-------------------------
OMB APPROVAL
-------------------------
OMB Number: 3235-0145
Expires:December 31, 1997
Estimated average burden
hours per form.....14.90
-------------------------
UNITED STATES
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)
37245M 10 8
------------------------------------------------
(CUSIP Number)
United Congregations Mesora
12 Hilltop Place
Monsey, NY 10549
Attn: Alisa Safier
(914) 352-3431
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
June 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 box |_|.
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 8.
Exhibit Index appears on page 8.
<PAGE>
SCHEDULE 13D
- --------------------------- ----------------------------
CUSIP NO. 37245M 10 8 PAGE 2 OF 8 PAGES
- ---------------------------- ---------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
UNITED CONGREGATIONS MESORA
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) |_|
(B) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,113,829
SHARES
BENEFICIALLY ---------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH NONE.
REPORTING
PERSON ---------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,113,829
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
NONE.
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,113,829
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.5%
(HOWEVER, IF MEASURED AGAINST COMMON STOCK ON A FULLY DILUTED BASIS,
SIGNIFICANTLY LESS THAN 5%)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
This statement constitutes the first amendment ("Amendment No.1") to a
statement on Schedule 13D previously filed with the Securities and Exchange
Commission, and amends and restates the previously filed statement in its
entirety. The sole change to the previously filed statement corrects a
typographical error in the percent of class represented by the shares
beneficially owned (i.e., change 25.7% to 20.5%)
ITEM 1. SECURITY AND ISSUER
The title and class of equity security to which this statement on
Schedule 13D relates is the common stock, $.001 par value per share (the "Common
Stock"), of Genta Incorporated, a Delaware corporation (the "Issuer"). The
address of the Issuer's principal executive office is 3550 General Atomics
Court, San Diego, California 92121.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(c), (f) The name of the person filing this statement is United
Congregations Mesora ("United"). United is a New York not-for-profit corporation
that is organized and operated exclusively for religious and charitable purposes
and qualified under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended. The address of United's principal business and office is 12 Hilltop
Place, Monsey, New York 10549.
The name, title, business address, present principal occupation or
employment (including the name, principal business and address of any
corporation or other organization, other than United, in which such employment
is conducted), and citizenship of each executive officer and trustee of United
is set forth on Schedule A attached hereto.
(d)-(e) Except as set forth on Schedule A attached hereto, during
the last five years, neither United, nor to the best of United's knowledge, any
of the persons listed on Schedule A hereto, has (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), or (ii) been
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding 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.
ITEM 3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On June 30, 1997, United purchased in a private placement offering
from the Issuer 10 Premium Preferred Units for an aggregate amount of
$1,000,000. Each unit consists of 1,000 shares of the Issuer's Series D
Convertible Preferred Stock, par value $.001 per share, stated value $100.00 per
share (the "Series D Convertible Preferred Stock"), and Class D Warrants
entitling United to purchase 50,000 shares of the Issuer's Common Stock (the
"Class D Warrants"). The Series D Convertible Preferred Stock is convertible
into the number of fully paid and nonassessable shares of Common Stock of the
Issuer determined by dividing the Conversion Price into $100. The Conversion
Price was initially set on June 30, 1997 at $.94 and is subject to adjustment
and reset if, on June 29, 1998, the Market Price of the Common Stock of the
Issuer is less than 140% of the Conversion Price. Market Price is determined as
the average closing bid price of the Common Stock of the Issuer for the 20
consecutive days ending on June 29, 1998. The Conversion Price is also subject
to adjustment upon the occurrence of certain events. The 10,000 shares of Series
D Convertible Preferred Stock could be converted into approximately 1,063,829
shares of Common Stock of the Issuer. The Class D Warrants are exercisable until
June 29, 2002, at $.94 per share of Common Stock of the Issuer, subject to
adjustment upon the occurrence of certain events. The Class D Warrants may be
redeemed by the Issuer on or after June 30, 1998 under certain conditions.
3
<PAGE>
The source of such funds was the working capital of United which in the
normal course includes proceeds from charitable contributions.
ITEM 4 PURPOSE OF TRANSACTION
United acquired the securities of the Issuer as an investment in the
Issuer. United may acquire additional securities of the Issuer or dispose of
securities of the Issuer at any time and from time to time in the open market or
otherwise. Although the foregoing represents the range of activities presently
contemplated by United with respect to the Issuer, it should be noted that the
possible activities of United are subject to change at any time.
Except as set forth above, United has no present plans or intentions
which relate to or would result in any of the actions described in subparagraphs
(a) through (j) of Item 4 of Schedule 13D.
ITEM 5 INTEREST IN SECURITIES OF ISSUER
(a) As of the close of business on June 30, 1997, United
beneficially owned in the aggregate approximately 1,113,829 shares of the Common
Stock of the Issuer, representing approximately 20.5% of the outstanding shares
of the Common Stock of the Issuer (based on the number of shares of Common Stock
reported to be outstanding in the Issuer's Form 10-Q for the quarterly period
ended March 31, 1997). United's beneficial ownership of the Common Stock of the
Issuer determined on a fully diluted basis, however, is significantly less than
5%. United's beneficial ownership consists of the following: (i) 10,000 shares
of Series D Convertible Preferred Stock which are convertible into approximately
1,063,829 shares of Common Stock of the Issuer (subject to adjustment and reset
as set forth in Item 3 hereof), and (ii) 50,000 Class D Warrants entitling
United to purchase 50,000 shares of Common Stock of the Issuer at $.94 per
share. See, Amended and Restated Certificate of Designation of Series D
Convertible Preferred Stock of Genta Incorporated and Warrant Agreement attached
hereto as Exhibits A and B, respectively, and incorporated herein by reference.
To the best of United's knowledge, none of the persons listed on Schedule A
hereto beneficially own any shares of the Common Stock of the Issuer.
(b) The responses of United to Rows (7) through (10) of the cover
page of this statement are incorporated herein by reference.
(c) There have been no transactions in Common Stock that were
effected during the past 60 days by United except for the acquisition of
beneficial ownership of Common Stock being reported on this Statement.
(d) Not applicable.
(e) Not applicable.
ITEM 6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
4
<PAGE>
Neither United nor, to the best of United's knowledge, any of the
persons listed on Schedule A hereto are parties to any contract, arrangement,
understanding or relationship (legal or otherwise) with respect to the
securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A Amended and Restated Certificate of Designation of Series D
Convertible Preferred Stock
Exhibit B Warrant Agreement
5
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: July 10, 1997
UNITED CONGREGATIONS MESORA
By: /s/ Alisa Safier
-------------------------------
Name: Alisa Safier
Title: Secretary
6
<PAGE>
SCHEDULE A
Executive Officers and Trustees of United
The name, title, business address and present principal occupation
or employment (including the name, principal business and address of any
corporation or other organization, other than United, in which such employment
is conducted) of each Executive Officer and Trustee of the United is set forth
below. Unless otherwise indicated, the business address of each person is the
address of United. Each person listed below is a citizen of the United States of
America.
Present Principal Occupation
Name Title or Employment
- ---- ----- ------------------------------
Nadine Wolfson President, Trustee President of United
Berel Wein Vice President, Trustee Writer, Educator and Rabbi
Alisa Safier Secretary, Treasurer, Secretary, Treasurer
Trustee
7
<PAGE>
EXHIBIT INDEX
Exhibit
A. Amended and Restated Certificate of Designation of Series D Convertible
Preferred Stock
B. Warrant Agreement
8
EXHIBIT A
---------
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS
of
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 Designations 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
Designations"), 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 Designations 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
Designations 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 Designations as "Series D
Convertible Preferred Stock" shall be 223,860 (hereinafter the "Series D
Preferred Stock"), and the powers, preferences and relative participating,
optional and other special rights of, and the qualifications,
1
NYFS06...:\49\81649\0008\2306\CRT7097U.040
<PAGE>
limitations and restrictions upon, the Series D Preferred Stock are hereby
amended and restated 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 this Amended and Restated Certificate of Designations (the
"Certificate of Designations") 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 Designations, 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 for subdivisions or
combinations of shares effected during such
2
<PAGE>
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 of dividends. The
"Dividend Base Amount" shall be $140.00 plus all accrued
3
<PAGE>
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 apart for payment on any class or series of
stock of the Corporation ranking, as to dividends,
4
<PAGE>
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 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
5
<PAGE>
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
Designations 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.
(ii) For securities for which there is an active public
market but which are subject to an investment letter or other
restrictions on free
6
<PAGE>
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 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.
7
<PAGE>
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 of the date that a notice of conversion is
received, which date shall be deemed to be the date of receipt for purposes
hereof.
8
<PAGE>
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 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
9
<PAGE>
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
successive reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(iii) [Reserved]
10
<PAGE>
(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 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
11
<PAGE>
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
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
12
<PAGE>
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 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.
13
<PAGE>
(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 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
14
<PAGE>
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.
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).
(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
15
<PAGE>
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 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
16
<PAGE>
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
(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
17
<PAGE>
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.
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
18
<PAGE>
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.
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
19
<PAGE>
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
Designations, 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.
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
20
<PAGE>
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").
(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
21
<PAGE>
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.
IN WITNESS WHEREOF, Genta Incorporated, has caused this certificate
to be signed on its behalf by _______________, its ________________________,
this ____ day of _______________________, ______.
GENTA INCORPORATED
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
ATTEST:
- ----------------------------------
Secretary
22
EXHIBIT B
---------
WARRANT AGREEMENT
-----------------
AGREEMENT, dated as of this 20th day of May, 1997, by and among
GENTA INCORPORATED, a Delaware corporation ("Company"), CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as warrant agent ("Warrant Agent"), and PARAMOUNT CAPITAL,
INC., a New York corporation ("Paramount").
W I T N E S S E T H
-------------------
WHEREAS, the Company has commenced a private placement (the "Private
Placement") of a minimum (the "Minimum Offering") of 10 Units (as defined below)
and a maximum (the "Maximum Offering") of 75 Units, with an option in favor of
Paramount, to offer up to an additional 50 Units to cover over-allotments, each
"Unit" consisting of (a) 1,000 shares of Series D Preferred Stock (as defined
below) of the Company, convertible into shares of common stock, par value $.001
per share, of the Company, (b) redeemable warrants (the "Class D Warrants") to
purchase at any time prior to the fifth anniversary of the Final Closing Date
(as defined below) 5,000 shares of Common Stock (as defined below) at the
initial conversion price of such Series D Preferred Stock, pursuant to a
placement agency agreement dated as of May 1, 1997 (the "Placement Agency
Agreement"), between the Company and Paramount;
WHEREAS, the Company may issue up to 781,250 Class D Warrants
pursuant to the Maximum Offering and the over-allotment option;
WHEREAS, each Class D Warrant entitles the Registered Holder (as
defined below) thereof to purchase one (1) share of Common Stock;
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Class D
Warrants, the issuance of certificates representing the Class D Warrants, the
exercise of the Class D Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Class D Warrants and the certificates representing the Class D
Warrants and the respective rights and obligations thereunder of the Company,
the holders of certificates representing the Class D Warrants and the Warrant
Agent, the parties hereto agree as follows:
1
NYFS06...:\49\81649\0008\2306\EXH7097U.130
<PAGE>
SECTION 1. Definitions. As used herein, the following terms shall
have the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the Initial Closing Date will consist of 4,327,752 (subject
to possible adjustment resulting from rounding upwards to the nearest whole
share in connection with the one for ten reverse stock split of the Common Stock
that was effected on April 4, 1997 and possible conversions, since April 18,
1997, of convertible securities issued by the Company) shares of Common Stock,
par value $.001 per share.
(b) "Closing Bid Price" for each trading day shall be the reported
per share closing bid price of the Common Stock 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.
(c) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which, at any particular time, its principal business
shall be administered, which office is located at the date hereof at Overpeck
Centre, 85 Challenger Road, Ridgefield Park, New Jersey, 07660.
(d) "Exercise Date" shall mean, as to any Class D Warrant, the date
on which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Class D Warrant, with the subscription form thereon duly
executed by the Registered Holder thereof or his attorney duly authorized in
writing, and (b) payment in cash, or by official bank or certified check made
payable to the Company, of an amount in lawful money of the United States of
America equal to the applicable Purchase Price.
(e) "Fair Market Value" of any asset (including any security) means
the fair market value thereof as mutually determined by the Company and the
Registered Holders of a majority of the Class D Warrants then outstanding. If
the Company and the Registered Holders of a majority of the Class D Warrants
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 of the Company
and the Registered Holders of a majority of the Class D Warrants 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
2
<PAGE>
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 Company.
(f) "Final Closing Date" shall mean the final closing date of the
Private Placement.
(g) "Initial Closing Date" shall mean, as to each Class D Warrant,
the date of the initial closing of the Offering.
(h) "Initial Warrant Exercise Date" shall mean, as to each Class D
Warrant, the Final Closing Date.
(i) "Interim Closing Date" shall mean, as to each Class D Warrant,
any closing date of the Offering other than the Initial Closing Date and the
Final Closing Date.
(j) "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 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.
(k) "Preferred Stock" shall mean the Series D Convertible Preferred
Stock of the Company, stated value $100.00 per share, par value $.001 per share
which at the Initial Closing Date will consist of 223,860 authorized shares.
(l) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Class D Warrant in accordance with the terms hereof, which
price shall be the lesser of (i) $3.00 and (ii) 50% of the Trading Price as of
the day immediately preceding (a) the Initial Closing Date, (b) any Interim
Closing Date, or (c) the Final Closing Date of the Offering, whichever is
lowest, subject to adjustment from time to time pursuant to the provisions of
Section 9, and subject to the Company's right to reduce the Purchase Price upon
notice to all warrantholders (which may be given, without limitation, prior to
the Final Closing Date).
(m) "Redemption Price" shall mean the price at which the Company
may, at its option in accordance with the terms hereof, redeem the Class D
Warrants, which price shall be $0.10 per share of Common Stock subject to such
Class D Warrants, as adjusted as provided in Section 9.
3
<PAGE>
(n) "Registered Holder" shall mean, as to any Class D Warrant and as
of any particular date, the person in whose name the certificate representing
the Class D Warrant shall be registered on that date on the books maintained by
the Warrant Agent pursuant to Section 6.
(o) "Series A Preferred Stock" means the Series A Preferred Stock
described in the Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation"), as in effect on the date hereof.
(p) The "Stock Market" shall mean the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, shall mean The Nasdaq National Market System or The Nasdaq SmallCap
Market (collectively, "Nasdaq") or, if the Common Stock is not quoted on Nasdaq,
shall mean the OTC Bulletin Board or, if the Common Stock 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 Company for that purpose.
(q) "Trading Price" shall mean the lower of (i) the average Closing
Bid Price (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 (with appropriate
adjustments for sub-divisions 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.
(r) A "trading day" shall mean a day on which the Stock Market is
open for the transaction of business.
(s) "Transfer Agent" shall mean ChaseMellon Shareholder Services,
L.L.C., as the Company's transfer agent, or its authorized successor, as such.
(t) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time)
on the day prior to the fifth anniversary of the Final Closing Date or the
Redemption Date as defined in Section 8, whichever is earlier; provided that if
such date shall in the State of New York be a holiday or a day on which banks
are authorized or required to close, then 5:00 P.M. (New York time) on the next
following day which in the State of New York is neither
4
<PAGE>
a holiday nor a day on which banks are authorized or required to close. Upon
notice to all Registered Holders, the Company shall have the right to extend the
Warrant Expiration Date.
(u) Unless otherwise stated, section references used within this
Warrant Agreement refer to sections of this Warrant Agreement.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Class D Warrant initially shall entitle the Registered Holder
of the Warrant Certificate representing such Class D Warrant to purchase one
share of Common Stock upon the exercise thereof, in accordance with the terms
hereof, subject to modification and adjustment as provided in Section 9.
(b) The Class D Warrants included in the offering of Units will
immediately be detachable and separately transferable from the shares of
Preferred Stock constituting part of such Units.
(c) Within five days after the Final Closing Date, Warrant
Certificates representing the number of Class D Warrants sold pursuant to the
Private Placement shall be executed by the Company and delivered to the Warrant
Agent. Within five days of receipt of the Warrant Certificates by the Warrant
Agent, the Warrant Agent shall send the Warrant Certificates to the Registered
Holders. The Company shall issue a written order, signed by its Chairman of the
Board, President or any Vice President and by its Secretary or an Assistant
Secretary, to the Warrant Agent directing that the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent in accordance with the
preceding sentence.
(d) From time to time, until the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 781,250 shares of
Common Stock, subject to adjustment as described herein, upon the exercise of
Class D Warrants in accordance with this Agreement.
(e) From time to time, until the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued
hereunder, (ii) those issued on or after the Initial Warrant Exercise Date, upon
the exercise of fewer than all Class D Warrants represented by any Warrant
5
<PAGE>
Certificate, to evidence any unexercised Class D Warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7 and (v) at the option of
the Company, in such form as may be approved by its Board of Directors, to
reflect any adjustment to, or change in: the Purchase Price; the number of
shares of Common Stock purchasable upon exercise of the Class D Warrants; the
Redemption Price of the Class D Warrants; or the Warrant Expiration Date.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Class D Warrants may be listed, or
to conform to usage or to the requirements of Section 2. The Warrant
Certificates shall be dated the date of issuance thereof (whether upon initial
issuance, transfer, exchange or in lieu of mutilated, lost, stolen or destroyed
Warrant Certificates) and issued in registered form. Warrant Certificates shall
be numbered serially with the letters DW on Class D Warrants of all
denominations.
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon. Warrant Certificates shall be manually countersigned
by the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be an officer of the Company or to hold
the particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issuance and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be an officer of the Company or to hold such
office. After countersignature by the Warrant Agent, Warrant Certificates shall
be delivered by the Warrant Agent to the Registered Holder without further
action by the Company, except as otherwise provided by Subsection 4(a).
6
<PAGE>
SECTION 4. Exercise.
(a) Each Class D Warrant may be exercised by the Registered Holder
thereof at any time on or after the Initial Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set forth
herein and in the applicable Warrant Certificate. A Class D Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
Exercise Date and the person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder of those
securities upon the exercise of the Class D Warrant as of the close of business
on the Exercise Date. As soon as practicable on or after the Exercise Date the
Warrant Agent shall deposit the proceeds received from the exercise of a Class D
Warrant and shall notify the Company in writing of the exercise of the Class D
Warrants. Promptly following, and in any event within five days after the date
of such notice from the Warrant Agent, the Warrant Agent, on behalf of the
Company, shall cause to be issued and delivered by the Transfer Agent, to the
person or persons entitled to receive the same, a certificate or certificates
for the securities deliverable upon such exercise (plus a certificate for any
remaining unexercised Class D Warrants of the Registered Holder). In the case of
payment made in the form of a check drawn on an account of Paramount or such
other investment banks and brokerage houses as the Company shall approve in
writing to the Warrant Agent, certificates shall immediately be issued without
prior notice to the Company nor any delay. Upon the exercise of any Class D
Warrant and clearance of the funds received, the Warrant Agent shall promptly
remit the payment received for the Class D Warrant (the "Warrant Proceeds") to
the Company or as the Company may direct in writing, subject to the provisions
of Subsections 4(b) and 4(c).
(b) On the Exercise Date in respect of the exercise of any Class D
Warrant, the Warrant Agent shall, simultaneously with the distribution of the
Warrant Proceeds to the Company, on behalf of the Company, pay from the Warrant
Proceeds, a fee of 5% (the "Paramount Fee") of the Purchase Price to Paramount
for Class D Warrant exercises solicited by Paramount or its representatives (of
which a portion may be reallowed by Paramount to the dealer who solicited the
exercise, which may also be Paramount). In the event the Paramount Fee is not
received within seven days of the date on which the Company receives Warrant
Proceeds, then the Paramount Fee shall begin accruing interest at an annual rate
300 basis points above prime payable by the Company to Paramount at the time
Paramount receives the Paramount Fee. Within Five days after exercise the
Warrant Agent shall send Paramount a copy of the reverse side of each Class D
Warrant exercised. In addition, Paramount and the Company may at any time during
business hours, examine the records of the Warrant Agent, including its ledger
of original Warrant Certificates returned to the Warrant Agent upon exercise of
Class D Warrants. Paramount is intended by
7
<PAGE>
the parties hereto to be, and is, a third-party beneficiary of this Agreement.
The provisions of this paragraph may not be modified, amended or deleted without
the prior written consent of Paramount. In addition to the foregoing, any costs
incurred by Paramount shall be promptly reimbursed by the Company.
(c) In order to enforce the provisions of Subsection 4(b) above, in
the event there is any dispute or question as to the amount or payment of the
Paramount Fee, the Warrant Agent is hereby expressly authorized to withhold
payment to the Company of the Warrant Proceeds unless and until the Company
establishes an escrow account for the purpose of depositing the entire amount of
the unpaid Paramount Fee claimed by Paramount, which amount will be deducted
from the net Warrant Proceeds to be paid to the Company. The funds placed in the
escrow account may not be released to the Company without a written agreement
from Paramount that the required Paramount Fee has been received by Paramount.
Paramount shall promptly notify the Warrant Agent by facsimile and certified
mail in the event of any such dispute or when the Paramount Fee has been paid.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Class D Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Class D Warrants.
The Company covenants that all shares of Common Stock which shall be issuable
upon exercise of the Class D Warrants shall, at the time of delivery (assuming
full payment of the purchase price thereof), be duly and validly issued, fully
paid, nonassessable and free from all issuance taxes, liens and charges with
respect to the issue thereof including, without limitation, adverse claims
whatsoever (with the exception of claims arising through the acts of the
Registered Holders themselves and except as arising from applicable Federal and
state securities laws), that the Company shall have paid all taxes, if any, in
respect of the original issuance thereof and that upon issuance such shares, to
the extent applicable, shall be listed on, or included in, the Stock Market.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of Class D Warrants hereunder require registration with,
or the approval of, any governmental authority under any federal securities law
before such securities may be validly issued or delivered upon such exercise,
then the Company will in good faith and as expeditiously as reasonably possible,
endeavor to secure such registration or approval; provided, however, that the
Company shall have no obligation to register such securities under the
Securities Act of 1933, as amended, except as provided in the Subscription
Agreement dated as of the date hereof between the Company and each Registered
Holder.
8
<PAGE>
The Company will use reasonable efforts to obtain appropriate approvals or
registrations under state "blue sky" securities laws; provided, that the Company
shall not be required to qualify as a foreign corporation or file a general or
limited consent to service of process in any such jurisdictions or make any
changes in its capital structure or any other aspects of its business or enter
into any agreements with blue sky commissions, including any agreement to escrow
shares of its capital stock. With respect to any such securities, however, Class
D Warrants may not be exercised by, or shares of Common Stock issued to, any
Registered Holder in any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other similar governmental charges that may be imposed with respect to the
issuance of Class D Warrants, or the issuance or delivery of any shares upon
exercise of the Class D Warrants; provided, however, that if the shares of
Common Stock are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Class D Warrant being
exercised, then no such delivery shall be made unless the person requesting the
same has paid to the Warrant Agent the amount of transfer taxes or charges
incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock issuable upon exercise of the Class D
Warrants and the Company will authorize the Transfer Agent to comply with all
such proper requisitions. The Company will file with the Warrant Agent a
statement setting forth the name and address of the Transfer Agent of the
Company for shares of Common Stock issuable upon exercise of the Class D
Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Class D Warrants of the
same class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute,
and the Warrant Agent shall countersign, issue and deliver in exchange therefor,
the Warrant Certificate or Certificates that the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and any transfers thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute
9
<PAGE>
and the Warrant Agent shall issue and deliver to the transferee or transferees a
new Warrant Certificate or Certificates representing an equal aggregate number
of Class D Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent on holders
for any exchange or registration of transfer of Warrant Certificates of such
holders. In addition, the Company may require payment by such holder of a sum
sufficient to cover any tax or governmental or other charge that may be imposed
in connection therewith.
(e) All Warrant Certificates surrendered for exercise, or for
exchange in case of mutilated Warrant Certificates, shall be promptly cancelled
by the Warrant Agent and thereafter retained by the Warrant Agent in a manner
consistent with its customary practices until termination of this Warrant
Agreement or resignation as Warrant Agent, or, with the prior written consent of
Paramount, disposed of or destroyed at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Class D
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice to the contrary. The Class D Warrants, which are being offered in Units
with shares of Preferred Stock pursuant to the Placement Agency Agreement, will
immediately be detachable and separately transferable from the Preferred Stock.
SECTION 7. Loss or Mutilation. Upon receipt by the Warrant Agent of
evidence satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to it, and (in the case of mutilation)
upon surrender and cancellation thereof, the Company shall execute and the
Warrant Agent shall (in the absence of notice to the Company and/or Warrant
Agent that the Warrant Certificate has been acquired by a bona fide purchaser)
countersign and deliver to the Registered Holder in lieu thereof a new Warrant
Certificate of like tenor representing an equal aggregate number of Class D
Warrants. Applicants for a
10
<PAGE>
substitute Warrant Certificate shall comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
SECTION 8. Redemption.
(a) If there is no Series A Preferred Stock outstanding, at any time
after the first anniversary of the Final Closing Date, on no fewer than sixty
(60) days' prior written notice to Registered Holders of the Class D Warrants
being redeemed, the Company may, at its option, redeem the Class D Warrants at
the Redemption Price, provided the Closing Bid Price exceeds 300% of the
Purchase Price per share of Common Stock subject to a Class D Warrant for at
least 20 trading days in any 30 consecutive trading day period ending three days
prior to the date of notice of redemption (which shall be the date of mailing of
such notice). In addition, regardless of whether there is any Series A Preferred
Stock outstanding at any time after the first anniversary of the Final Closing
Date, on no fewer than sixty (60) days' prior written notice to Registered
Holders of the Class D Warrants being redeemed, the Company may, at its option,
redeem the Class D Warrants at the Redemption Price, provided the Closing Bid
Price exceeds 600% of the Purchase Price per share of Common Stock subject to a
Class D Warrant for at least 20 trading days in any 30 consecutive trading day
period ending three days prior to the date of notice of redemption (which shall
be the date of mailing of such notice). All outstanding Class D Warrants must be
redeemed if any are redeemed. The date fixed for redemption of the Class D
Warrants is referred to herein as the "Redemption Date."
(b) If the conditions set forth in Subsection 8(a) are met, and the
Company desires to exercise its right to redeem the Class D Warrants, it shall
request the Warrant Agent to mail a notice of redemption to each of the
Registered Holders of the Class D Warrants to be redeemed, first class, postage
prepaid, not later than the sixtieth day before the date fixed for redemption,
at their last address as shall appear on the records maintained pursuant to
Subsection 6(b). Any notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given whether or not the Registered
Holder receives such notice.
(c) The notice of redemption shall specify (i) the Redemption Price,
(ii) the Redemption Date, (iii) the place where the Warrant Certificates shall
be delivered and the Redemption Price paid, (iv) that Paramount will assist each
Registered Holder of a Class D Warrant and be entitled to a commission and
reimbursement of costs in connection with the exercise thereof and (v) that the
right to exercise the Class D Warrant shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the
11
<PAGE>
validity of the proceedings for such redemption except as to a Registered Holder
(a) to whom notice was not mailed or (b) whose notice was defective. An
affidavit of the Warrant Agent or of the Secretary or an Assistant Secretary of
the Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Class D Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, Holders of the Class D Warrants shall
have no further rights except to receive, upon surrender of the Class D Warrant,
the Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the
place specified in the notice of redemption, upon presentation and surrender to
the Company by or on behalf of the Registered Holder thereof of one or more
Warrant Certificates evidencing Class D Warrants to be redeemed, deliver or
cause to be delivered to or upon the written order of such Holder a sum in cash
equal to the Redemption Price of such Class D Warrants From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Class D Warrant called for redemption, such Class D
Warrants shall expire and become void and all rights hereunder and under the
Warrant Certificates, except the right to receive payment of the Redemption
Price, shall cease.
SECTION 9. Adjustment of Purchase Price and Number of Shares of
Common Stock or Class D Warrants. Upon each adjustment of the Purchase Price
pursuant to this Section 9, the total number of shares of Common Stock
purchasable upon the exercise of each Class D Warrant shall (subject to the
provisions contained in Subsection 9(c)) be such number of shares (calculated to
the nearest tenth) purchasable at the Purchase Price in effect immediately prior
to such adjustment multiplied by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately after
such adjustment.
(a) Except as otherwise provided herein, in the event the Company
shall, at any time or from time to time after the date hereof, (i) sell or issue
any shares of Common Stock for a consideration per share less than either (a)
the Purchase Price in effect on the date of such sale or issuance or (b) the
Market Price of the Common Stock as of the date of the sale or issuance, (ii)
issue any shares of Common Stock as a stock dividend to the holders of Common
Stock, or (iii) subdivide or combine the outstanding shares of Common Stock into
a greater or fewer 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 Purchase Price in effect immediately prior to
such Change of
12
<PAGE>
Shares shall be changed to a price (rounded to the nearest cent) determined by
multiplying the Purchase Price in effect immediately prior thereto by a
fraction, the numerator of which shall be (x) the sum of (A) the number of
shares of Common Stock outstanding immediately prior to the sale or issuance of
such additional shares or such subdivision or combination plus (B) the number of
shares of Common Stock that the aggregate consideration received (determined as
provided in Paragraph 9(g)(vi)) for the issuance of such additional shares would
purchase at the greater of (1) the Purchase Price in effect on the date of such
issuance or (2) the Market Price as of such date, and the denominator of which
shall be (y) 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 any such
issuance is made.
(b) 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 Company with or into another entity (other than a consolidation or
merger in which the Company 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 Company as, or substantially
as, an entirety (other than a sale/leaseback, mortgage or other financing
transaction), the Company shall cause effective provision to be made so that
each holder of a Class D Warrant then outstanding shall have the right
thereafter, by exercising such Class D Warrant, upon the terms and conditions
specified in the Class D Warrants and in lieu of the shares of Common Stock
immediately theretofore purchasable upon exercise of the Class D Warrants, to
purchase 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 that might have been purchased upon exercise of
such Class D Warrant 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 Section
9. The Company shall not effect any such consolidation, merger or sale unless
prior to, or simultaneously with, the consummation thereof the successor (if
other than the Company) 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 Warrant Agent, the obligation to
deliver to the holder of each Class D Warrant such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this Agreement. The
foregoing provisions shall similarly apply to successive reclassifications,
capital
13
<PAGE>
reorganizations and other changes of outstanding shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(c) If, at any time or from time to time, 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 an issuance or distribution governed by one of the preceding
subsections of this Section 9 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")), then in each case the Purchase Price shall be adjusted by
multiplying the Purchase Price theretofore in effect by a fraction, the
numerator of which shall be the Market Price in effect on the record date of
such issuance or distribution less the Fair Market Value of the Special Dividend
applicable to one share of Common Stock and the denominator of which shall be
such Market Price. Such adjustment shall be made whenever any such distribution
is made and shall become effective on the date of distribution retroactive to
the record date for the determination of stockholders entitled to receive such
distribution.
(d) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class D Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Class D Warrant as hereinabove provided, so that each Class D Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Class D Warrant held of record prior to such
adjustment of the number of Class D Warrants shall become that number of Class D
Warrants (calculated to the nearest tenth) determined by multiplying the number
one by a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each adjustment
of the number of Class D Warrants pursuant to this Section 9, the Company shall,
as promptly as practicable, cause to be distributed to each Registered Holder of
Warrant Certificates on the date of such adjustment Warrant Certificates
evidencing, subject to Section 10, the number of additional Class D Warrants to
which such Holder shall be entitled as a result of such adjustment or, at the
option of the Company, cause to be distributed to such Holder in substitution
and replacement for the Warrant Certificates held by him prior to the date of
adjustment (and upon surrender thereof if required by the Company) new Warrant
Certificates evidencing the number of Class D Warrants to which such Holder
shall be entitled after such adjustment.
(e) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Common Stock purchasable upon exercise of the Class D
Warrants, the
14
<PAGE>
Warrant Certificates theretofore and thereafter issued shall, unless the Company
shall exercise its option to issue new Warrant Certificates pursuant to
Subsection 2(e), continue to express the same Purchase Price per share, number
of shares purchasable thereunder and Redemption Price therefor as when the same
were originally issued.
(f) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company 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 Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Class D Warrant after such adjustment, and, if
the Company shall have elected to adjust the number of Class D Warrants pursuant
to Subsection 9(d), the number of Class D Warrants to which the registered
holder of each Class D Warrant shall then be entitled, and the adjustment in
Redemption Price resulting therefrom, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly file such certificate
with the Warrant Agent and cause a brief summary thereof to be sent by ordinary
first class mail to Paramount and to each Registered Holder of Class D Warrants
at his or her last address as it shall appear on the registry books of the
Warrant 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 Warrant Agent or the Secretary or an Assistant Secretary of
the Company that such notice has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. The Warrant 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.
(g) For purposes of Subsections 9(a) and 9(c), the following
provisions (i) to (v) shall also be applicable:
(i) 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.
(ii) No adjustment of the Purchase 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 Paragraph (ii) 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 Purchase Price then in effect hereunder.
15
<PAGE>
(iii) In case of (1) the sale by the Company (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 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 Company, without the receipt by the Company 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 Company upon the exercise of such
rights, warrants or options, plus the consideration received by the Company 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 Purchase 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 Subsections 9(a) and 9(c) 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 Subsections 9(a) and 9(c).
(iv) In case of the sale or other issuance by the Company 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 received by the
Company for the sale of such Convertible Securities, plus the minimum aggregate
amount, as set forth in the instrument relating thereto
16
<PAGE>
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 Purchase 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
Subsections 9(a) and 9(c) 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 Subsections 9(a) and 9(c).
(v) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in Paragraphs (iii) or
(iv) of this Subsection 9(g) or any other securities of the Company 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 Company after such modification is less
than either the Purchase 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 Company shall be
deemed, for purposes of calculating any adjustments pursuant to this Section 9,
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 Purchase Price
then in effect hereunder shall forthwith be readjusted to such Purchase 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 Convertible Securities and (b) had adjustments been made on the basis of
the Purchase Price as adjusted under clause (a) of this sentence for all
transactions (which would have affected such adjusted Purchase Price) made after
the issuance or sale of such rights, warrants, options or Convertible
Securities.
17
<PAGE>
(vi) 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 Company therefor shall be deemed to be the gross
sales price therefor without deducting therefrom any expense paid or incurred by
the Company or any underwriting discounts or commissions or concessions paid or
allowed by the Company in connection therewith. In the event that any securities
shall be issued in connection with any other securities of the Company, 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 Company
determines in good faith; provided, however that if holders of more than of 10%
of the then outstanding Class D Warrants disagree with such determination, the
Company shall retain an independent investment banking firm for the purpose of
obtaining in appraisal.
(h) Notwithstanding any other provision hereof, no adjustment to the
Purchase Price of the Class D Warrants or to the number of shares of Common
Stock purchasable upon the exercise of each Class D Warrant will be made:
(i) upon the exercise of any of the options outstanding on
the date hereof under the Company's existing stock option plans; or
(ii) 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
(iii) upon issuance or exercise of the Placement Warrants or
the Advisory Warrants (as defined in 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 Units of the Corporation issued (A) on or prior to the Final
Closing Date or (B) 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 Paramount; or
18
<PAGE>
(iv) 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 sale of the Class D Warrants or
were thereafter issued or sold, provided that an adjustment was either made or
not required to be made in accordance with Subsections 9(a) or 9(c) in
connection with the issuance or sale of such securities or any modification of
the terms thereof: or
(v) 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
Class D Warrants were thereafter issued or sold.
Paragraph 9(g)(v) shall nevertheless apply to any modification of the rights of
conversion, exchange or exercise of any of the securities referred to in
Paragraphs (i), (ii) and (iii) of this Subsection 9(h).
(i) As used in this Section 9, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Units and shall also include any capital stock of any class of the
Company 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 Company; provided, however, that the shares
issuable upon exercise of the Class D Warrants 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 Units or (i), in the case of any reclassification,
change, consolidation, merger, sale or conveyance of the character referred to
in Subsection 9(c), 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 exercise of the Class D
Warrants 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.
(j) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Class D Warrants and the Company if made in good faith by the Board of Directors
of the Company.
19
<PAGE>
(k) Notwithstanding anything to the contrary herein, in no case
shall the Purchase Price be adjusted to an amount less than $.001 per share, the
current par value of the Common Stock for which the Class D Warrants are
exercisable.
(l) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company may at its option elect concurrently therewith to grant to
each Registered Holder as of the record date for such transaction of the Class D
Warrants then outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date used to
determine the stockholders entitled to the rights, warrants or options being
granted by the Company, the Registered Holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise of his or her
Class D Warrants. If the Company shall so elect under this Subsection 9(l), then
such grant by the Company to the holders of the Class D Warrants shall be in
lieu of any adjustment which otherwise might be called for pursuant to this
Section 9.
SECTION 10. Fractional Warrants and Fractional Shares. If the number
of shares of Common Stock purchasable upon the exercise of each Class D Warrant
is adjusted pursuant to Section 9, the Company nevertheless shall not be
required to issue fractions of shares, upon exercise of the Class D Warrants or
otherwise, nor to distribute certificates that evidence fractional shares. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Registered Holder an amount in cash equal to such
fraction multiplied by the Market Price of one share of Common Stock as of the
date of exercise.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of
Class D Warrants shall, as such, be entitled to vote or to receive dividends or
be deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Class D Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Class D Warrants, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Class D
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
20
<PAGE>
SECTION 12. Rights of Action. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the Class D
Warrants, and any Registered Holder of a Class D Warrant, without consent of the
Warrant Agent or of the holder of any other Class D Warrant, may, in his own
behalf and for his own benefit, enforce against the Company his right to
exercise his Class D Warrants for the purchase of shares of Common Stock in the
manner provided in the Warrant Certificate and this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of any Class
D Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of any Class D Warrant that:
(a) The Class D Warrants are transferable only on the registry books
of the Warrant Agent by the Registered Holder thereof in person or by his or her
attorney duly authorized in writing and only if the Warrant Certificates
representing such Class D Warrants are surrendered at the office of the Warrant
Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent, in its sole discretion, together with payment
of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Class D Warrants represented thereby for
all purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary, except as otherwise expressly provided
in Section 6.
SECTION 14. Cancellation of Warrant Certificates. If the Company
shall purchase or acquire any Class D Warrant or Class D Warrants, the Warrant
Certificate or Warrant Certificates evidencing the same, by redemption or
otherwise, shall thereupon be delivered to the Warrant Agent and canceled by it
and retired. The Warrant Agent shall also cancel the Warrant Certificate or
Warrant Certificates following exercise of any or all of the Class D Warrants
represented thereby or delivered to it for transfer, split up, combination or
exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates, or by any other act
hereunder, be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Class D Warrants represented
thereby or of any securities or other property delivered upon
21
<PAGE>
exercise of any Class D Warrant or whether any stock issued upon exercise of any
Class D Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists that may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any as or omission in connection
with this Agreement except for its own negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory
to it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, or any Vice President and the Secretary,
or any Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder as governed by a separate agreement to be entered into between the
Warrant Agent and the Company; the Company further agrees to indemnify the
Warrant Agent and save it harmless against any and all losses, expenses and
liabilities, including judgments, costs and reasonable counsel fees, for
anything done or omitted by the Warrant Agent in the execution of its duties and
powers hereunder except losses, expenses and liabilities arising as a result of
the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's
22
<PAGE>
own negligence or willful misconduct), after giving 30 days' prior written
notice to the Company. At least 15 days prior to the date such resignation is to
become effective, the Warrant Agent shall cause a copy of such notice of
resignation to be mailed to the Registered Holders of each Warrant Certificate
at the Company's expense. Upon such resignation, or any inability of the Warrant
Agent to act as such hereunder, the Company shall appoint a new warrant agent in
writing. If the Company shall fail to make such appointment within a period of
15 days after it has been notified in writing of such resignation by the
resigning Warrant Agent, then the Registered Holder of any Warrant Certificate
may apply to any court of competent jurisdiction for the appointment of a new
warrant agent. Any new warrant agent, whether appointed by the Company or by
such a court, shall be a bank or trust company having capital and surplus, as
shown by its last published report to its stockholders, of not less than
$10,000,000 or a stock transfer company. After acceptance in writing of such
appointment by the new warrant agent is received by the Company, such new
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment, the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any entity into which the Warrant Agent or any new warrant agent may
be converted or merged or any entity resulting from any consolidation to which
the Warrant Agent or any new warrant agent shall be a party or any entity
succeeding to the trust business of the Warrant Agent shall be a successor
warrant agent under this Agreement without any further act, provided that such
entity is eligible for appointment as successor the Warrant Agent under the
provisions of the preceding paragraph. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed the
Company and to the Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Class D Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
23
<PAGE>
SECTION 16. Modification of Agreement. Subject to the provisions of
Subsection 4(b), the parties hereto and the Company may by supplemental
agreement make any changes or corrections in this Agreement (i) that they shall
deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; (ii) to
reflect an increase in the number of Class D Warrants which are to be governed
by this Agreement resulting from a subsequent offering of Company securities
which includes Class D Warrants having the same terms and conditions as the
Class D Warrants, originally covered by or subsequently added to this Agreement
under this Section 16; or (iii) that they may deem necessary or desirable and
that shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing more than
50% of the Class D Warrants then outstanding; and provided, further, that no
change in the number or nature of the securities purchasable upon the exercise
of any Class D Warrant, or the Purchase Price therefor, or the acceleration of
the Warrant Expiration Date, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate representing such Class D Warrant,
other than such changes as are specifically prescribed by this Agreement
(including those contemplated in Subsection 9(d)) as originally executed or are
made in compliance with applicable law.
SECTION 17. Notices. All notices requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed by means of first class registered or certified
mail, postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, at 3550 General Atomics
Court, San Diego, California, 92121, Attention: Chief Executive Officer, or at
such other address as may have been furnished to the Warrant Agent in writing by
the Company; if to the Warrant Agent, at its Corporation Office; and, if to
Paramount, at Paramount Capital Inc., 787 Seventh Avenue, New York, New York
10019, Attention:
Michael S. Weiss.
SECTION 18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, Paramount, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended nor shall be construed to
confer upon any other person any
24
<PAGE>
right, remedy or claim, in equity or at law, or to impose upon any other person
any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the close
of business on the Warrant Expiration Date of all the Class D Warrants or such
earlier date upon which all Class D Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company for cash held by and
the provisions of Section 15 shall survive such termination.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
GENTA INCORPORATED
By:
----------------------------------
Authorized Officer
CHASEMELLON SHAREHOLDER SERVICES,
as Warrant Agent
By:
----------------------------------
Authorized Officer
PARAMOUNT CAPITAL, INC.
By:
----------------------------------
Authorized Officer
25
<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS D WARRANT CERTIFICATE]
No __ __________________ Class D Warrants
VOID AFTER __________________, 2002
CLASS D WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
GENTA INCORPORATED
This certifies that FOR VALUE RECEIVED
___________________________________ or registered assigns (the "Registered
Holder") is the owner of the number of Class D Warrants ("Class D Warrants")
specified above. Each Class D Warrant represented hereby initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Warrant Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, par value $.001 per share
("Common Stock") of Genta Incorporated, a Delaware corporation (the "Company"),
at any time between ______________, 1997, and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of ChaseMellon Shareholder Services, L.L.C., as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of the
Purchase Price (as defined in the Warrant Agreement) in lawful money of the
United States of America in cash or by official bank or certified check made
payable to the Company.
This Warrant Certificate and each Class D Warrant represented hereby
are issued pursuant to, and are subject in all respects to, the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
as of May 20, 1997, by and among the Company, the Warrant Agent and Paramount
Capital, Inc.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the
<PAGE>
exercise of each Class D Warrant represented hereby are subject to modification
or adjustment.
Each Class D Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of fewer than every Class D Warrant
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate or
Warrant Certificates of like tenor, which the Warrant Agent shall countersign,
for the balance of such Class D Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
______________ 2002, or such earlier date as the Class D Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close. Upon notice to
all Registered holders of the Class D Warrants, the Company shall have the right
to extend the Expiration Date.
THE REGISTERED HOLDER OF THIS CLASS D WARRANT SHALL HAVE THE
REGISTRATION RIGHTS AS PROVIDED IN SECTION 5 OF THE SUBSCRIPTION AGREEMENT (THE
"SUBSCRIPTION AGREEMENT") DATED AS OF THE DATE HEREOF BETWEEN THE COMPANY AND
SUCH REGISTERED HOLDER. The Class D Warrants represented hereby shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant Certificate is exchangeable upon the surrender hereof
by the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class D Warrants, each of such new Warrant Certificates to
represent such number of Class D Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Class D
Warrants will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Warrant Agreement.
Prior to the exercise of any Class D Warrant represented hereby, the
Registered Holder shall not be entitled to any right of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions,
<PAGE>
and shall not be entitled to receive any notice of an proceedings of the
Company, except as provided in the Warrant Agreement.
The Class D Warrants represented hereby may be redeemed at the
option of the Company, at a redemption price of $.10 per share subject to such
Class D Warrants (subject to adjustment under the circumstances set forth in
Section 9 of the Warrant Agreement) (the "Redemption Price"). Notice of
redemption shall be given not later than the sixtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect to
the Class D Warrants represented hereby except to receive the Redemption Price
upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class D Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price to
Paramount Capital, Inc. under certain conditions as specified in the Warrant
Agreement upon the exercise of the Class D Warrants represented hereby. Any
costs incurred by the Placement Agent in connection with the solicitation of
Class D Warrant exercises or the redemption of Class D Warrants shall be
reimbursed by the Company.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
GENTA INCORPORATED
Dated: By:
---------------- -----------------------------------
By:
-----------------------------------
[seal]
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Warrant Agent
By:
----------------------------------
Authorized Officer
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $__________ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise D Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise __________ Class D Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Class D
Warrants, and requests that certificates for such securities shall be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
[please print or type name and address]
and be delivered to
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
[please print or type name and address]
and if such number of Class D Warrants shall not be all the Class D Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class D Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
The undersigned represents that the exercise of the within Class D Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. If not solicited
<PAGE>
by an NASD member, please write "unsolicited" in the space below. Unless
otherwise indicated by listing the name of another NASD member firm, it will be
assumed that the exercise was solicited by Paramount Capital, Inc.
--------------------------------------
(Name of NASD Member)
Dated: X
--------------------------------------
--------------------------------------
--------------------------------------
Address
--------------------------------------
Taxpayer Identification Number
--------------------------------------
Signature Guaranteed
--------------------------------------
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Class D Warrants
FOR VALUE RECEIVED, hereby
------------------------------------------------
sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
[please print or type name and address]
of the Class D Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
- --------------------------------------------------------------------------------
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: X
-------------------------------------
Signature Guaranteed
-------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
