SCHEDULE A
(Rule a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.a-11(c) or Sec. 240.a -12
Genta Incorporated
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
<PAGE>
5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
[Company Logo]
3550 GENERAL ATOMICS COURT
SAN DIEGO, CA 92121
(619) 455-2700
March 14, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on April 4, 1997, at 11:00 a.m., at the Hyatt Regency, 3777
La Jolla Village Drive, La Jolla, California.
The Board of Directors unanimously recommends adoption of a proposal,
referred to in The Proxy Statement, which would effectuate a one for ten reverse
stock split of the Company's outstanding Common Stock. THE NASDAQ STOCK MARKET,
INC. HAS INDICATED THAT SHARES OF COMMON STOCK OF THE COMPANY WILL BE DELISTED
FROM THE NASDAQ STOCK MARKET UNLESS THIS PROPOSAL IS APPROVED BY STOCKHOLDERS.
SEE "THREAT OF NASDAQ DELISTING" ON PAGE 7. YOUR VOTE IS THEREFORE ESPECIALLY
IMPORTANT.
The formal notice of the Annual Meeting and the Proxy Statement have
been made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return,
at an early date, the enclosed proxy in the prepaid envelope addressed to
ChaseMellon Shareholder Services, our agent, to ensure that your shares will be
represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE
ENCLOSED PROXY OR ATTEND THE MEETING IN PERSON.
A copy of the Company's Form 10-K for the year ended December 31, 1996
is enclosed.
The Board of Directors and Management look forward to seeing you at the
meeting.
Sincerely yours,
Thomas H. Adams
Chairman of the Board and
Chief Executive Officer
<PAGE>
GENTA INCORPORATED
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 4, 1997
------------
The Annual Meeting of Stockholders ("Annual Meeting") of Genta
Incorporated (the "Company") will be held at the Hyatt Regency, 3777 La Jolla
Village Drive, La Jolla, California, on April 4, 1997 at 11:00 a.m., for the
following purposes:
1. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to effectuate a one for ten reverse
stock split (if approved, each ten shares of outstanding Common
Stock will be converted into one share of Common Stock and the
conversion ratios of the outstanding shares of Preferred Stock
will be commensurately adjusted) while reducing the authorized
number of shares of Common Stock of the Company from 150,000,000
to 70,000,000.
2. To elect one Class III director.
3. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors.
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment of the Annual Meeting.
The Board of Directors has fixed the close of business on March 4, 1997
as the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof. A complete list of
stockholders entitled to vote will be available at the Assistant Secretary's
office, 3550 General Atomics Court, San Diego, California, for ten days before
the meeting.
March 14, 1997 By Order of the Board of Directors,
Thomas H. Adams
Chairman of the Board and
Chief Executive Officer
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN
IF YOU PLAN TO ATTEND IN PERSON, PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
<PAGE>
GENTA INCORPORATED
3550 GENERAL ATOMICS COURT
SAN DIEGO, CALIFORNIA 92121
(619) 455-2700
------------
PROXY STATEMENT
------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Genta Incorporated, a Delaware corporation (the
"Company"), of proxies in the accompanying form to be used at the Annual Meeting
of Stockholders to be held at the Hyatt Regency, 3777 La Jolla Village Drive, La
Jolla, California, on April 4, 1997 at 11 a.m. and any adjournment thereof (the
"Annual Meeting"). The shares represented by the proxies received in response to
this solicitation and not revoked will be voted at the Annual Meeting. A proxy
may be revoked at any time before it is exercised by filing with the Secretary
of the Company a written revocation or a duly executed proxy bearing a later
date or by voting in person at the Annual Meeting. On the matters coming before
the Annual Meeting for which a choice has been specified by a stockholder by
means of the ballot on the proxy, the shares will be voted accordingly. If no
choice is specified, the shares will be voted FOR the approval of Proposal One
described in this Proxy Statement, FOR the election of the nominee for Class III
director listed in this Proxy Statement and FOR the approval of Proposal Three
described in this Proxy Statement.
Stockholders of record of the Company's Common Stock (the "Common
Stock") at the close of business on March 4, 1997 (the "Record Date") are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on the Record Date, the Company had 39,991,626 shares of Common Stock
outstanding and entitled to vote. Each holder of Common Stock is entitled to one
vote for each share held as of the Record Date. As of the close of business on
the Record Date, the Company also had 528,100 shares of Series A Convertible
Preferred Stock (the "Series A Preferred Stock") and 1,424 shares of Series C
Convertible Preferred Stock ("the Series C Preferred Stock") outstanding and
entitled to notice of the Annual Meeting. Holders of the Series A and Series C
Preferred Stock are not entitled to vote at the Annual Meeting.
Proposal One to be approved will require the affirmative vote of a
majority of the shares of outstanding Common Stock. Directors are elected by a
plurality vote of shares present in person or represented by proxy and entitled
to vote on the election of directors. Proposal Three and any other matters
submitted for stockholder approval at this Annual Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy and entitled to vote on each such matter. Abstentions with respect to any
matter are treated as shares present or represented and entitled to vote on that
matter and thus have the same effect as negative votes. Broker non-votes and
other circumstances in which proxy authority has been withheld with respect to
any matter are not deemed to be present or represented for purposes of
determining whether stockholder approval of that matter has been obtained.
The entire expense of printing, preparing, assembling and mailing proxy
materials and the cost of soliciting proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, solicitation may be made by
certain directors, officers and other employees of the Company by personal
interview, telephone, telegram or facsimile. No additional compensation will be
paid to such persons for such solicitation. In addition, the Company has
retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for
an estimated cost not to exceed $10,000, plus reimbursement of reasonable
out-of-pocket expenses. MacKenzie Partners, Inc. will solicit proxies from
individuals, brokers, banks, nominees and other institutional holders.
Approximately 20 persons will be utilized by MacKenzie Partners, Inc. in their
solicitation efforts, which may be made by telephone, facsimile, telegram and in
person.
The Company will reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation materials to beneficial owners of
the Company's Common Stock and Series A and Series C Preferred Stock.
This Proxy Statement and the accompanying form of proxy are being
mailed to stockholders on or about March 14, 1997.
<PAGE>
IMPORTANT
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE- PREPAID RETURN ENVELOPE SO THAT,
WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT, YOUR SHARES OF
COMMON STOCK CAN BE VOTED. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT
THE ANNUAL MEETING.
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<PAGE>
PROPOSAL ONE
APPROVAL FOR A ONE FOR TEN REVERSE STOCK SPLIT OF THE COMPANY'S OUTSTANDING
COMMON STOCK AND DECREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Board of Directors has unanimously approved and
recommended that the stockholders of the Company approve an amendment to the
Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation") , to effect a one for ten reverse stock split of the Company's
outstanding Common Stock and to reduce the Company's authorized shares of Common
Stock to 70,000,000 (the "Reverse Split Amendment"). If this proposal is
approved, the Certificate of Incorporation will be amended in the form attached
hereto as Exhibit A.
ADVANTAGES
Unless the Reverse Split Amendment is approved by stockholders, the
Nasdaq Stock Market, Inc. ("Nasdaq") has indicated that the Company will be
delisted from the Nasdaq Stock Market. See "Threat of Nasdaq Delisting" below.
The Board of Directors believes that such a delisting is likely
adversely to affect the liquidity of the Company's shares and the ability of the
Company to attract investors. In addition, delisting of the Company's Common
Stock from the Nasdaq SmallCap Market may be deemed to constitute a "Fundamental
Change" under the Company's Certificate of Incorporation. The Certificate of
Incorporation currently provides that, upon the occurrence of a "Fundamental
Change," each holder of Series A Preferred Stock has the option of requiring the
Company to repurchase all of such holder's shares of Series A Preferred Stock at
a redemption price of $50 per share plus accrued and unpaid dividends, an event
that could result in the Company being required to pay to the holders of Series
A Preferred Stock up to an aggregate of approximately $30,000,000 in cash. Given
the Company's current financial condition and market conditions, it is unlikely
that the Company would be able to make such payment to the holders of Series A
Preferred Stock and it is therefore likely that the Company would be forced to
discontinue operations or liquidate part or all of its assets and may seek
protection from creditors under the federal bankruptcy laws.
The increase in the portion of authorized shares that would be unissued
after the reverse stock split (the "Increased Available Portion of Shares")
could be used for any proper corporate purpose approved by the Company. The
Increased Available Portion of Shares will also provide the Company with
additional flexibility to issue additional shares in connection with future
financings. The Company has entered into a Letter of Intent, dated January 28,
1997, with Paramount Capital, Inc. ("PCI") pursuant to which PCI confirmed its
interest in acting as placement agent, on a "best efforts" basis, of a private
placement of Company stock, convertible notes and warrants for proceeds of up to
$7,500,000 (plus an over-allotment option), subject to certain conditions set
forth therein. Additional shares could also be used for employee benefit plans
or in connection with acquisitions by the Company. On February 13, 1997, the
Aries Funds (as hereinafter defined) provided $3,000,000 in financing to the
Company, arranged by PCI, through the purchase of Bridge Notes and warrants. See
footnote 2 under the caption "Stock Ownership of Management and Certain
Beneficial Owners."
DISADVANTAGES
Because the Reverse Split Amendment will result in the Increased
Available Portion of Shares, it may be construed as having an anti-takeover
effect, although neither the Board of Directors nor the management of the
Company views this proposal in that perspective. However, the Company could use
the Increased Available Portion of Shares to frustrate persons seeking to effect
a takeover or otherwise gain control of the Company by, for example, privately
placing shares with purchasers who might side with the Board of Directors in
opposing a hostile takeover bid. In addition, shares of Common Stock may be
issued in the event that the rights issued in connection with the Company's
Stockholder Rights Plan are exercised. Shares of Common Stock could also be
issued to a holder that would thereafter have sufficient voting power to assure
that any proposal to amend or repeal the By-Laws or certain provisions of the
Certificate of Incorporation would not receive the requisite vote. Such uses of
the Common Stock could render more difficult, or discourage, an attempt to
acquire control of the Company, if such transaction were opposed by the Board of
Directors. Further, the Increased Available Portion of Shares not otherwise
required to meet the Company's obligations under its Certificate of
Incorporation (including shares of Common Stock which the Company could be
required to issue upon an Event of Default under the Bridge Notes) could
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<PAGE>
be issued by the Company without further stockholder approval, which could
result in further dilution to the holders of Common Stock.
As of March 5, 1997 there were (i) 39,991,626 shares of Common Stock
outstanding; (ii) 528,100 shares of Series A Preferred Stock, par value $.001
per share outstanding; (iii) 1,424 shares of Series C Preferred Stock, par value
$.001 per share outstanding; (iv) 1,649,302 options granted and not expired,
cancelled nor exercised; and (v) warrants granted to purchase 21,557,685 shares
of Common Stock. As of March 5, 1997, pursuant to the terms of outstanding
convertible instruments, options, warrants and other obligations, the Company
may be required to issue up to 141,546,576 shares of Common Stock plus an
additional approximately 300,000,000 shares of Common Stock which might be
issuable upon an Event of Default under the Bridge Notes. As the conversion
rates and anti-dilution adjustments of some of these convertible instruments are
influenced by the market price of the Company's Common Stock at any given time,
the numbers of shares of Common Stock issuable upon conversion of such
instruments will be affected by fluctuations in the market price of the
Company's Common Stock.
REQUIRED VOTE
In order to be adopted, this proposal must receive the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock.
THREAT OF NASDAQ DELISTING
Since October 22, 1996 the Company's Common Stock has been trading at
less than $1.00 per share. Effective February 7, 1997 the Company's Common Stock
was removed from the Nasdaq National Market and began trading on the Nasdaq
SmallCap Market under a conditional exception from the bid price and capital
surplus requirements of the Nasdaq SmallCap Market. Nasdaq has indicated that
unless the Company's Common Stock achieves a minimum bid price of at least $1.50
per share by April 7, 1997, and maintains a minimum bid price of at least $1.50
per share for a period of ten consecutive days immediately following the reverse
stock split, the Company's Common Stock will be delisted. The Company believes
that, if the Reverse Split Amendment is approved, it can meet these terms;
however, there can be no assurance that, even with the reverse stock split, the
Company will be able to maintain its listing on the Nasdaq SmallCap Market. To
maintain its Nasdaq listing, the Company will also be required to make a public
filing with the SEC and Nasdaq evidencing minimum capital and surplus of
$6,000,000 on or before April 7, 1997. There can be no assurances that the
Company will succeed in timely achieving this minimum capital and surplus level
or that even if successful the Company's Common Stock would not be delisted from
the Nasdaq SmallCap Market. There can be no assurances that approval of the
Reverse Split Amendment will succeed in raising the bid price of the Company's
Common Stock above $1.50 per share, that such minimum price if achieved would be
maintained for the requisite period, or that even if Nasdaq's minimum bid price
requirement were satisfied the Company's Common Stock would not be delisted from
the Nasdaq SmallCap Market for other reasons.
EXCHANGE OF STOCK CERTIFICATES
If the Reverse Split Amendment is approved by the Company's
stockholders, the Company will instruct its transfer agent to act as its
exchange agent (the "Exchange Agent") and to act for holders of Common Stock in
implementing the exchange of their certificates.
Commencing on the effective date of the Reverse Split Amendment (the
"Effective Date"), stockholders will be notified and requested to surrender
their certificates representing shares of Common Stock to the Exchange Agent in
exchange for certificates representing new Common Stock. One share of new Common
Stock will be issued in exchange for each ten presently issued and outstanding
shares of Common Stock. Beginning on the Effective Date, each certificate
representing shares of the Company's Common Stock will be deemed for all
corporate purposes to evidence ownership of shares of new Common Stock.
LIQUIDATION OF FRACTIONAL SHARES
No scrip or fractional certificates will be issued in connection with
the reverse stock split. Stockholders who ostensibly would be entitled to
receive fractional shares because they hold a number of shares of Common Stock
not evenly divisible by ten will be entitled, upon surrender to the Exchange
Agent of certificates representing such shares, to receive one additional share
of Common Stock for any fractional share they may be entitled to. Stockholders
may now hold "odd lots" as a result of the reverse stock split and as such may
be subject to increased transaction costs on the sale of their Common Stock.
Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the Common Stock due
them for fractional interests.
FEDERAL INCOME TAX CONSEQUENCES
The reverse stock split should not result in the recognition of gain or
loss (except in the case of additional shares received for fractional shares as
described below). The holding period of the shares of new Common Stock will
include the stockholders' respective holding periods for the shares of Common
Stock exchanged therefore, provided that the shares of Common Stock were held as
a capital asset. The adjusted basis of the shares of new Common Stock will be
the same as the adjusted basis of the Common Stock exchanged therefore, reduced
by the basis applicable to the receipt of additional shares in lieu of
fractional shares described below.
A stockholder who receives additional shares in lieu of fractional
shares will be treated as if the Company would issue additional shares to him.
Such stockholder should generally recognize gain or loss, as the case may be,
measured by the difference between the number of additional shares received and
the basis of his old Common Stock applicable to such fractional shares had they
actually been issued. Such gain or loss shall be a capital gain or loss (if such
stockholder's Common Stock was held as a capital asset), any such capital gain
or loss shall generally be long-term capital gain or loss to the extent such
stockholder's holding for his Common Stock exceeds twelve months.
NO DISSENTER'S RIGHTS
Under Delaware law, stockholders are not entitled to dissenter's rights
of appraisal with respect to the reverse stock split.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE.
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<PAGE>
PROPOSAL TWO
ELECTION OF DIRECTOR
The Company has three classes of directors serving staggered three-year
terms. Class I and Class II each consist of two directors and Class III consists
of three directors. Currently, there is one director vacancy in Class II and two
director vacancies in Class III. One Class III director is to be elected at the
Annual Meeting for a term of three years expiring at the Annual Meeting in 2000
or until such director's successor shall have been elected and qualified. The
other directors of the Company will continue in office for their existing terms,
which expire in 1998 and 1999 for Class I and Class II directors, respectively.
Unless authority to vote for directors is withheld, the Company intends
that the shares represented by the enclosed proxy will be voted for the election
of Robert E. Klem, Ph.D, who is currently a member of the Board of Directors of
the Company, and a Class III Director. In the event such nominee becomes unable
or unwilling to accept nomination or election, the shares represented by the
enclosed proxy will be voted for the election of such person as the Board of
Directors may select. The Board of Directors has no reason to believe that such
nominee will be unable or unwilling to serve.
The Board of Directors has not nominated anyone to fill the two Class
III Director vacancies. Proxies cannot be voted for more than one Class III
Director.
Set forth below is information regarding the nominee for the Class III
director and the continuing directors of Class I and Class II, including
information furnished by them as to their principal occupations at present and
for the past five years, certain directorships held by each, their ages as of
February, 1997 and the year in which each became a director of the Company.
Name Age
---- ---
CLASS III
Robert E. Klem, Ph.D. .................................................... 52
Dr. Klem has been a director of the Company since February 1991 and a Vice
President of the Company since October 1991. Dr. Klem co-founded JBL Scientific,
Inc. ("JBL"), a wholly owned subsidiary of the Company, in 1973 and, since then,
has been Chairman of the Board and Chief Technical Officer of JBL with
responsibility for research, development and marketing activities. Previously,
Dr. Klem was the Plant Manager for E.I. DuPont in Victoria, Texas from 1970 to
1974. Dr. Klem received his Ph.D. in Organic Chemistry from the University of
California at Riverside.
CLASS I
Thomas H. Adams, Ph.D. .................................................... 53
Dr. Adams was the founder of the Company and has been Chairman of the Board and
Chief Executive Officer of the Company since February 1989. He previously served
as Chairman of the Board and Chief Executive Officer of Gen-Probe Incorporated
("Gen-Probe"), which he co-founded in 1984. Prior to joining Gen-Probe, he held
the positions of Senior Vice President of Research & Development and Chief
Technical Officer at Hybritech Incorporated ("Hybritech"), a leading monoclonal
antibody products company which was acquired by Eli Lilly and Company in 1986.
He had previously held senior scientific management positions with Technicon
Instruments Corp., the Hyland Laboratories Division of Baxter Travenol, and
DuPont. Dr. Adams is a director of Life Technologies, Inc., a life sciences
company, and three private biotechnology firms . He received his Ph.D. in
Biochemistry from the University of California at Riverside.
Sharon B. Webster, Ph.D. ................................................. 59
Dr. Webster has been a director of the Company since February 1989. She has been
President, Chief Executive Officer, Chairman of the Board and Managing Director
of A. A. Global, Inc., a consulting firm, since 1989. From 1988 to 1989,
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<PAGE>
she was a financial consultant at Shearson Lehman Hutton Inc. From 1983 to 1988
Dr. Webster was an investment banker and account executive at Johnston, Lemen &
Co. Inc. She received her Ph.D. in International Political and Economic
Relations from the University of Virginia.
CLASS II
Paul O.P. Ts'o, Ph.D. .................................................... 67
Dr. Ts'o has been a director of the Company since its inception in February
1988. Dr. Ts'o is currently Professor of Biophysics, Department of Biochemistry
at The Johns Hopkins University ("Johns Hopkins"). Dr. Ts'o has been a professor
at Johns Hopkins since 1967, and was Director of the Division of Biophysics from
1973 to 1990. He received his Ph.D. from the California Institute of Technology.
The Board of Directors held 27 meetings during the year ended December
31, 1996. All directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and of the committees on which such directors
had served. Directors receive no fees for their services, but non-employee
directors are eligible for stock options (see "Compensation of Directors").
By letter dated October 8, 1996, James C. Blair, Ph.D. announced that
he would be resigning as a Director and as Vice Chairman of the Board of
Directors of the Company, effective immediately. Dr. Blair cited as the reason
for the resignation his perception that his views regarding the proper program
to resolve the financial and strategic issues faced by the Company were
irreconcilably different from those held by the Company's Chairman of the Board
and by a majority of the Company's Board of Directors.
Effective as of the close of business on October 22, 1996, Samuel D.
Colella resigned from the Company's Board of Directors without citing a reason.
Effective as of the close of business on January 28, 1997 David F. Hale resigned
from the Company's Board of Directors without citing a reason.
The Board of Directors appointed an Executive Committee, a Compensation
Committee, a Stock Plan Committee, and an Audit Committee in 1995 and the
designated members of such committees were designated to continue to serve until
such members' respective successors are duly designated and qualified or until
such members' earlier resignation or removal.
The Company does not have a standing Nominating Committee. The
functions customarily performed by a nominating committee are performed by the
Board of Directors as a whole. Any stockholder who wishes to make a nomination
at an annual or special meeting for election of directors must do so in
compliance with the applicable procedures set forth in the Company's By-laws.
The Company will furnish copies of such By-law provision upon written request to
the Company at the offices of the Company at 3550 General Atomics Court, San
Diego, California 92121.
The members of the Executive Committee were Thomas H. Adams , James C.
Blair, David F. Hale and Samuel D. Colella. The Executive Committee held three
meetings during 1996. Subject to the ultimate direction and control of the Board
of Directors, the Executive Committee's function is to exercise, with certain
exceptions, all of the powers and authority of the Board in the management of
the business and affairs of the Company.
The members of the Stock Plan Committee were James C. Blair and David
F. Hale. The Stock Plan Committee held one meeting during 1996. The Stock Plan
Committee's functions are to supervise the administration of, and grant options
under, the 1991 Stock Plan of the Company (the "1991 Stock Plan").
The members of the Compensation Committee were Thomas H. Adams , James
C. Blair and David F. Hale. The Compensation Committee held one meeting during
1996. The compensation of the officers was not addressed at this meeting. The
Compensation Committee's functions are to assist in the implementation of, and
provide recommendations with respect to, general and specific compensation
policies and practices of the Company.
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<PAGE>
The members of the Audit Committee were Thomas H. Adams, James C. Blair
and Samuel D. Colella. The Audit Committee did not hold any meetings during
1996. The Audit Committee's functions are to review the scope of the annual
audit, monitor the independent auditor's relationship with the Company, advise
and assist the Board of Directors in evaluating the auditor's review, supervise
the Company's financial and accounting organization and financial reporting, and
nominate for stockholder approval at the annual meeting, with the approval of
the Board of Directors, a firm of certified public accountants whose duty it is
to audit the financial records of the Company for the fiscal year for which they
are appointed.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE CLASS III
NOMINEE FOR DIRECTOR LISTED ABOVE.
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<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 5, 1997 as to
shares of Common Stock beneficially owned by (i) the Company's directors, (ii)
the Company's executive officers named in the Summary Compensation Table set
forth herein, (iii) the directors and executive officers of the Company as a
group and (iv) each person known by the Company to be the beneficial owner of
more than five percent of the outstanding shares of the Common Stock of the
Company. As of March 5 , 1997, each share of Series A Preferred Stock was
convertible at the option of the holder, unless previously redeemed, into 21.40
shares of Common Stock. Each share of Series C Preferred Stock is convertible
into that number of shares of Common Stock determined by dividing the sum of
$1,000 plus accrued dividends on each share of Series C Preferred Stock by the
conversion price of the Series C Preferred Stock. The conversion price of the
Series C Preferred Stock is equal to 75% of the average of the closing bid
prices of the Company's Common Stock on the Nasdaq Stock Market for a specified
period prior to the conversion date. The number of shares of Common Stock
issuable upon conversion of the Series C Preferred Stock included in the table
set forth below is based upon the Nasdaq Stock Market closing bid price of the
Company's Common Stock on March 5, 1997 which was $.4375. Except as required by
law or with respect to the creation or amendment of senior classes of preferred
stock or creation of different series or classes of Common Stock, and in certain
other instances, the holders of Series A and Series C Preferred Stock do not
have voting rights until conversion into Common Stock. As the conversion rates
and anti-dilution adjustments of these convertible preferred stocks are
influenced by the market price of the Company's Common Stock at any given time,
the numbers of shares of Common Stock issuable upon conversion of such
instruments will be affected by fluctuations in the market price of the
Company's Common Stock.
Amount and Nature
of Beneficial Percent
Name and Address of Beneficial Owner Ownership(1) of Class
- ------------------------------------ ------------ --------
Paramount Capital Asset Management, Inc.......... 40,915,000(2) 51.15%
787 Seventh Avenue
New York, New York 10019
Institutional Venture Partners IV................ 2,543,783(3) 6.12%
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, California 94025
SkyePharma Plc
105 Piccadilly
London W1V 9FN, England...................... 2,320,561(4) 5.48%
Paul O.P. Ts'o................................... 887,000(5) 2.22%
Thomas H. Adams.................................. 635,397(6) 1.58%
Robert E. Klem................................... 283,154(7) *
Guy Van de Winckel............................... 60,000(8) *
Sharon B. Webster................................ 24,000(5) *
Zofia E. Dziewanowska............................ 85,233(8) *
Lauren Brown..................................... 213,443(9) *
Robert Wang...................................... 85,945(10) *
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<PAGE>
All directors and executive officers
as a group (8 persons)....................... 2,274,172(11) 5.62%
- ---------------
* Less than one percent
(1) The number of shares beneficially owned is determined under rules
promulgated by the Securities and Exchange Commission (the "SEC"), and
the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power
or investment power and also any shares which the individual has the
right to acquire within 60 days after March 5, 1997 through the
exercise of any stock option, convertible security, warrant or other
right. The inclusion herein of such shares, however, does not
constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated,
each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with
respect to all shares of capital stock listed as owned by such person
or entity.
(2) Based on information as of February 24, 1996 contained in a Statement
on Schedule 13D filed with the SEC by Paramount Capital Asset
Management, Inc. ("PCAM"), Dr. Lindsay A. Rosenwald, The Aries Fund,
and The Aries Domestic Fund, L.P. According to the Schedule 13D, Dr.
Rosenwald and PCAM may be deemed to have shared voting and investment
power over the 26,640,500 and 14,274,500 shares of Common Stock,
respectively, which may be deemed to be beneficially owned by The Aries
Fund and The Aries Domestic Fund, L.P.(collectively, the "Aries
Funds"). According to the Schedule 13D, The Aries Fund owns (i) 640,500
shares of Common Stock, (ii) $1,950,000 principal amount of a Senior
Secured Bridge Note (a "Bridge Note") which, subject to antidilution
adjustments, is initially convertible into 390,000 shares of Series D
Preferred Stock (the "Series D Preferred Stock"), which, in turn,
subject to antidilution adjustments, are initially convertible into
13,000,000 shares of Common Stock, and (iii) five-year warrants to
purchase 13,000,000 shares of Common Stock. According to the Schedule
13D, The Aries Domestic Fund, L.P. owns (i) 274,500 shares of Common
Stock, (ii) $1,050,000 principal amount of a Bridge Note which, subject
to antidilution adjustments, is initially convertible into 210,000
shares of Series D Preferred Stock, which, in turn, subject to
antidilution adjustments, are initially convertible into 7,000,000
shares of Common Stock, and (iii) five-year warrants to purchase
7,000,000 shares of Common Stock. Pursuant to a Note and Warrant
Purchase Agreement dated January 28, 1997 with the Company, the Aries
Funds have the right to appoint a majority of the members of the Board
of Directors of the Company; provided, however, that in the event the
Company has not obtained Future Financings (as defined in the Note and
Warrant Purchase Agreement) in excess of $3,500,000 on or before July
28, 1997, then the Aries Funds shall have the contractual right to
appoint only two directors or observers and, if additional directors
have been appointed, they shall be required to resign. As of the date
of this Proxy Statement, the Aries Funds have not exercised such right.
(3) Consists of: (i) 875,618 shares of Common Stock and 1,628,693 shares of
Common Stock issuable upon the conversion of Series C Preferred Stock
beneficially owned by Institutional Venture Partners IV; and (ii)
13,334 shares of Common Stock , 22,138 shares of Common Stock issuable
upon the conversion of Series C Preferred Stock and 4,000 vested
options to purchase Common Stock beneficially owned by Institutional
Venture Management IV.
(4) Based on information as of June 26, 1996 contained in a Statement on
Schedule 13D filed with the SEC by Jagotec AG ("Jagotec"), Jago Finance
Limited, Jago Holding AG and SkyePharma Plc. (the "Reporting Persons").
According to the Schedule 13D, as a result of SkyePharma Plc.'s
acquisition of Jago Holding AG, SkyePharma Plc. has become a beneficial
owner of the Common Stock held by Jagotec and Jago Finance Limited, and
each of the Reporting Persons has become a member of a "group" within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended.
(5) Includes 4,000 shares of Common Stock which Dr. Ts'o and Dr. Webster
may each acquire within 60 days after March 5, 1997 pursuant to the
exercise of options.
-9-
<PAGE>
(6) Includes 115,000 shares of Common Stock held in several trusts for Dr.
Adams' children, as to which Dr. Adams has shared voting and investment
power. Also includes 217,075 shares of Common Stock which may be
acquired within 60 days after March 5, 1997 pursuant to the exercise of
options.
(7) Includes 18,750 shares of Common Stock held by a trust for Dr. Klem's
children, as to which Dr. Klem has shared voting and investment power.
Includes 1,500 shares of Common Stock owned by Dr. Klem's wife, as to
which he disclaims beneficial ownership. Also includes 48,076 shares of
Common Stock which may be acquired within 60 days after March 5, 1997
pursuant to the exercise of options.
(8) These shares may be acquired within 60 days after March 5, 1997
pursuant to the exercise of options.
(9) Includes 12,865 shares of Common Stock which may be acquired within 60
days after March 5, 1997 pursuant to the exercise of options.
(10) Includes 42,945 shares of Common Stock which may be acquired within 60
days after March 5, 1997 pursuant to the exercise of options.
(11) Includes 474,194 shares of Common Stock which may be acquired within
60 days after March 5, 1997 pursuant to the exercise of options.
Includes 133,750 shares of Common Stock held by family trusts for the
benefit of family members of directors and officers as to which such
directors and officers have voting and investment power .
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth compensation for services in all
capacities to the Company and its subsidiaries, for the fiscal years ended
December 31, 1994 , 1995 and 1996 of: (i) those persons who were, respectively,
at December 31, 1996 the Company's Chief Executive Officer and the other four
most highly compensated executive officers of the Company whose total annual
salary and bonus for fiscal year 1996 exceeded $100,000; and (ii) one additional
individual who would have been one of such other four most highly compensated
executive officers if such individual had served as an executive officer for the
entire fiscal year (collectively, the "Named Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Awards
Securities
Name and Other Annual Underlying
Principal Position Year Salary ($) Bonus ($) Compensation($) Options(#)
- ------------------ ---- ---------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. 1996 $285,000(5) -- -- 27,990(5)
Chairman of the 1995 285,000 -- 200,000(1)
Board and Chief 1994 283,542 -- -- --
Executive Officer
Zofia E. Dziewanowska, 1996 $235,000(5) -- -- 15,735(5)
Ph.D., M.D., Senior Vice 1995 235,000 -- 14,759(3) 120,000(1)
President, Global Clinical 1994 137,348(2) 10,000 14,362 (3)
Affairs
-10-
<PAGE>
Guy Van de Winckel 1996 $170,000 -- -- --
Vice President, European 1995 170,000 -- -- 60,000(1)
Operations and President 1994 170,000 -- 37,000(3) --
of Genta Pharmaceuticals
Europe, S.A.
Robert E. Klem, Ph.D. 1996 $155,000(5) -- 2,580(4) 8,533(5)
Vice President, Chairman 1995 161,458(8) -- 2,580 (4) 45,000(1)
of the Board of JBL 1994 154,292 -- 2,580(4) --
Robert Wang 1996 $150,000 -- -- --
Vice President 1995 135,833(6) -- -- 60,000(1)
Corporate Operations 1994 130,000 -- -- --
Howard Sampson(7) 1996 $175,000 -- -- --
Vice President and Chief 1995 132,671 -- -- 65,000
Financial Officer 1994 123,958 -- -- --
- ---------------
</TABLE>
(1) These options (the "New Options") were granted in exchange for
unexercised options granted prior to April 20, 1995 with an exercise
price above $2.25 per share (the "Old Options"). The New Options were
granted at fair market value at the date of grant and have the same
vesting schedule as the Old Options. However, the New Options were not
exercisable until after April 20, 1997, regardless of the Old Option's
vesting schedule, unless the holder is terminated involuntarily without
cause prior to April 20, 1997. None of these option have been exercised
to date.
(2) Dr. Dziewanowska joined the Company in May 1994. Dr. Dziewanowska's
salary for 1994 reflects a partial year of service.
(3) Represents payments for expenses incurred in connection with
relocation including applicable tax gross-ups.
(4) Represents payments for an insurance policy covering Dr. Klem.
(5) Options were granted to Named Officers during the year ended December
31, 1996 to compensate them for accepting deferral of the payment of a
portion of base salary. The portions of salaries so deferred are
included in the 1996 salary figures in this table, consisting of
$35,625, $19,583 and $12,917 for Dr. Adams, Dr. Dziewanowska and Dr.
Klem, respectively.
(6) Effective September 1, 1995 Dr. Wang received a salary increase of
$20,000 and stock options exercisable for 20,000 shares of Common
Stock. The additional 40,000 options are New Options granted in
exchange for Old Options.
(7) On September __, 1996, Mr. Sampson entered into an executive
compensation agreement with the Company which requires (i) the
continued payment of Mr. Sampson's salary at his then current rate of
$175,000 until October 18, 1997, the first anniversary of the date of
Mr. Sampson's voluntary resignation from the Company; (ii) eligibility
for coverage under the Company's health insurance plan; and (iii) the
grant of 75,000 shares of the Company Stock at no cost to Mr. Sampson.
As of the date of this Proxy Statement, such shares have not been
issued to Mr. Sampson. In 1996, Mr. Sampson received an aggregate of
$37,522 in severance payments under the agreement.
-11-
<PAGE>
(8) Represents 25 bi-monthly pay periods during 1995 that resulted from Dr.
Klem's having been transferred from the Company's payroll calendar to
JBL's payroll calendar in September of 1995.
-12-
<PAGE>
COMPENSATION OF DIRECTORS
Directors of the Company receive no fees for their services as
directors or committee members. Non-employee directors are reimbursed by the
Company for their out-of-pocket expenses incurred in attending meetings of the
Board of Directors and its committees. In addition, non-employee directors are
eligible to receive automatic grants of nonstatutory stock options pursuant to
the 1991 Stock Plan .
During 1996, Dr. Ts'o, a non-employee director, received $38,333 under
a consulting agreement between Dr. Ts'o and the Company. The agreement may be
terminated by either party upon giving written notice to that effect.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the Company's fiscal year ended December 31, 1996, Thomas H. Adams,
James C. Blair and David F. Hale were the members of the Company's Compensation
Committee. Mr. Blair resigned from the Board of Directors on October 8, 1996.
Mr. Hale resigned from the Board of Directors on January 28, 1997. Dr. Adams is
Chairman of the Board of Directors and Chief Executive Officer of the Company.
None of the executive officers of the Company had any "interlock" relationship
to report during the Company's fiscal year ended December 31, 1996.
The Company's Relationship with Jagotec. In December 1992, the Company
and Jagotec formed Genta Jago Technologies BV ("Genta Jago"), a 50/50 joint
venture to develop and commercialize products in six major therapeutic areas.
In 1996, SkyePharma Plc acquired Jagotec. Dr. Adams is a managing director of
Genta Jago.
Among other things, the Company is required to provide loans to Genta
Jago pursuant to a working capital agreement which expires in October 1998. The
loans are advanced up to a mutually agreed upon maximum commitment amount, which
amount is established by the parties on a periodic basis. As of December 31,
1996, the Company had advanced working capital loans of approximately $15.3
million to Genta Jago, net of principal repayments and credits, which amount
fully satisfied the loan commitment established by the parties through December
31, 1996. Such loans bear interest and are payable in full in October 1998, or
earlier in the event certain revenues are received by Genta Jago from third
parties. There can be no assurance, however, that Genta Jago will obtain the
necessary financial resources to repay such loans to the Company.
Under the terms of the joint venture, Genta Jago has contracted with
the Company to conduct research and development and provide certain other
services. Revenues associated with providing such services, totaling $1.5
million in 1996, were recorded by the Company as a reduction of the related
research and development and general and administrative expenses. Terms of the
arrangement also grant the Company an option to purchase SkyePharma's interest
in Genta Jago exercisable from December 1998 through 2000.
Genta Jago's Collaboration with Gensia. In January 1993, Genta Jago
entered into a collaboration agreement with Gensia Pharmaceuticals, Inc.
("Gensia") for the development and commercialization of certain oral
controlled-release pharmaceutical products for treatment of cardiovascular
disease. Under the agreement, Gensia provided funding for formulation and
preclinical development to be conducted by Genta Jago and is responsible for
clinical development, regulatory submissions and marketing. Genta Jago received
$2.2 million, of research and development funding in 1996 pursuant to the
agreement.
Gensia in turn in 1994 entered into a collaboration with Boehringer
Mannheim Pharmaceuticals Corporation ("Boehringer") to develop and co-promote
Genta Jago's potential nifedipine product. Gensia transferred its rights under
this collaboration to Brightstone, SkyePharma's U.S. subsidiary in October,
1996.
Dr. Adams is a member of Gensia's Scientific Advisory Board. Mr. Hale,
a former outside director, is Chairman of the Board of Directors, President and
Chief Executive Officer of Gensia. See "Certain Relationships and Related
Transactions" below.
-13-
<PAGE>
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
-14-
<PAGE>
STOCK OPTIONS
The following tables summarize the option grants to and exercises by
the Named Officers and the value of these options held by such persons at the
end of fiscal 1996. The Company does not grant Stock Appreciation Rights. Grants
of options to purchase a total of 128,323 shares were made in 1996 solely to
compensate employees for accepting deferral of a portion of their salaries. The
Company granted options to purchase a total of 128,323 shares to employees in
fiscal 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1996
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
NUMBER OF % OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ----------- ----------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D................. 27,990 22% 17,812 2.06 2006 23,156 58,601
10,178 1.75 2006 11,196 28,396
Zofia E. Dziewanowska, Ph.D., M.D..... 15,735 12% 7,343 2.06 2006 9,546 24,158
8,392 1.75 2006 9,231 23,414
Guy Van De Winckel.................... -- -- -- -- -- --
Robert E. Klem, Ph.D.................. 8,533 6% 4,843 2.06 2006 6,296 15,933
3,690 1.75 2006 4,059 10,295
Robert Wang.......................... -- -- -- -- -- --
Howard Sampson....................... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Assumes that the stock prices on the relevant grant dates ($2.0625 and
$1.75 on February 8, 1996 and June 18, 1996, respectively) have grown,
as indicated, at: (a) 5% per annum over the term of the option, to
$3.3596 and $2.8506, respectively; or (b) 10% per annum over the term
of the option, to $5.3496 and $4.5390, respectively. The 5% and 10%
assumed rates of appreciation are calculated pursuant to the
regulations promulgated by the SEC and do not represent the Company's
estimate or projection of the future Common Stock price.
-15-
<PAGE>
<TABLE>
<CAPTION>
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year End(#) Fiscal Year End($)(1)
Shares Acquired Value
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. -- -- 217,075 10,915 -- --
Zofia E. Dziewanowska, Ph.D., M.D. -- -- 95,908 39,827 -- --
Guy Van de Winckel -- -- 60,000 -- -- --
Robert E. Klem, Ph.D. -- -- 48,076 5,457 -- --
Howard Sampson -- -- 82,624 32,376 -- --
Robert Wang -- -- 42,945 17,055 -- --
</TABLE>
- ---------------------
(1) Calculated on the basis of the fair market value of the underlying
securities as of December 31, 1996 ($.4375 per share), minus the
exercise price.
BOARD REPORT TO STOCKHOLDERS ON COMPENSATION
OVERVIEW
Although the Board of Directors appointed a Compensation Committee,
each of its independent members resigned from the Board of Directors before the
Committee had met to make any determinations or recommendations to the Board of
Directors as to the compensation of the Company's Chief Executive Officer and
other executive officers . Accordingly, this Report is being made by the full
Board of Directors.
The Company seeks to achieve three objectives which serve as guidelines
in making compensation decisions :
o Providing a total compensation package which is competitive
and, therefore, enables the Company to attract and retain, on
a long-term basis, high-caliber executive personnel;
o Integrating compensation programs with the Company's
short-term and long-term strategic plan and business
objectives; and
o Encouraging achievement of business objectives and enhancement
of stockholder value by providing executive management
long-term incentive through equity ownership.
In making its compensation determinations, the Board of Directors and
prior years' Compensation Committees have relied, in part, on independent
surveys and analyses of management compensation of companies in the
biotechnology and pharmaceutical industries (including companies in the Nasdaq
Pharmaceutical Stock Index used in the Company's Stock Price Performance Graph
set forth in this Proxy Statement) and recommendations of management. The Board
of Directors believes it has established executive compensation levels which are
competitive with companies in the biotechnology and pharmaceutical industries
when taking into account relative company size, stage of development, individual
responsibilities and experience, individual and overall corporate performance
and geographic location.
-16-
<PAGE>
COMPONENTS OF EXECUTIVE COMPENSATION
The Company's potential therapeutic products are in various stages of
research and development, and no revenues have as yet been generated from
therapeutic product sales. As a result, the use of traditional performance
standards, such as corporate profitability, are not believed to be appropriate
in the evaluation of the performance of the Company or its individual
executives. The compensation of the Company's executive officers is based, in
substantial part, on the achievement of individual and overall corporate
objectives. Such objectives are established and modified as necessary to reflect
changes in market conditions, and other factors. Individual and overall
corporate performance is measured by reviewing whether these corporate
objectives have been achieved.
The Company's compensation package for executive officers generally
consists of annual cash compensation and long-term compensation in the form of
stock options. In light of the Company's stage of development, considerable
emphasis is placed on equity-based compensation in an effort to preserve cash to
finance the Company's research and development efforts.
ANNUAL CASH COMPENSATION
Compensation levels for the Company's executive officers are
determined, in part, through comparisons with companies of a similar size, stage
of development and level of complexity in the biotechnology and pharmaceutical
industries, and other companies with which the Company competes for personnel.
In addition, the compensation level for each executive officer reflects an
evaluation of the responsibilities required for each respective position,
individual experience levels, and individual performance and contributions
toward achievement of the Company's business objectives. The compensation levels
for the Company's executive officers, including the Chief Executive Officer, are
designed to be competitive within a range that the Compensation Committee
determines to be reasonable in light of the aforementioned factors. Compensation
levels are generally set at the midrange of the comparable companies in order to
remain competitive and attract key personnel. The salary levels of each
executive officer are reviewed on an annual basis and adjustments are made as
deemed necessary.
STOCK OPTIONS
The Board of Directors of the Company believes that by providing all
full-time employees, including executive officers who have responsibility for
the management and growth of the Company, with an opportunity to obtain an
equity interest in the Company, the best interests of stockholders and
executives will be closely aligned. Accordingly, all full-time employees,
including executive officers, are eligible to receive stock option grants from
time to time, giving them the right to purchase shares of the Company's Common
Stock at a specified price.
COMPENSATION OF EXECUTIVE OFFICERS
In making compensation decisions for 1996, the Board of Directors took
into account the Company's limited cash resources, weakened financial condition
and general financial performance during 1996 and the importance of retaining
the Company's cash to finance its development programs, but also considered the
importance to the Company of retaining highly qualified key personnel due to the
complex and technologically sophisticated nature of the Company's business. In
light of these factors, it was decided to increase the base salaries of Drs.
Klem and Brown to competitive levels in the industry and not to increase the
base salary of any other executive (other than Mr. Sampson) beyond 1995 levels,
not to award any bonuses and to request that certain executives defer a portion
of their base salary. The Board granted stock options in 1996 only to compensate
the executives for such deferral of base salary. The above disclosure does not
apply to Mr. Sampson, the former Chief Financial Officer of the Company, who
informed the Company in September, 1996 that he would not continue to perform
essential duties for the Company unless the Company entered an employment
contract, effective as of January 1, 1996, on terms acceptable to him. See
footnote 7 to the Summary Compensation Table set forth under the caption
"Compensation of Executive Officers and Directors." In light of the serious
economic issues faced by the Company at that time the Company felt it had no
alternative but to enter into such employment contract.
-17-
<PAGE>
This Compensation Report shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates this report
by reference, and shall not otherwise be deemed filed under such Acts.
Thomas H. Adams, Ph.D.
Robert E. Klem, Ph. D.
Paul O.P. Ts'o, Ph.D.
Sharon B. Webster, Ph.D.
-18-
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the five-year
cumulative total stockholder return (change in stock price plus reinvested
dividends) of the Company's Common Stock with the CRSP Total Return Index for
The Nasdaq National Market (U.S. and Foreign) (the "Nasdaq Composite Index") and
the CRSP Total Return Index for Nasdaq Pharmaceutical Stocks (the "Nasdaq
Pharmaceutical Index")/1/. The comparisons in the graph are required by the SEC
and are not intended to forecast or be indicative of possible future performance
of the Company's Common Stock.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 30, December 29, December 31,
1991 1992 1993 1994 1995 1996
----------- ------------ ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Genta Incorporated.................. $100 $92.31 $75.69 $52.56 $25.64 $4.99
Nasdaq Composite................... 100 116.03 134.32 130.28 182.96 224.06
Nasdaq Pharmaceutical............... 100 83.22 74.17 55.83 102.05 102.44
</TABLE>
Assumes a $100 investment on December 31, 1991 in each of the Company's
Common Stock, the securities comprising the Nasdaq Composite Index, and the
securities comprising the Nasdaq Pharmaceutical Index.
- --------
/1/ The Nasdaq Pharmaceutical Index includes all companies on Nasdaq within SIC
code 283. A copy of the list of companies which comprise the Nasdaq
Pharmaceutical Index may be obtained upon request by contacting Genta
Incorporated, Investor Relations, 3550 General Atomics Court, San Diego,
California 92121 (619) 455-2700.
-19-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1989. the Company entered into a license agreement with
Drs. Paul Ts'o and Paul Miller (the "Ts'o/Miller Agreement") pursuant to which
Drs. Ts'o and Miller granted an exclusive license to the Company to certain
issued patents, patent applications and related technology regarding the use of
nucleic aids and oligonucleotides, including methylphosphonates, as
pharmaceutical agents. Dr. Ts'o is a Director of the Company and a Professor of
Biophysics, Department of Biochemistry at Johns Hopkins, and Dr. Miller is a
Professor of Biochemistry, at the School of Public Health and Hygiene, Johns
Hopkins. In May 1990, the Company entered into a license agreement with Johns
Hopkins (the "Johns Hopkins Agreement" and the Ts'o/Miller Agreement are
together referred to as the "Ts'o/Miller/Hopkins Agreements") pursuant to which
Johns Hopkins granted the Company an exclusive license to its rights in certain
issued patents, patent applications and related technology developed as a result
of research conducted at Johns Hopkins by Drs. Ts'o and Miller and related to
the use of nucleic acids and obligonucleotides as pharmaceutical agents. In
addition, Johns Hopkins has granted the Company certain rights of first
negotiation to inventions made by Drs. Ts'o and Miller in their laboratories in
the area of oligonucleotides and inventions made by investigators at Johns
Hopkins in the course of research funded by the Company, which inventions are
not otherwise included in the Ts'o/Miller/Hopkins Agreements. The Company has
agreed to pay Dr. Ts'o, Dr. Miller and Johns Hopkins royalties on net sales of
products covered by the issued patents and patent applications, but not the
related technology, licensed to the Company under the Ts'o/Miller/Hopkins
Agreement. The Company has also agreed to pay certain minimum royalties prior to
commencement of commercial sales of such products, which royalties may be
credited under certain conditions against royalties payable on subsequent sales.
Subject to certain rights of early termination, the Ts'o/Miller/Hopkins
Agreements remain in effect for the life of the last-to-expire patent licensed
under the respective agreements or until abandonment of the last-pending patent
application licensed under the respective agreements.
As of December 31, 1996 the Company owed Johns Hopkins $627,271 of
which $200,000 is for the royalty payments due for 1995 and 1996. In February,
1997 the Company paid Johns Hopkins $100,000 towards the 1995 royalties due. The
Company is in the process of negotiations with Johns Hopkins as to the payment
of a portion of the balance in securities rather than cash.
In July 1991, a trust as to which Mr. Hale, a former Board member, has
shared voting and investment power acquired 25,000 shares of convertible
preferred stock of the Company (which converted into 12,500 shares of the
Company's Common Stock upon the closing of the Company's initial public offering
in December 1991) at a purchase price of $50,000, including a promissory note of
$49,975, secured by the shares of stock. The note, which bears interest at the
rate of 8% per annum (compounded annually), had an outstanding balance including
accrued interest of approximately $76,380 at December 31, 1996, and, as amended,
was forgiven by the Board of Directors on December 30, 1996 in return for the
cancellation of the 12,500 shares of Common Stock which secured the note. As of
March 5, 1997 this cancellation has not yet been effected.
In February 1991, in connection with the acquisition of JBL, the
Company assumed certain leases between JBL and Granada Associates and Sueldo
Associates, both of which are affiliates of Drs. Brown and Klem. Dr. Brown is
currently Vice President of the Company and President of JBL. Dr. Klem is Vice
President of the Company and Chairman of the Board of JBL. The current aggregate
monthly payment under such leases is approximately $32,000.
In January 1993, Genta Jago entered into a collaboration agreement with
Gensia for the development and commercialization of certain oral
controlled-release pharmaceutical products for treatment of cardiovascular
disease (the "Gensia Agreement"). Under the Gensia Agreement, Gensia is
responsible for clinical development, regulatory submissions and marketing, and
funds Genta Jago's formulation and preclinical development. Genta Jago received
$2.2 million, $1.9 million, $4.9 million and $2.0 million of research and
development funding in 1996, 1995, 1994 and 1993, respectively, pursuant to the
Gensia Agreement. Terms of the Gensia Agreement provide Gensia exclusive rights
to market and distribute the products in North America, Europe and certain other
territories. In connection with the Gensia Agreement and a collaboration between
Boehringer and Gensia to develop and co-promote Genta Jago's potential
nifedipine product, Genta Jago received $1.1 million in revenues in November
1994 and may receive additional milestone payments triggered upon regulatory
submissions and approvals, as well as royalties or profit sharing ranging from
10 to 21 percent of product sales, if any. Genta's Chairman and Chief Executive
Officer is a member of Gensia's Scientific Advisory Board. In October 1996
SkyePharma Plc signed a letter of intent with Gensia and Boehringer whereby
Brightstone, SkyePharma's U.S. subsidiary
-20-
<PAGE>
would assume Gensia's rights to develop an AB rated bio-equivalent version of
Pfizer's procardia XL in collaboration with Boehringer.
-21-
<PAGE>
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP as
the Company's independent auditors for the fiscal year ended December 31, 1997,
subject to ratification by the stockholders at the Annual Meeting. Ernst & Young
LLP has audited the Company's financial statements since the Company's inception
in February 1988. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting. They will have an opportunity to make a
statement, if they desire to do so, and are expected to be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL
THREE.
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STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 annual
meeting of stockholders of the Company must be received by the Company at the
offices of the Company, at 3550 General Atomics Court, San Diego, California
92121 no later than November 14, 1997 in order to be included in the proxy
statement and form of proxy relating to such annual meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
the Company's directors, executive officers and any persons holding more than
10% of the Company's Common Stock are required to report their initial ownership
of the Company's Common Stock and any subsequent changes in that ownership to
the SEC. Specific due dates for these reports have been established and the
Company is required to identify in this proxy statement those persons who failed
to timely file these reports. All of the filing requirements were satisfied
except for an Annual Statement on Form 5 for Robert Wang. In making this
disclosure, the Company has relied solely on written representations of its
directors and executive officers and copies of the reports that have been filed
with the SEC.
OTHER MATTERS
The Board of Directors knows of no other business that will be
presented at the Annual Meeting. If any other business is properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form will
be voted in accordance with the judgment of the persons voting the proxies.
Whether you intend to be present at the Annual Meeting or not, we urge
you to return your signed proxy promptly.
By order of the Board of Directors,
Thomas H. Adams
Chairman of the Board and
Chief Executive Officer
Dated: March 14, 1997
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EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
GENTA INCORPORATED
GENTA INCORPORATED, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Genta
Incorporated, resolutions were duly adopted setting forth a proposed amendment
of the Restated Certificate of Incorporation of the corporation, and declaring
that such amendment is advisable and that such amendment should be submitted to
the stockholders of the corporation for approval. The resolution setting forth
the proposed amendment is as follows:
RESOLVED, that the first paragraph of Section A of Article IV
of the Restated Certificate of Incorporation, as amended, of this corporation be
amended to substantially read as follows:
"A. Classes of Stock. The total number of shares of all
classes of capital stock which the corporation shall have authority to
issue is seventy-five million (75,000,000) of which seventy million
(70,000,000) shares of the par value of One Tenth of One Cent ($.001)
each shall be Common Stock (the "Common Stock") and Five Million
(5,000,000) shares of the par value of One Tenth of One Cent ($.001)
each shall be Preferred Stock (the "Preferred Stock"). At the time this
amendment becomes effective, each ten shares of the Common Stock, par
value of One Tenth of One Cent ($.001) per share, issued and
outstanding at such time shall be, and hereby are, reduced and
converted into one fully paid and nonassessable share of Common Stock,
par value of One Tenth of One Cent ($.001) per share, of the
corporation as herein authorized. Each outstanding stock certificate of
this corporation which immediately prior to the time this amendment
becomes effective represented one or more shares of Common Stock, par
value of One Tenth of One Cent ($.001) per share, shall thereafter
represent the number of whole shares of Common Stock, par value of One
Tenth of One Cent ($.001) per share, determined by dividing the number
of shares represented by such certificate immediately prior to the time
this amendment becomes effective by ten and rounding such number up to
the nearest whole integer. The amount of capital represented by the new
shares in the aggregate at the time this Certificate of Amendment
becomes effective shall be adjusted by the transfer of One Tenth of One
Cent ($.001) from the capital account of the Common Stock to the
additional paid in capital account for each new share issued (except
for new shares issued as the result of rounding up fractional shares in
which case no capital adjustment shall be made), such transfer to be
made at such time. The corporation shall not be required to issue or
deliver any fractional shares of Common Stock. There shall be
designated as capital in respect of such new shares an amount equal to
the aggregate par value of such shares. Upon surrender by a holder of
Common Stock of a certificate or certificates for Common Stock, par
value of One Tenth of One Cent ($.001), duly endorsed, at the office of
the corporation, the corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Common
Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock, par value of One
Tenth of One Cent ($.001) per share, to which such holder shall be
entitled as aforesaid."
SECOND: Thereafter, pursuant to resolutions of the corporation's Board
of Directors, the amendment was submitted to the stockholders of the corporation
for approval at a Meeting of Stockholders, and such meeting was called and held
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware. The necessary number of shares as required by statute were
voted in favor of the amendment.
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<PAGE>
THIRD: The said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said corporation has caused this
certificate to be signed by Thomas H. Adams, its Chairman of the Board, and by
Robert Wang, its Vice President, as of this ____ day of ________, 1997.
GENTA INCORPORATED
By ___________________________
Thomas H. Adams
Chairman of the Board
Attest:
- ------------------------------
Robert Wang
Vice President
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<PAGE>
GENTA INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON APRIL 4, 1997.
The undersigned stockholder of Genta Incorporated (the "Company")
acknowledges receipt of Notice of Annual Meeting of Stockholders and the
Stockholders' Proxy Statement each dated March 14, 1997 and the undersigned
revokes all prior proxies and appoints Thomas H. Adams , Robert Wang, or either
of them, proxies for the undersigned to vote all shares of Common Stock of the
Company which the undersigned would be entitled to vote at the Meeting of
Stockholders to be held at the Hyatt Regency, 3777 La Jolla Village Drive, La
Jolla, California at 11:00 a.m. on April 4, 1997 and any postponement or
adjournment thereof, and instructs said proxies to vote as follows:
1. APPROVAL FOR A ONE FOR TEN REVERSE SPLIT OF THE COMPANY'S
OUTSTANDING COMMON STOCK AND DECREASE IN THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS:
[ ] FOR the Class III nominee listed below
[ ] WITHHOLD AUTHORITY to vote for the Class III nominee listed below
Robert E. Klem, Ph.D.
3. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4 . In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR APPROVAL OF THE REVERSE
STOCK SPLIT AND REDUCTION IN THE NUMBER OF AUTHORIZED SHARES OF COMPANY COMMON
STOCK, FOR THE ELECTION OF THE CLASS III NOMINEE FOR DIRECTOR, AND FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
GENTA INCORPORATED
BOARD OF DIRECTORS PROXY
Meeting of Stockholders April 4, 1997
Dated :
--------------------------------------------
(Signature of Stockholder)
---------------------------------------------
(Signature of Stockholder)
Please sign exactly as your name or names appear hereon. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such. If shares are held jointly, each holder must sign.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
