presentation of this Warrant upon such exercise, execute and deliver
(along with the certificate for the Warrant Shares purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon proper exercise of this Warrant, the Company promptly
shall deliver certificates for the Warrant Shares to the Holder duly legended as
authorized by the subscription form. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Warrant; provided that
the Company shall pay to the holders of the Warrant cash in lieu of such
fractional shares.
2. RESERVATION OF WARRANT SHARES; FULLY PAID SHARES; TAXES.
The Company hereby represents that it has, and until expiration of this Warrant
agrees that it shall, reserve for issuance or delivery upon exercise of this
Warrant, such number of shares of the Common Stock as shall be required for
issuance and/or delivery upon exercise of this Warrant in full, and agrees that
all Warrant Shares so issued and/or delivered will be validly issued, fully paid
and non-assessable, and further agrees to pay all taxes and charges that may be
imposed upon such issuance and/or delivery.
3. PROTECTION AGAINST DILUTION.
----------------------------
(a) In the event the Company shall, at any time or from time
to time after the date of issuance of this Warrant, issue or distribute to all
of the holders of its shares of Common Stock evidence of its indebtedness, any
other securities of the Company or any cash, property or other assets (any such
event being herein called a "SPECIAL DIVIDEND"), the Per Share Exercise Price
shall be adjusted by multiplying the Per Share Exercise Price then in effect by
a fraction, the numerator of which shall be the then Current Market Price (as
defined in paragraph 3(k) below) of the Common Stock, less the Current Market
Price of the Special Dividend issued or distributed in respect of one share of
Common Stock, and the denominator of which shall be the Current Market Price of
the Common Stock. Such adjustment shall be made successively whenever such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(b) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding
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shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares or (iv) issue
by reclassification of its Common Stock any shares of capital stock of the
Company, the Per Share Exercise Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Exercise Price and the
denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company issuable upon exercise of this Warrant assuming
this Warrant had been exercised immediately prior to such action. An adjustment
made pursuant to this subsection 3(b) shall become effective immediately after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c)(i) Except as provided in subsections 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the consideration, if any, payable to the Company upon
exercise or conversion thereof (collectively, the "TOTAL CONSIDERATION") by (ii)
the number of additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities) which is less than the then Current
Market Price of the Common Stock (as defined below) but not below the current
Per Share Exercise Price (which event is governed by subsection 3(c)(ii)), the
Per Share Exercise Price shall be adjusted as of the date of such issuance or
sale by multiplying the Per Share Exercise Price then in effect by a fraction,
the numerator of which shall be (x) the sum of (A) the number of shares of
Common Stock outstanding on the record date of such issuance or sale plus (B)
the Total Consideration divided by the Current Market Price of the Common Stock,
and the denominator of which shall be (y) the number of shares of Common Stock
outstanding on the record date of such issuance or sale plus the maximum number
of additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities.
(c)(ii) Except as provided in subsection 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (the "ISSUE PRICE"), (determined by dividing (i) the Total
Consideration by (ii) the number of additional shares of Common Stock issuable
upon exercise or conversion of such securities) which is less than the then
current Per Share Exercise Price in effect on the record date of such issuance,
the Per Share Exercise Price shall be adjusted to equal the Issue Price.
(d) In the event of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
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(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior to
such event. A sale of all or substantially all of the assets of the Company for
a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(e) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(f) Whenever the Per Share Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to this Section 3, the number of
shares of Common Stock underlying a Warrant shall simultaneously be adjusted to
equal the number obtained by dividing the Aggregate Exercise Price by the
adjusted Per Share Exercise Price.
(g) No adjustment in the Per Share Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.01 per share of Common Stock; provided, however, that any adjustments
which by reason of this subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3 shall be made to the nearest
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cent or to the nearest 1/100th of a share, as the case may be. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Per Share Exercise Price, in addition to those required
by this Section 3, as it in its discretion shall deem to be advisable in order
that any stock dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Exercise Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Company shall promptly
obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Exercise
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock, the Company
shall mail notice thereof to the Holders of the Warrants not less than 30 days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Exercise Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
(k) For the purpose of any computation under Section 3 above,
the then Current Market Price per share (the "CURRENT MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or, if the Common Stock is not reported on
NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined by agreement between the Company's Board of Directors, on the one
part, and the Holders of Warrants representing the right to purchase a majority
of the Warrant Shares subject to all outstanding Warrants, on the second part.
If the Board of
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Directors and such Holders fail to agree on the Current Market Price within 60
days of the date of the action giving rise to any adjustment pursuant to this
Section 3, such Holders shall be entitled to appoint a firm of independent
public accountants or appraisers of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to such Current
Market Price on a basis consistent with the essential intent and principles
established herein. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder of this Warrant and shall make the adjustments
described therein. The fees and expenses of such independent public accountants
or appraisers shall be borne by the Company.
4. REGISTRATION UNDER SECURITIES ACT OF 1933. The resale of
the Warrant Shares shall be registered on the Shelf Registration Statement (as
defined in Article 8 of the Note and Warrant Purchase Agreement (the "Purchase
Agreement") dated as of January 28, 1997, by and among the Company, The Aries
Fund, a Cayman Island Trust, and The Aries Domestic Fund, L.P., a Delaware
limited partnership) and certain purchasers and the Holder of this Warrant shall
have the registration rights as provided in Article 8 of the Purchase Agreement.
If the Holder is not a party to the Purchase Agreement, by acceptance of this
Warrant the Holder agrees to comply with provisions of Article 8 of the Purchase
Agreement to the same extent as if it were a party thereto.
5. LIMITED TRANSFERABILITY. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All Warrants issued upon the transfer or assignment of this
Warrant will be dated the same date as this Warrant, and all rights of the
holder thereof shall be identical to those of the Holder.
6. LOSS, ETC., OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
7. STATUS OF HOLDER. This Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.
8. NOTICES. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
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<PAGE>
(a) the Company at 3550 General Atomic Corporation, San Diego,
California 92121, Attention: Thomas H. Adams, or such other address as the
Company has designated in writing to the Holder; or
(b) the Holder at the address indicated in the notice
provisions to the Purchase Agreement, or other such address as the
Holder has designated in writing to the Company.
9. SPECIAL EXERCISE PRICE ADJUSTMENT. The Per Share Exercise
Price shall be adjusted at the time of the Final Closing Date (as that term is
defined in the Letter between Genta and Paramount Capital Inc., dated January
28, 1997) if the exercise price of the Offering Warrants (as defined below) is
less than the exercise price of the Warrants. In such event the Per Share
Exercise Price shall be reduced to equal 50% of the then current exercise price
of the Offering Warrants (as hereafter defined). "Offering Warrants" shall mean
the warrants described in paragraph 7 of the Letter between the Company and
Paramount Capital, Inc. dated January 28, 1997.
10. HEADINGS. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to principles of conflicts of law thereof.
IN WITNESS WHEREOF, Dr. Robert E. Klem, acting for and on
behalf of the Company, has executed this Warrant and caused the Company's
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary as of June 23, 1997.
GENTA INCORPORATED
By: _______________________
Name: Dr. Robert E. Klem
Title: Vice President
ATTEST:
- -------------------------
Secretary or Assistant Secretary
[Corporate Seal]
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SUBSCRIPTION
------------
The undersigned, ____________________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing _____________________ shares of Common Stock
thereunder and hereby makes payment of $_______________ by certified or official
bank check in payment of the exercise price therefor.
Dated:_______________ Signature:_____________________________
Address:_______________________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________________________________
hereby sells, assigns and transfers unto _____________________________________
the foregoing Warrant and all rights evidenced thereby, and does irrevocably
constitute and appoint _____________________________, attorney, to transfer said
Warrant on the books of Genta, Inc.
Dated:_______________ Signature:_____________________________
Address:______________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED __________________________ hereby assigns
and transfers unto _________________________ the right to purchase __________
shares of the Common Stock, no par value per share, of Genta, Inc. covered by
the foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
__________________________, attorney, to transfer that part of said Warrant on
the books of Genta, Inc.
Dated:_______________ Signature:___________________________
Address:_____________________________
8
<PAGE>
EXHIBIT V
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE
STATE SECURITIES LAWS.
GENTA INCORPORATED
New Class B Bridge Warrant for the Purchase of Shares of
--------------------------------------------------------
Common Stock
------------
No. CB-1 350,000 Shares
FOR VALUE RECEIVED, GENTA INCORPORATED., a Delaware
corporation (the "COMPANY"), hereby certifies that THE ARIES DOMESTIC FUND, LP
or its registered assigns (the "Holder") is entitled to purchase from the
Company, subject to the provisions of this Warrant (the "Warrant"), at any time
on or after the date hereof (the "INITIAL EXERCISE DATE"), and prior to 5:00
P.M., New York City time, on January 27, 2002 (the "TERMINATION DATE"), 350,000
fully paid and non-assessable shares of the Common Stock, $.001 par value, of
the Company ("Common Stock"), at an exercise price of $1.50 per share of Common
Stock for an aggregate exercise price of FIVE HUNDRED TWENTY-FIVE THOUSAND
DOLLARS ($525,000.00) (the aggregate purchase price payable for the Warrant
Shares hereunder is hereinafter sometimes referred to as the "AGGREGATE EXERCISE
PRICE"). The number of shares of Common Stock to be received upon exercise of
this Warrant and the price to be paid for each share of Common Stock are subject
to possible adjustment from time to time as hereinafter set forth. The shares of
Common Stock or other securities or property deliverable upon such exercise as
adjusted from time to time is hereinafter sometimes referred to as the "WARRANT
SHARES." The exercise price of a share of Common Stock in effect at any time and
as adjusted from time to time is hereinafter sometimes referred to as the "PER
SHARE EXERCISE PRICE." The Per Share Exercise Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of Warrant
Shares shall also be adjusted, by dividing the Aggregate Exercise Price by the
Per Share Exercise Price in effect immediately after such adjustment. The
Aggregate Exercise Price is not subject to adjustment.
<PAGE>
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised in whole or in part, at any
time by its holder commencing on the Initial Exercise Date and prior to the
Termination Date, by presentation and surrender of this Warrant, together with
the duly executed subscription form attached at the end hereof, at the address
set forth in subsection 8(a) hereof, together with payment, by certified or
official bank check or wire transfer payable to the order of the Company, of the
Aggregate Exercise Price or the proportionate part thereof if exercised in part.
(b) If this Warrant is exercised in part only, the Company
shall, upon presentation of this Warrant upon such exercise, execute and deliver
(along with the certificate for the Warrant Shares purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon proper exercise of this Warrant, the Company promptly
shall deliver certificates for the Warrant Shares to the Holder duly legended as
authorized by the subscription form. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Warrant; provided that
the Company shall pay to the holders of the Warrant cash in lieu of such
fractional shares.
2. RESERVATION OF WARRANT SHARES; FULLY PAID SHARES; TAXES.
The Company hereby represents that it has, and until expiration of this Warrant
agrees that it shall, reserve for issuance or delivery upon exercise of this
Warrant, such number of shares of the Common Stock as shall be required for
issuance and/or delivery upon exercise of this Warrant in full, and agrees that
all Warrant Shares so issued and/or delivered will be validly issued, fully paid
and non-assessable, and further agrees to pay all taxes and charges that may be
imposed upon such issuance and/or delivery.
3. PROTECTION AGAINST DILUTION.
(a) In the event the Company shall, at any time or from time
to time after the date of issuance of this Warrant, issue or distribute to all
of the holders of its shares of Common Stock evidence of its indebtedness, any
other securities of the Company or any cash, property or other assets (any such
event being herein called a "SPECIAL DIVIDEND"), the Per Share Exercise Price
shall be adjusted by multiplying the Per Share Exercise Price then in effect by
a fraction, the numerator of which shall be the then Current Market Price (as
defined in paragraph 3(k) below) of the Common Stock, less the Current Market
Price of the Special Dividend issued or distributed in respect of one share of
Common Stock, and the denominator of which shall be the Current Market Price of
the Common Stock. Such adjustment shall be made successively whenever such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(b) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding
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shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares or (iv) issue
by reclassification of its Common Stock any shares of capital stock of the
Company, the Per Share Exercise Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Exercise Price and the
denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company issuable upon exercise of this Warrant assuming
this Warrant had been exercised immediately prior to such action. An adjustment
made pursuant to this subsection 3(b) shall become effective immediately after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c)(i) Except as provided in subsections 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the consideration, if any, payable to the Company upon
exercise or conversion thereof (collectively, the "TOTAL CONSIDERATION") by (ii)
the number of additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities) which is less than the then Current
Market Price of the Common Stock (as defined below) but not below the current
Per Share Exercise Price (which event is governed by subsection 3(c)(ii)), the
Per Share Exercise Price shall be adjusted as of the date of such issuance or
sale by multiplying the Per Share Exercise Price then in effect by a fraction,
the numerator of which shall be (x) the sum of (A) the number of shares of
Common Stock outstanding on the record date of such issuance or sale plus (B)
the Total Consideration divided by the Current Market Price of the Common Stock,
and the denominator of which shall be (y) the number of shares of Common Stock
outstanding on the record date of such issuance or sale plus the maximum number
of additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities.
(c)(ii) Except as provided in subsection 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (the "ISSUE PRICE"), (determined by dividing (i) the Total
Consideration by (ii) the number of additional shares of Common Stock issuable
upon exercise or conversion of such securities) which is less than the then
current Per Share Exercise Price in effect on the record date of such issuance,
the Per Share Exercise Price shall be adjusted to equal the Issue Price.
(d) In the event of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
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<PAGE>
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior to
such event. A sale of all or substantially all of the assets of the Company for
a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(e) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(f) Whenever the Per Share Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to this Section 3, the number of
shares of Common Stock underlying a Warrant shall simultaneously be adjusted to
equal the number obtained by dividing the Aggregate Exercise Price by the
adjusted Per Share Exercise Price.
(g) No adjustment in the Per Share Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.01 per share of Common Stock; provided, however, that any adjustments
which by reason of this subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3 shall be made to the nearest
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<PAGE>
cent or to the nearest 1/100th of a share, as the case may be. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Per Share Exercise Price, in addition to those required
by this Section 3, as it in its discretion shall deem to be advisable in order
that any stock dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Exercise Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Company shall promptly
obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Exercise
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock, the Company
shall mail notice thereof to the Holders of the Warrants not less than 30 days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Exercise Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
(k) For the purpose of any computation under Section 3 above,
the then Current Market Price per share (the "CURRENT MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or, if the Common Stock is not reported on
NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined by agreement between the Company's Board of Directors, on the one
part, and the Holders of Warrants representing the right to purchase a majority
of the Warrant Shares subject to all outstanding Warrants, on the second part.
If the Board of
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Directors and such Holders fail to agree on the Current Market Price within 60
days of the date of the action giving rise to any adjustment pursuant to this
Section 3, such Holders shall be entitled to appoint a firm of independent
public accountants or appraisers of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to such Current
Market Price on a basis consistent with the essential intent and principles
established herein. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder of this Warrant and shall make the adjustments
described therein. The fees and expenses of such independent public accountants
or appraisers shall be borne by the Company.
4. REGISTRATION UNDER SECURITIES ACT OF 1933. The resale of
the Warrant Shares shall be registered on the Shelf Registration Statement (as
defined in Article 8 of the Note and Warrant Purchase Agreement (the "Purchase
Agreement") dated as of January 28, 1997, by and among the Company, The Aries
Fund, a Cayman Island Trust, and The Aries Domestic Fund, L.P., a Delaware
limited partnership) and certain purchasers and the Holder of this Warrant shall
have the registration rights as provided in Article 8 of the Purchase Agreement.
If the Holder is not a party to the Purchase Agreement, by acceptance of this
Warrant the Holder agrees to comply with provisions of Article 8 of the Purchase
Agreement to the same extent as if it were a party thereto.
5. LIMITED TRANSFERABILITY. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All Warrants issued upon the transfer or assignment of this
Warrant will be dated the same date as this Warrant, and all rights of the
holder thereof shall be identical to those of the Holder.
6. LOSS, ETC., OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
7. STATUS OF HOLDER. This Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.
8. NOTICES. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
6
<PAGE>
(a) the Company at 3550 General Atomic Corporation, San Diego,
California 92121, Attention: Thomas H. Adams, or such other address as
the Company has designated in writing to the Holder; or
(b) the Holder at the address indicated in the notice
provisions to the Purchase Agreement, or other such address as the
Holder has designated in writing to the Company.
9. SPECIAL EXERCISE PRICE ADJUSTMENT. The Per Share Exercise
Price shall be adjusted at the time of the Final Closing Date (as that term is
defined in the Letter between Genta and Paramount Capital Inc., dated January
28, 1997) if the exercise price of the Offering Warrants (as defined below) is
less than the exercise price of the Warrants. In such event the Per Share
Exercise Price shall be reduced to equal 50% of the then current exercise price
of the Offering Warrants (as hereafter defined). "Offering Warrants" shall mean
the warrants described in paragraph 7 of the Letter between the Company and
Paramount Capital, Inc. dated January 28, 1997.
10. HEADINGS. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to principles of conflicts of law thereof.
IN WITNESS WHEREOF, Dr. Robert E. Klem, acting for and on
behalf of the Company, has executed this Warrant and caused the Company's
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary as of June 23, 1997.
GENTA INCORPORATED
By: _____________________
Name: Dr. Robert E. Klem
Title: Vice President
ATTEST:
- -------------------------
Secretary or Assistant Secretary
[Corporate Seal]
7
<PAGE>
SUBSCRIPTION
------------
The undersigned, ____________________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing _____________________ shares of Common Stock
thereunder and hereby makes payment of $_______________ by certified or official
bank check in payment of the exercise price therefor.
Dated:_______________ Signature:_____________________________
Address:_______________________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________________________________
hereby sells, assigns and transfers unto _____________________________________
the foregoing Warrant and all rights evidenced thereby, and does irrevocably
constitute and appoint _____________________________, attorney, to transfer said
Warrant on the books of Genta, Inc.
Dated:_______________ Signature:_____________________________
Address:______________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED __________________________ hereby assigns
and transfers unto _________________________ the right to purchase __________
shares of the Common Stock, no par value per share, of Genta, Inc. covered by
the foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
__________________________, attorney, to transfer that part of said Warrant on
the books of Genta, Inc.
Dated:_______________ Signature:___________________________
Address:_____________________________
8
<PAGE>
EXHIBIT W
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE
STATE SECURITIES LAWS.
GENTA INCORPORATED
New Class B Bridge Warrant for the Purchase of Shares of
--------------------------------------------------------
Common Stock
------------
No. CB-2 650,000 Shares
FOR VALUE RECEIVED, GENTA INCORPORATED., a Delaware
corporation (the "COMPANY"), hereby certifies that THE ARIES TRUST or its
registered assigns (the "Holder") is entitled to purchase from the Company,
subject to the provisions of this Warrant (the "Warrant"), at any time on or
after the date hereof (the "INITIAL EXERCISE DATE"), and prior to 5:00 P.M., New
York City time, on January 27, 2002 (the "TERMINATION DATE"), 650,000 fully paid
and non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock"), at an exercise price of $1.50 per share of Common Stock for an
aggregate exercise price of NINE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($975,000.00) (the aggregate purchase price payable for the Warrant Shares
hereunder is hereinafter sometimes referred to as the "AGGREGATE EXERCISE
PRICE"). The number of shares of Common Stock to be received upon exercise of
this Warrant and the price to be paid for each share of Common Stock are subject
to possible adjustment from time to time as hereinafter set forth. The shares of
Common Stock or other securities or property deliverable upon such exercise as
adjusted from time to time is hereinafter sometimes referred to as the "WARRANT
SHARES." The exercise price of a share of Common Stock in effect at any time and
as adjusted from time to time is hereinafter sometimes referred to as the "PER
SHARE EXERCISE PRICE." The Per Share Exercise Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of Warrant
Shares shall also be adjusted, by dividing the Aggregate Exercise Price by the
Per Share Exercise Price in effect immediately after such adjustment. The
Aggregate Exercise Price is not subject to adjustment.
<PAGE>
1. EXERCISE OF WARRANT.
--------------------
(a) This Warrant may be exercised in whole or in part, at any
time by its holder commencing on the Initial Exercise Date and prior to the
Termination Date, by presentation and surrender of this Warrant, together with
the duly executed subscription form attached at the end hereof, at the address
set forth in subsection 8(a) hereof, together with payment, by certified or
official bank check or wire transfer payable to the order of the Company, of the
Aggregate Exercise Price or the proportionate part thereof if exercised in part.
(b) If this Warrant is exercised in part only, the Company
shall, upon presentation of this Warrant upon such exercise, execute and deliver
(along with the certificate for the Warrant Shares purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon proper exercise of this Warrant, the Company promptly
shall deliver certificates for the Warrant Shares to the Holder duly legended as
authorized by the subscription form. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Warrant; provided that
the Company shall pay to the holders of the Warrant cash in lieu of such
fractional shares.
2. RESERVATION OF WARRANT SHARES; FULLY PAID SHARES; TAXES.
The Company hereby represents that it has, and until expiration of this Warrant
agrees that it shall, reserve for issuance or delivery upon exercise of this
Warrant, such number of shares of the Common Stock as shall be required for
issuance and/or delivery upon exercise of this Warrant in full, and agrees that
all Warrant Shares so issued and/or delivered will be validly issued, fully paid
and non-assessable, and further agrees to pay all taxes and charges that may be
imposed upon such issuance and/or delivery.
3. PROTECTION AGAINST DILUTION.
----------------------------
(a) In the event the Company shall, at any time or from time
to time after the date of issuance of this Warrant, issue or distribute to all
of the holders of its shares of Common Stock evidence of its indebtedness, any
other securities of the Company or any cash, property or other assets (any such
event being herein called a "SPECIAL DIVIDEND"), the Per Share Exercise Price
shall be adjusted by multiplying the Per Share Exercise Price then in effect by
a fraction, the numerator of which shall be the then Current Market Price (as
defined in paragraph 3(k) below) of the Common Stock, less the Current Market
Price of the Special Dividend issued or distributed in respect of one share of
Common Stock, and the denominator of which shall be the Current Market Price of
the Common Stock. Such adjustment shall be made successively whenever such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(b) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding
2
<PAGE>
shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares or (iv) issue
by reclassification of its Common Stock any shares of capital stock of the
Company, the Per Share Exercise Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Exercise Price and the
denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company issuable upon exercise of this Warrant assuming
this Warrant had been exercised immediately prior to such action. An adjustment
made pursuant to this subsection 3(b) shall become effective immediately after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c)(i) Except as provided in subsections 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the consideration, if any, payable to the Company upon
exercise or conversion thereof (collectively, the "TOTAL CONSIDERATION") by (ii)
the number of additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities) which is less than the then Current
Market Price of the Common Stock (as defined below) but not below the current
Per Share Exercise Price (which event is governed by subsection 3(c)(ii)), the
Per Share Exercise Price shall be adjusted as of the date of such issuance or
sale by multiplying the Per Share Exercise Price then in effect by a fraction,
the numerator of which shall be (x) the sum of (A) the number of shares of
Common Stock outstanding on the record date of such issuance or sale plus (B)
the Total Consideration divided by the Current Market Price of the Common Stock,
and the denominator of which shall be (y) the number of shares of Common Stock
outstanding on the record date of such issuance or sale plus the maximum number
of additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities.
(c)(ii) Except as provided in subsection 3(a) and 3(b)(i), in
the event the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or warrants to
purchase Common Stock or securities convertible into Common Stock, in each case
for a price per share or entitling the holders thereof to purchase Common Stock
at a price per share (the "ISSUE PRICE"), (determined by dividing (i) the Total
Consideration by (ii) the number of additional shares of Common Stock issuable
upon exercise or conversion of such securities) which is less than the then
current Per Share Exercise Price in effect on the record date of such issuance,
the Per Share Exercise Price shall be adjusted to equal the Issue Price.
(d) In the event of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
3
<PAGE>
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior to
such event. A sale of all or substantially all of the assets of the Company for
a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(e) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(f) Whenever the Per Share Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to this Section 3, the number of
shares of Common Stock underlying a Warrant shall simultaneously be adjusted to
equal the number obtained by dividing the Aggregate Exercise Price by the
adjusted Per Share Exercise Price.
(g) No adjustment in the Per Share Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.01 per share of Common Stock; provided, however, that any adjustments
which by reason of this subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3 shall be made to the nearest
4
<PAGE>
cent or to the nearest 1/100th of a share, as the case may be. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Per Share Exercise Price, in addition to those required
by this Section 3, as it in its discretion shall deem to be advisable in order
that any stock dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Exercise Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Company shall promptly
obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Exercise
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock, the Company
shall mail notice thereof to the Holders of the Warrants not less than 30 days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Exercise Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
(k) For the purpose of any computation under Section 3 above,
the then Current Market Price per share (the "CURRENT MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or, if the Common Stock is not reported on
NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined by agreement between the Company's Board of Directors, on the one
part, and the Holders of Warrants representing the right to purchase a majority
of the Warrant Shares subject to all outstanding Warrants, on the second part.
If the Board of
5
<PAGE>
Directors and such Holders fail to agree on the Current Market Price within 60
days of the date of the action giving rise to any adjustment pursuant to this
Section 3, such Holders shall be entitled to appoint a firm of independent
public accountants or appraisers of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to such Current
Market Price on a basis consistent with the essential intent and principles
established herein. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder of this Warrant and shall make the adjustments
described therein. The fees and expenses of such independent public accountants
or appraisers shall be borne by the Company.
4. REGISTRATION UNDER SECURITIES ACT OF 1933. The resale of
the Warrant Shares shall be registered on the Shelf Registration Statement (as
defined in Article 8 of the Note and Warrant Purchase Agreement (the "Purchase
Agreement") dated as of January 28, 1997, by and among the Company, The Aries
Fund, a Cayman Island Trust, and The Aries Domestic Fund, L.P., a Delaware
limited partnership) and certain purchasers and the Holder of this Warrant shall
have the registration rights as provided in Article 8 of the Purchase Agreement.
If the Holder is not a party to the Purchase Agreement, by acceptance of this
Warrant the Holder agrees to comply with provisions of Article 8 of the Purchase
Agreement to the same extent as if it were a party thereto.
5. LIMITED TRANSFERABILITY. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All Warrants issued upon the transfer or assignment of this
Warrant will be dated the same date as this Warrant, and all rights of the
holder thereof shall be identical to those of the Holder.
6. LOSS, ETC., OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
7. STATUS OF HOLDER. This Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.
8. NOTICES. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
6
<PAGE>
(a) the Company at 3550 General Atomic Corporation, San Diego,
California 92121, Attention: Thomas H. Adams, or such other address as
the Company has designated in writing to the Holder; or
(b) the Holder at the address indicated in the notice
provisions to the Purchase Agreement, or other such address as the
Holder has designated in writing to the Company.
9. SPECIAL EXERCISE PRICE ADJUSTMENT. The Per Share Exercise
Price shall be adjusted at the time of the Final Closing Date (as that term is
defined in the Letter between Genta and Paramount Capital Inc., dated January
28, 1997) if the exercise price of the Offering Warrants (as defined below) is
less than the exercise price of the Warrants. In such event the Per Share
Exercise Price shall be reduced to equal 50% of the then current exercise price
of the Offering Warrants (as hereafter defined). "Offering Warrants" shall mean
the warrants described in paragraph 7 of the Letter between the Company and
Paramount Capital, Inc. dated January 28, 1997.
10. HEADINGS. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction
hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without
giving effect to principles of conflicts of law thereof.
IN WITNESS WHEREOF, Dr. Robert E. Klem, acting for and on
behalf of the Company, has executed this Warrant and caused the Company's
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary as of June 23, 1997.
GENTA INCORPORATED
By: _______________________
Name: Dr. Robert E. Klem
Title: Vice President
ATTEST:
- -------------------------
Secretary or Assistant Secretary
[Corporate Seal]
7
<PAGE>
SUBSCRIPTION
------------
The undersigned, ____________________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing _____________________ shares of Common Stock
thereunder and hereby makes payment of $_______________ by certified or official
bank check in payment of the exercise price therefor.
Dated:_______________ Signature:_____________________________
Address:_______________________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________________________________
hereby sells, assigns and transfers unto _____________________________________
the foregoing Warrant and all rights evidenced thereby, and does irrevocably
constitute and appoint _____________________________, attorney, to transfer said
Warrant on the books of Genta, Inc.
Dated:_______________ Signature:_____________________________
Address:______________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED __________________________ hereby assigns
and transfers unto _________________________ the right to purchase __________
shares of the Common Stock, no par value per share, of Genta, Inc. covered by
the foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
__________________________, attorney, to transfer that part of said Warrant on
the books of Genta, Inc.
Dated:_______________ Signature:___________________________
Address:_____________________________
8
