SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.a-11(c) or ss. 240.a-12
Genta Incorporated
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
GENTA
3550 GENERAL ATOMICS COURT
SAN DIEGO, CA 92121
(619) 455-2700
June 22, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on July 14, 1998, at 11:00 a.m. at the Harborside Hyatt
Conference Center & Hotel, 101 Harborside Drive, Boston, Massachusetts.
Proposal One would permit the Company to effectuate a reverse stock
split of the Company's outstanding Common Stock to the extent deemed necessary
by the Board of Directors to permit Genta to meet the minimum bid price
requirement necessary to allow Genta's Common Stock to remain listed on the
Nasdaq Stock Market, Inc., among other things. FURTHERMORE, UNLESS THE REVERSE
STOCK SPLIT PROPOSAL IS APPROVED, THE COMPANY MIGHT HAVE INSUFFICIENT AUTHORIZED
BUT UNISSUED SHARES OF COMMON STOCK TO SATISFY THE CONVERSION INTO COMMON STOCK
OF ALL OUTSTANDING SERIES D PREFERRED STOCK. 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 to ensure that your
shares will be represented at the meeting. If you have any questions or need
assistance in voting your shares, please call our proxy solicitor, MacKenzie
Partners, Inc., at (800) 322- 2885 or (212) 929-5500 (call collect).
A copy of the Company's Form 10-K, as amended, for the year ended
December 31, 1997, is enclosed.
The Board of Directors and Management look forward to seeing you at the
meeting.
Sincerely yours,
/s/ Kenneth G. Kasses, Ph.D.
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Kenneth G. Kasses, Ph.D.
President and
Chief Executive Officer
<PAGE>
GENTA INCORPORATED
Notice of Annual Meeting of Stockholders
to be held July 14, 1998
The Annual Meeting of Stockholders ("Annual Meeting") of Genta
Incorporated (the "Company") will be held at the Harborside Hyatt Conference
Center & Hotel, 101 Harborside Drive, Boston, Massachusetts on July 14, 1998 at
11:00 a.m., for the following purposes:
1. To consider and vote upon alternate proposals to amend the
Company's Restated Certificate of Incorporation, as amended, to
effectuate a two for three, one for two, two for five, one for
three, one for four, one for five, one for seven or one for ten
reverse stock split (if approved, shares of outstanding Common
Stock will be converted into a lesser number of shares of Common
Stock and the conversion ratios of the outstanding shares of
Preferred Stock will be commensurately adjusted).
2. To consider and vote upon a proposal to amend the Company's
Restated Certificate of Incorporation, as amended, to remove the
requirement that stockholder action be taken at a meeting.
3. To consider and vote upon a proposal to amend the Company's
Restated Certificate of Incorporation, as amended, to remove the
classification of the Board of Directors.
4. To elect four Class I directors.
5. To adopt the 1998 Stock Incentive Plan and to approve grants of
options under such plan.
6. To adopt the Non-Employee Directors' 1998 Stock Option Plan and
to approve grants of options under such plan.
7. To transact such other business as may properly come before the
Annual Meeting and any adjournment of the Annual Meeting.
The Executive Committee of the Board of Directors has fixed the close of
business on June 8, 1998 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, during the ten days before the meeting.
June 22, 1998 By Order of the Board of Directors,
/s/ Kenneth G. Kasses, Ph.D.
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Kenneth G. Kasses, Ph.D.
President 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
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PROXY STATEMENT
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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 HARBORSIDE HYATT CONFERENCE CENTER & HOTEL,
101 HARBORSIDE DRIVE, BOSTON, MASSACHUSETTS ON JULY 14, 1998 AT 11:00 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 each proposal described in this Proxy Statement.
Stockholders of record of the Company's Common Stock (the "Common
Stock") and the Series D Convertible Preferred Stock ("Series D Preferred
Stock") at the close of business on June 8, 1998 (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 5,752,116 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 226,995 shares of Series D Preferred Stock
outstanding and entitled to vote. The Series D Preferred Stock is entitled to
vote together with the Common Stock on an as-converted basis (each share of the
Series D Preferred Stock has the equivalent vote of approximately 105.96 shares
of Common Stock.) In addition, as of the close of business on the Record Date,
the Company had 451,100 shares of Series A Convertible Preferred Stock (the
"Series A Preferred Stock") outstanding and entitled to notice of the Annual
Meeting. Holders of the Series A Preferred Stock, however, are not entitled to
vote at the Annual Meeting.
Approval of Proposal One will require the affirmative vote of a majority
of the aggregate voting power of the shares of outstanding Common Stock and
Series D Preferred Stock, voting together as a single class. Approval of
Proposals Two and Three will require the affirmative vote of the holders of at
least sixty-six and two-thirds percent of the aggregate voting power of all of
the then outstanding shares of Common Stock and Series D Preferred Stock, voting
together as a single class. Approval of Proposals Five and Six and any other
matters submitted for stockholder approval at this Annual Meeting will require
the affirmative vote of a majority of the aggregate voting power of the shares
of Common Stock and Series D Preferred Stock, present in person or represented
by proxy and entitled to vote on each such matter, voting together as a single
class. Directors are elected by a plurality vote of the aggregate voting power
of the shares of Common Stock and Series D Preferred Stock, present in person or
represented by proxy, voting together as a single class. For the election of
directors, votes may be cast in favor of or withheld; votes that are withheld
will be excluded entirely from the vote and will have no effect. Abstentions
with respect to any other matter are treated as shares present or represented
and entitled to vote on that matter and thus have the same effect as negative
votes.
Abstentions and broker non-votes are treated as shares that are present
and entitled to vote for purposes of determining the presence or absence of a
quorum. However, broker non-votes will not be counted for the purposes of
determining the number of votes cast with respect to the particular proposal on
which the broker has expressly not voted. Therefore, broker non-votes will not
affect the determination as to whether the requisite majority of votes cast has
been obtained with respect to a particular proposal.
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<PAGE>
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. ("MacKenzie") to assist in the solicitation of
proxies for an estimated cost not to exceed $12,000, plus reimbursement of
reasonable out-of-pocket expenses. MacKenzie will solicit proxies from
individuals, brokers, banks, nominees and other institutional holders.
Approximately 20 persons will be used by MacKenzie 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 proxy materials to the beneficial owners of
the Company's Common Stock, Series A and Series D Preferred Stock, and obtaining
voting instructions from beneficial owners of the Company's Common Stock and
Series D Preferred Stock.
This Proxy Statement and the accompanying form of proxy, together with a
copy of the Company's Form 10-K, as amended, for the year ended December 31,
1997, are being mailed to stockholders on or about June 22, 1998.
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 OR SERIES D PREFERRED 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 OF REVERSE STOCK SPLITS OF THE
COMPANY'S OUTSTANDING COMMON STOCK
The Company's Board of Directors has unanimously approved, and
recommended that the stockholders of the Company approve, amendments to the
Company's Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), to effect a two for three, one for two, two for five, one for
three, one for four, one for five, one for seven and one for ten reverse stock
split, respectively, of the Company's outstanding Common Stock (each a "Reverse
Stock Split" and, collectively, the "Reverse Stock Splits"). If approved by the
stockholders, a Reverse Stock Split may be effected, as described below.
IF THE REVERSE STOCK SPLITS ARE APPROVED BY THE STOCKHOLDERS OF THE
COMPANY AT THE ANNUAL MEETING, A REVERSE STOCK SPLIT WILL BE EFFECTED ONLY UPON
A DETERMINATION BY THE BOARD OF DIRECTORS THAT A REVERSE STOCK SPLIT IS IN THE
BEST INTERESTS OF THE COMPANY AND THE STOCKHOLDERS. IN CONNECTION WITH ANY SUCH
DETERMINATION BY THE BOARD OF DIRECTORS, THE BOARD WILL ALSO SELECT, IN ITS
DISCRETION, ONE OF THE REVERSE STOCK SPLITS BASED ON ITS DETERMINATION OF HOW
MANY SHARES OF COMMON STOCK ARE LIKELY TO BECOME ISSUABLE PURSUANT TO EXISTING
INSTRUMENTS AND AGREEMENTS, ON ITS DETERMINATION OF WHICH REVERSE STOCK SPLIT
WOULD RESULT IN THE GREATEST MARKETABILITY AND LIQUIDITY OF THE COMMON STOCK, ON
PREVAILING MARKET CONDITIONS, ON THE LIKELY EFFECT OF SUCH REVERSE STOCK SPLIT
ON THE MARKET PRICE OF THE COMMON STOCK AND ON OTHER RELEVANT FACTORS. THE
REMAINING ALTERNATIVE REVERSE STOCK SPLITS WOULD BE ABANDONED BY THE BOARD
PURSUANT TO SECTION 242(C) OF THE DELAWARE GENERAL CORPORATION LAW (THE "DGCL")
WITHOUT FURTHER ACTION BY THE STOCKHOLDERS OF THE COMPANY.
Stockholders may approve or reject the Reverse Stock Splits in whole but
not in part. If approved by the stockholders of the Company, a Reverse Stock
Split would become effective on any date (the "Effective Date") selected by the
Board of Directors on or prior to the Company's next Annual Meeting of
Stockholders. If no Reverse Stock Split is effected by such date, the Board of
Directors will take action to abandon all of the Reverse Stock Splits pursuant
to Section 242(c) of the DGCL. The procedures for consummation of the Reverse
Stock Splits are set forth in Exhibit A hereto.
The terms of the Company's outstanding warrants, options and convertible
preferred stocks provide that, upon any Reverse Stock Split, their respective
exercise or conversion prices will be commensurately adjusted and the number of
shares of Common Stock issuable upon exercise or conversion of such instruments
immediately following a Reverse Stock Split will equal the number of shares of
Common Stock that the respective holders of such instruments would have held
following the Reverse Stock Split if they had exercised for, or converted into,
Common Stock immediately prior to such Reverse Stock Split.
ADVANTAGES
The Board believes that a decrease in the number of shares of Common
Stock outstanding without any material alteration of the proportionate economic
interest in the Company represented by individual shareholdings may increase the
trading price of such shares to a price more appropriate for a listed security,
although no assurance can be given that the market price of the Common Stock
will rise in proportion to the reduction in the number of outstanding shares
resulting from any Reverse Stock Split or at all or remain at such a price for
any significant period of time.
The Nasdaq Stock Market, Inc. ("Nasdaq") requires that listed companies
maintain a minimum bid price. See "Threat of Nasdaq Delisting" below. The Board
of Directors believes that such a delisting could adversely affect the ability
of the Company to attract new investors. In addition, the Company has submitted
applications to the Pacific Exchange and the Boston Stock Exchange and plans to
submit an application to the Philadelphia Stock Exchange. Such exchanges have
minimum bid price per share (or in some cases closing price per share)
requirements for initial listing of $1.00 for the Pacific Exchange, $2.00 for
the Boston Stock Exchange and $3.00 for the Philadelphia Stock Exchange. These
Reverse Stock Split proposals are designed to establish a stock price
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<PAGE>
to meet the Nasdaq and Pacific Exchange requirement and, if deemed advisable by
the Board of Directors, the minimum price requirement of some or all of these
other stock exchanges.
In addition, the Certificate of Designations for the Series D Preferred
Stock provides that the conversion price of the Series D Preferred Stock in
effect on June 29, 1998 (the "Reset Date") be adjusted and reset effective as of
the Reset Date if the average closing bid price of the Common Stock for the 20
consecutive trading days immediately preceding the Reset Date (the "12-month
Trading Price") is less than 140% of the then applicable Conversion Price (a
"Reset Event"). The Company has provided the holders of the Series D Preferred
Stock with the opportunity to agree, conditioned on acceptance by a majority, to
extend the Reset Date to January 29, 1999, to waive the SEC registration
requirement, coupled with removal of the "lock-up" provisions (which would have
prevented the sale of up to 75% of their securities for a nine-month period
following the effectiveness of the Registration Statement) and to receive
additional warrants ("Consent Warrants") which, if all of the holders of Series
D Preferred Stock accepted, would result in the issuance of additional warrants
to purchase, at $0.94375 per share, 807,900 shares of Common Stock, subject to
certain antidilution adjustments, exercisable until June 29, 2002.
Upon the occurrence of a Reset Event, the then applicable Conversion
Price will be reduced to be equal to the greater of (i) the 12-month Trading
Price divided by 1.40 and (ii) 25% of the then applicable Conversion Price. Each
share of Series D Preferred Stock is presently convertible into approximately
105.96 shares of Common Stock. Upon the occurrence of a Reset Event, up to an
additional approximately 85 million shares of Common Stock could be issuable
upon conversion of Series D Preferred Stock (including shares of Series D
Preferred Stock issuable upon exercise of Unit Purchase Warrants (as defined
below)). In the event there is a Reset Event, the Company may not have enough
authorized but unissued shares of Common Stock to satisfy the conversion of all
outstanding shares of Series D Preferred Stock unless a sufficient Reverse Stock
Split is effected.
The increase in the portion of authorized shares that would be unissued
after a Reverse Stock Split (the "Increased Available Portion of Shares") could
be used for any proper corporate purpose approved by the Board of Directors of
the Company. The Increased Available Portion of Shares will provide the Company
with increased flexibility to issue additional shares in connection with future
financings, for employee benefit plans, in connection with acquisitions by the
Company, upon the occurrence of a Reset Event as described in the preceding
paragraph, to issue Consent Warrants and to satisfy any requirement to issue
Penalty Warrants (as defined and described under "Capitalization" below.) In
addition, a Reverse Stock Split would increase the per-share conversion price of
Series D Preferred Stock, rendering fewer shares issuable upon conversion
thereof. This further alleviates the possibility of there being an insufficient
number of shares of Common Stock available to satisfy the conversion obligation
upon the occurrence of a Reset Event.
DISADVANTAGES
Because a Reverse Stock Split will result in the Increased Available
Portion of Shares, the Reverse Stock Split 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 Company's Amended and Restated
Bylaws (the "Bylaws") 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 could be issued by the
Company, without further stockholder approval, which could result in dilution to
the holders of Common Stock.
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<PAGE>
CAPITALIZATION
As of June 8, 1998, the Company had outstanding: (i) 5,752,116 shares of
Common Stock; (ii) 451,100 shares of Series A Preferred Stock which were
convertible into an aggregate of approximately 3,287,304 shares of Common Stock
at a conversion price of $8.27 per share; (iii) 226,995 shares of Series D
Preferred Stock which were convertible into an aggregate of approximately
24,052,450 shares of Common Stock at a conversion price of $0.94375 per share;
(iv) warrants ("Series A Warrants") to purchase an aggregate of approximately
675,966 shares of Common Stock at an exercise price of $9.32 per share; (v)
warrants ("Class D Warrants") to purchase an aggregate of approximately 807,900
shares of Common Stock at an exercise price of $0.94375 per share; (vi) warrants
("Bridge Warrants") to purchase an aggregate of 6,357,616 shares of Common Stock
at an exercise price of $0.471875 per share; (vii) warrants ("Line of Credit
Warrants") to purchase an aggregate of 50,000 shares of Common Stock at an
exercise price of $2.50 per share; (viii) warrants to purchase an aggregate of
95,768 shares of Common Stock at various exercise prices between approximately
$13 and $21 per share; (ix) options to purchase an aggregate of 109,552 shares
of Common Stock; and (x) warrants ("Unit Purchase Warrants") to purchase an
aggregate of 40,395 shares of Series D Preferred Stock and 201,975 Class D
Warrants, which in turn are respectively convertible into, and exercisable for,
an aggregate of 4,482,240 shares of Common Stock at $0.94375 per share. Such
exercise and conversion prices, and, in the case of warrants, numbers of shares,
are subject to adjustment upon the occurrence of certain events. Furthermore,
upon a Reset Event, up to an additional approximately 85 million shares of
Common Stock might be issuable upon conversion of the Series D Preferred Stock
(including the Series D Preferred Stock issuable upon exercise of the Unit
Purchase Warrants) as a result of the reduction in the conversion price thereof.
Pursuant to the Note and Warrant Purchase Agreement dated as of January 28, 1997
(the "Note and Warrant Purchase Agreement") between the Company, the Aries
Domestic Fund, L.P. ("Aries Domestic") and The Aries Fund, a Cayman Islands
Trust ("Aries Trust" and, together with Aries Domestic, the "Aries Funds"), a
number of additional Bridge Warrants ("Penalty Warrants") equal to 1.5% of the
number of Bridge Warrants then held by the Aries Funds shall be issued to the
Aries Funds for each day beyond 30 days after consummation of a Qualified
Offering (as defined in the Note and Warrant Purchase Agreement, and which date
was June 30, 1997) that a shelf registration statement covering the Common Stock
underlying the securities purchased pursuant to the Note and Warrant Purchase
Agreement is not filed with the Securities and Exchange Commission (the "SEC")
and for each day beyond 210 days after the closing date of the investment
contemplated by the Note and Warrant Purchase Agreement that such shelf
registration statement is not declared effective by the SEC. The Company filed
such shelf registration statement with the SEC on September 9, 1997; however,
the Company has to date been unable to have such shelf registration statement
declared effective by the SEC. As a result, the Company could be obligated to
issue Penalty Warrants to the Aries Funds. The Aries Funds have not, to date,
requested that the Company issue such Penalty Warrants. The Company and the
Aries Funds are currently conducting negotiations to determine whether, and to
what extent, Penalty Warrants will be issued.
THREAT OF NASDAQ DELISTING
On various dates since December 10, 1997, the minimum bid price of the
Company's Common Stock has been less than $1.00 per share. The rules of the
Nasdaq SmallCap Market require issuers to maintain a minimum bid price for
continued inclusion of $1.00 per share of listed securities. Pursuant to the
Nasdaq's Marketplace Rule 4310(c)(8)(B), a failure to meet the minimum bid price
requirement for continued inclusion shall be deemed to exist if the relevant bid
price remains under $1.00 for a period of 30 consecutive business days. The
Company believes that, if the Reverse Stock Splits are approved, it can continue
to meet these requirements; however, there can be no assurance that approval of
the Reverse Stock Splits will succeed in securing a bid price for the Company's
Common Stock of at least $1.00 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 Stock Splits are approved by the Company's stockholders,
the Company will instruct its transfer agent to serve as its exchange agent (the
"Exchange Agent") and to act for holders of Common Stock in implementing the
exchange of their certificates.
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<PAGE>
Commencing on the Effective Date of a Reverse Stock Split, stockholders
will be notified and requested to surrender their certificates representing
shares of Common Stock to the Exchange Agent in exchange for certificates
representing post-Reverse Stock Split Common Stock. Shares of new Common Stock
will be issued in exchange for presently issued and outstanding shares of Common
Stock in the applicable ratio selected by the Board of Directors. 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 post-Reverse Stock Split Common Stock.
TREATMENT OF FRACTIONAL SHARES
No scrip or fractional certificates will be issued in connection with a
Reverse Stock Split. Stockholders who would otherwise be entitled to receive
fractional shares because they hold a number of shares of Common Stock not
evenly divisible will be entitled, upon surrender to the Exchange Agent of
certificates representing such shares, to receive one additional share of Common
Stock in exchange for any fractional share to which they would otherwise be
entitled. If more than one certificate shall be surrendered at one time for the
account of the same stockholder, the number of full shares of Common Stock to
which such stockholder shall be entitled shall be computed on the basis of the
aggregate number of shares represented by the certificates so surrendered. In
the event that the Company's transfer agent determines that a holder of
certificates has not tendered all his certificates for exchange, the transfer
agent shall carry forward any fractional share until all certificates of that
holder have been presented for exchange such that rounding up for fractional
shares to any one person shall not exceed one share. As a result of a Reverse
Stock Split, stockholders who now own "round lots" may hold "odd lots" after
such Reverse Stock Split and, as a result, 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 Splits should not result in the recognition of gain or
loss. The holding period of the shares of post-Reverse Stock Split Common Stock
will include the stockholders' respective holding periods for the shares of
pre-Reverse Stock Split Common Stock exchanged therefor, provided that the
shares of Common Stock were held as a capital asset. The adjusted basis of the
shares of post-Reverse Stock Split Common Stock will be the same as the adjusted
basis of the Common Stock exchanged therefor.
Although not free from doubt, the above treatment should also apply with
respect to additional shares received for fractional shares. However, it is
possible that the receipt of additional shares could be wholly or partly
taxable. Holders should consult with their own tax advisors.
NO DISSENTER'S RIGHTS
Under Delaware law, stockholders are not entitled to dissenter's rights
of appraisal with respect to the Reverse Stock Splits.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE.
Approval of Proposal One will require the affirmative vote of a majority of the
aggregate voting power of the shares of outstanding Common Stock and Series D
Preferred Stock, voting together as a single class.
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PROPOSAL TWO
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO REMOVE
THE STOCKHOLDER MEETING REQUIREMENT
The Board has determined that the Certificate of Incorporation should be
amended to eliminate the requirement that stockholder action be taken at a
meeting, and has unanimously voted to recommend such amendment to the
stockholders. If the proposed amendment is approved, the requirement that
stockholder action be taken at a meeting will be eliminated and any future
action that currently must be taken at an annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote if a written consent setting forth the action is signed by the holders of
outstanding stock having not less than the minimum number of votes necessary to
authorize the action at a meeting at which all the shares entitled to vote on
the action were present and voted.
Article XI of the Certificate of Incorporation currently provides as
follows:
No action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting and
the power of stockholders to consent in writing, without a meeting, to
the taking of any action is specifically denied. Special meetings of the
stockholders of the corporation may be called only by the Chairman of
the Board or the Chief Executive Officer of the corporation or by a
resolution adopted by the affirmative vote of a majority of the Board of
Directors.
If the proposed amendment is approved, the first sentence of Article XI
of the Certificate of Incorporation would be deleted.
Section 228 of the DGCL states that unless a corporation's certificate
of incorporation provides otherwise, any action required to be taken, or any
action that may be taken, at any annual or special meeting of stockholders, may
be taken without a meeting, without prior notice and without a vote if a written
consent setting forth the action to be taken is signed by the holders of
outstanding stock having not less than the minimum number of votes necessary to
authorize the action at a meeting at which all the shares entitled to vote
thereon were present and voted. Article XI of the Certificate of Incorporation
presently provides that stockholders of the Company may not take action by
written consent, but must take any actions at a duly called annual or special
meeting. The deletion of the provisions of Article XI of the Certificate of
Incorporation relating to the requirement that stockholder action be taken at a
meeting is intended to remove any express provisions therein requiring that
stockholder action be taken at a meeting. The procedures for consummation of the
removal of the stockholder meeting requirement are set forth in Exhibit B
hereto.
The Company believes that the delay and unnecessary expense involved in
holding such meetings is unwarranted if the holders of sufficient votes to adopt
the proposed action are in favor of the action. The Company does intend to
continue to hold annual meetings of stockholders. Accordingly, the Company now
proposes to amend its Certificate of Incorporation to permit stockholders to
take action by written consent in lieu of a meeting.
If Proposal Two is approved, the Company will file a certificate with
the Secretary of State of the State of Delaware reflecting the deletion of the
first sentence of Article XI of the Certificate of Incorporation, such deletion
to become effective on the filing thereof. Furthermore, the Board of Directors
will amend Section Eleven of Article I of the Bylaws to remove the requirement
that stockholder action be taken at a meeting from the Bylaws.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL TWO.
Approval of Proposal Two will require the affirmative vote of the holders of at
least sixty-six and two-thirds percent of the aggregate voting power of all of
the then outstanding shares of Common Stock and Series D Preferred Stock, voting
together as a single class.
- 7 -
<PAGE>
PROPOSAL THREE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO ELIMINATE
THE CLASSIFICATION OF THE BOARD OF DIRECTORS
The Board has determined that the Certificate of Incorporation should be
amended to eliminate the classification of the Board and to provide for the
annual election of all directors, and has unanimously voted to recommend such
amendment to the stockholders. If the proposed amendment is approved, the
classified Board will be eliminated, the current term of office of each director
will end at the Annual Meeting in 1999 and all directors will thereafter be
elected for one-year terms at each annual meeting of stockholders.
Pursuant to the Certificate of Incorporation, the Board is divided into
three classes with staggered three-year terms and not more than one class of
directors is elected at any annual meeting of stockholders. The proposed
amendment to the Certificate of Incorporation would eliminate the three classes
with their staggered three-year terms, as described below, and provide for the
annual election of all directors.
Proponents of classified boards of directors believe that a classified
board helps the board of directors maintain a greater continuity of experience
because the majority of directors at any given time will have experience with
the business affairs and operations of the company. This continuity may assist
the company in long-term strategic planning. Additionally, proponents argue that
a classified board reduces the possibility of a sudden change in majority
control of the board of directors; in the event of a hostile takeover attempt, a
classified board may encourage a person seeking control of the company to
initiate arm's-length discussions with management and the board, who are in a
position to negotiate a more favorable transaction for stockholders.
However, the Board believes that a classified board of directors limits
the ability of stockholders to elect directors and to exercise influence over
the Company. Therefore, the Board believes that it is in the best interest of
the Company and its stockholders to eliminate the classified Board of Directors
thereby permitting the Company's stockholders to elect all members of the Board
of Directors annually. The Board further believes that this will promote greater
accountability of each director to all stockholders and will allow the Company's
stockholders an opportunity annually to register their views on the collective
performance of the Board of Directors and the performance of each director
individually. In addition, the Board believes that the Company should no longer
retain the current Board structure because of the negative perception among many
potential investors and investor groups concerning staggered boards in general.
Article X of the Certificate of Incorporation currently provides as
follows:
The Board of Directors shall be divided into three classes,
designated Class I, Class II and Class III, as nearly equal in number as
possible, and the term of office of directors of one class shall expire
at each annual meeting of stockholders, and in all cases as to each
director until such director's successor shall be elected and shall
qualify or until such director's earlier resignation, removal from
office, death or incapacity. Additional directorships resulting from an
increase in number of directors shall be apportioned among the classes
as equally as possible. The initial term of office of directors of Class
I shall expire at the annual meeting of stockholders in 1995; that of
Class II shall expire at the annual meeting in 1996; and that of Class
III shall expire at the annual meeting in 1997; and in all cases as to
each director until such director's successor shall be elected and shall
qualify or until such director's earlier resignation, removal from
office, death or incapacity. At each annual meeting of stockholders the
number of directors equal to the number of directors of the class whose
term expires at the time of such meeting (or, if less, the number of
directors properly nominated and qualified for election) shall be
elected to hold office until the third succeeding annual meeting of
stockholders after their election.
If the proposed amendment is approved, Article X of the Certificate of
Incorporation would be deleted and replaced with the following:
- 8 -
<PAGE>
The number of directors which shall constitute the whole Board of
Directors of the corporation shall be determined in the by-laws as
provided therein. The directors of the corporation shall be elected by
the stockholders entitled to vote thereon at each annual meeting of
stockholders and shall hold office until the next annual meeting of
stockholders and until their respective successors shall have been
elected and qualified, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. The term of office
of each director in office on July 14, 1998 shall expire at the time of
the opening of the polls for the election of directors at the next
annual meeting of stockholders of the corporation.
Section 141(d) of the DGCL requires that a corporation desiring to
classify its board of directors must expressly provide for such classification
in either its certificate of incorporation or its by-laws. The deletion of the
provisions of Article X relating to the classification of the Board is intended
to remove any express provision for the classification of the Board, thereby
removing the classification of the Board. If the classified Board of Directors
is eliminated, Delaware law provides that any director or the entire Board may
be removed, with or without cause, by the holders of a majority of the shares of
the Company entitled to vote for the election of directors.
If Proposal Three is approved, the Company will file a certificate with
the Secretary of State of the State of Delaware reflecting the changes resulting
from the amendment, such changes to become effective on the filing thereof.
Thereafter, the terms of the directors currently serving in Class I whose terms
would otherwise expire at the 2001 Annual Meeting of Stockholders and the terms
of directors serving in Class III whose terms would otherwise expire at the 2000
Annual Meeting of Stockholders will have their terms as directors expire at the
1999 Annual Meeting of Stockholders. All current members of the Board of
Directors and all current nominees for director have agreed to shorten their
terms as directors to expire at the date of the next Annual Meeting of
Stockholders. Accordingly, if Proposal Three is approved, commencing with the
next Annual Meeting of Stockholders, the entire Board of Directors of the
Company will be elected annually. The procedures for consummation of the
declassification of the Board of Directors are set forth in Exhibit C hereto.
The proposal to eliminate the classification of the Board of Directors
is neither the result of any effort to unseat incumbent directors, nor, to the
knowledge of the Board of Directors, any effort by any person to take control of
the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL THREE.
Approval of Proposal Three will require the affirmative vote of the holders of
at least sixty-six and two-thirds percent of the aggregate voting power of all
of the then outstanding shares of Common Stock and Series D Preferred Stock,
voting together as a single class.
- 9 -
<PAGE>
PROPOSAL FOUR
ELECTION OF CLASS I DIRECTORS
The Company has three classes of directors (each a "Class") serving
staggered three-year terms. Each Class consists of four directors. Currently,
there is one director vacancy in Class II and one director vacancy in Class III.
If Proposal Three is approved by the stockholders, four Class I directors are to
be elected at the Annual Meeting for a term of one year expiring at the next
Annual Meeting or until such directors' successors shall have been elected and
qualified, and the other directors of the Company will continue in office until
the next Annual Meeting. If Proposal Three is not approved by the stockholders,
four Class I directors are to be elected at the Annual Meeting for a term of
three years expiring at the Annual Meeting in 2001 or until such directors'
successors shall have been elected and qualified, and the other directors of the
Company will continue in office for their existing terms, which expire in 1999
and 2000 for Class II and Class III 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 Kenneth G. Kasses, Ph.D., Peter Salomon, M.D., Andrew J. Stein, and Harlan J.
Wakoff, who are currently members of the Board of Directors of the Company and
Class I Directors. In the event such nominees become unable or unwilling to
accept nomination or election, the shares represented by the enclosed proxy will
be voted for the election of such persons as the Board of Directors may select.
The Board of Directors has no reason to believe that any of such nominees will
be unable or unwilling to serve.
Set forth below is certain information regarding the Company's directors
and executive officers, including information furnished by them as to their
principal occupations and business experience for the past five years, certain
directorships held by each, their respective ages as of June 8, 1998 and the
year in which each became a director of the Company. Each director has served
continuously with the Company since his first election as indicated below.
DIRECTORS
Name Age
CLASS I
Kenneth G. Kasses, Ph.D./1/.................................................53
Peter Salomon, M.D..........................................................38
Andrew J. Stein/2/..........................................................53
Harlan J. Wakoff/3/.........................................................31
CLASS II
Glenn L. Cooper, M.D./1/, /2/...............................................45
Lawrence J. Kessel, M.D./3/.................................................44
Bobby W. Sandage, Jr., Ph.D./3/.............................................44
CLASS III
Donald G. Drapkin/1/........................................................50
Michael S. Weiss/1/,/2/.....................................................32
Robert E. Klem, Ph.D........................................................52
/1/ Member of the Company's Executive Committee formed by resolution of the
Board of Directors on January 29, 1998.
/2/ Member of the Company's Compensation Committee formed by resolution of the
Board of Directors on January 29, 1998.
/3/ Member of the Company's Audit Committee formed by resolution of the Board of
Directors on January 29, 1998.
- 10 -
<PAGE>
Kenneth G. Kasses, Ph.D., has been Genta's President and Chief Executive
Officer since October 1997 and a member of the Board of Directors since
September 1997. From 1991-1997, Dr. Kasses was affiliated with the
Radiopharmaceutical Division of The Dupont Merck Pharmaceutical Company, serving
as Senior Vice President and General Manager until 1994 when he was appointed
President. From 1988 through 1990, he served as Director, Business Development
and Planning, for the Medical Products Department of E.I. DuPont de Nemours &
Company, Inc. In that capacity he played a key role in the formation of The
Dupont Merck Pharmaceutical Company, a joint venture between DuPont and Merck
and Co., Inc. Prior to that he served as Director, U.S. Pharmaceuticals, for
DuPont from 1987-1988 and as President of DuPont Critical Care from 1986-1987.
Prior to this, Dr. Kasses held a variety of executive positions from 1973-1986
at American Critical Care, CIBA-GEIGY Pharmaceuticals, Ayerst Laboratories and
Block Drug Company. Dr. Kasses received a B.S. in biology from Dickinson College
in 1966 and a Ph.D. in pharmacology from New York Medical College in 1974.
Peter Salomon, M.D., FACG, has been a member of the Genta Board of
Directors since September 1997. His principal employment during the last five
years has been as a Board Certified Gastroenterologist in private practice in
Boca Raton and Delray Beach, Florida with Gastroenterology Consultants of South
Florida. In addition, he is an expert consultant for several insurance companies
and law firms in the areas of gastroenterology and liver diseases. Dr. Salomon
graduated magna cum laude from New York University in 1981. He received his
Medical Degree from New York University in 1985. Following this he received his
training in Internal Medicine and Gastroenterology at The Mount Sinai Hospital
in New York where he also held a grant from the Crohn's and Colitis Foundation
to perform research in inflammatory bowel disease. He was also selected to
receive advanced training in therapeutic endoscopic techniques at Aarhus
Kommunehospital in Aarhus, Denmark. He has been elected to the Phi Beta Kappa
society and is a member of MENSA. He has done extensive research in the field of
gastroimmunology and has published numerous articles and book chapters in
various leading scientific journals and textbooks. He is also currently a
director of PolaRx, a privately-held biotechnology firm.
Andrew J. Stein has been a member of the Genta Board of Directors since
September 1997. In addition, he is President of Benake Corporation, Equity
Partner in Metromedia Asia and a member of the Board of Directors of News
Communications. Mr. Stein is also a member of the New York State Commission of
Privatization and the New York State Research Council on Privatization. He was
the Chairman of the Commission for the Study of Youth Crime and Violence and
Reform of the Juvenile Justice System from 1993-1995. From 1986 to 1993 he was
President of the Council, New York City. From 1978 to 1985 he was President of
the Borough of Manhattan and from 1969 to 1977 he was a member of the New York
State Assembly, where he served on the Health Committee and was appointed by
Gov. Nelson Rockefeller as Chairman of the Commission on Living Costs and the
Economy, which reformed the nursing home industry in New York State. He was also
Chairman of the New York City Commission on Public Information and
Communication, and has been a Trustee of the New York City Employees Retirement
System and an ex officio member of The Museum of The City of New York, The New
York Public Library, The Metropolitan Museum of Art and The Queens Borough
Public Library.
Harlan J. Wakoff has been a member of the Genta Board of Directors since
September 1997. He is also the Chairman of the Company's Audit Committee. Mr.
Wakoff has been a Vice President of the Media and Entertainment Investment
Banking Group at Furman Selz L.L.C. since June 1996. He was previously
affiliated with the investment banking groups at NatWest Markets from January
1995 to June 1996 and Kidder Peabody & Co. from August 1993 to January 1995. Mr.
Wakoff received an M.B.A. from The Wharton School at the University of
Pennsylvania in May 1993 and a B.S. in accounting, summa cum laude, from the
State University of New York at Albany.
Glenn L. Cooper, M.D., has been a member of the Genta Board of Directors
since September 1997. He is also the Chairman of the Company's Compensation
Committee. He has also been President, Chief Executive Officer and a director of
Interneuron Pharmaceuticals, Inc. since May 1993. From September 1992 to June
1994 Dr. Cooper was President, Chief Executive Officer and a director of
Progenitor, Inc. and is currently Chairman at Progenitor. He is also Chairman of
Intercardia, Inc., Chairman and Acting President of Transcell Technologies, Inc.
and a director of InterNutria, Inc., all of which are subsidiaries of
Interneuron. In addition, Dr. Cooper serves as a director of Aeolus
Pharmaceuticals, Inc., a subsidiary of Intercardia. Dr. Cooper also served as
President and Chief Executive Officer of Intercardia from March 1994 to January
1995. Prior to joining Progenitor, Dr. Cooper
- 11 -
<PAGE>
was Executive Vice President and Chief Operating Officer of Sphinx
Pharmaceuticals Corporation since August 1990. Dr. Cooper had been associated
with Eli Lilly since 1985, most recently, from June 1987 to July 1990, as
Director, Clinical Research, Europe, of Lilly Research Center Limited; from
October 1986 to May 1987 as International Medical Advisor, International
Research Coordination of Lilly Research Laboratories; and from June 1985 to
September 1986 as Medical Advisor, Regulatory Affairs, Chemotherapy Division at
Lilly Research Laboratories. Dr. Cooper received his M.D. from Tufts University
School of Medicine, performed his postdoctoral training in Internal Medicine and
Infectious Diseases at the New England Deaconess Hospital and Massachusetts
General Hospital and is a magna cum laude graduate of Harvard College.
Lawrence J. Kessel, M.D., FACP, CMD, has been a member of the Genta
Board of Directors since September 1997. Dr. Kessel is a physician in private
practice in Philadelphia and a diplomate in both internal medicine and geriatric
medicine, as well as a Fellow of the American College of Physicians and a
Certified Medical Director of Long-Term Nursing Facilities. Dr. Kessel is
affiliated with Chestnut Hill Hospital, Roxborough Memorial Hospital and
Chestnut Hill Rehabilitation Hospital and serves as a clinical instructor at
Jefferson Medical College. He is also a medical director at Integrated Health
Services (IHS) and a staff physician at Fairview Paper Mill, Green Acres Ivy
Hill and St. Joseph's Villa. Dr. Kessel is a director of PolaRx, a
privately-held biotechnology company.
Bobby W. Sandage, Jr., Ph.D., has been a member of the Genta Board of
Directors since September 1997. Dr. Sandage joined Interneuron Pharmaceuticals,
Inc. in November 1991 as Vice President, Medical and Scientific Affairs. Since
December 1995 he has been Executive Vice President, Research and Development and
Chief Scientific Officer of Interneuron. From February 1989 to November 1991 he
held management positions in the Cardiovascular Research and Development
division of The DuPont Merck Pharmaceutical Company. From May 1985 to February
1989 he was affiliated with the Medical Department of DuPont Critical Care. Dr.
Sandage is an adjunct professor in the Department of Pharmacology at the
Massachusetts College of Pharmacy. Dr. Sandage received his Ph.D. in Clinical
Pharmacy from Purdue University and his B.S. in Pharmacy from the University of
Arkansas. Dr. Sandage is a director of Aeolus Pharmaceuticals, Inc., a
subsidiary of Intercardia, Inc.
Donald G. Drapkin has been Chairman of the Genta Board of Directors
since September 1997. He is also the Chairman of the Company's Executive
Committee. Mr. Drapkin has been a director and Vice Chairman of MacAndrews &
Forbes Holdings, Inc. and various of its affiliates since March 1987. Prior to
joining MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm of
Skadden, Arps, Meagher & Flom in New York for more than five years. Mr. Drapkin
also is a director of the following corporations which file reports pursuant to
the Securities Exchange Act of 1934: Algos Pharmaceutical Corporation,
Anthracite Capital, Inc., BlackRock Asset Investors, Cardio Technologies, Inc.,
The Cosmetic Center, Inc., Playboy Enterprises, Inc., Revlon, Inc., Revlon
Consumer Products Corporation, VIMRx Pharmaceuticals Inc. and Weider Nutrition
International.
Michael S. Weiss has been Vice Chairman of the Genta Board of Directors
since September 1997 and was the Interim Chairman from May 1997 to September
1997. Mr. Weiss is currently Senior Managing Director of Paramount Capital,
Inc., an investment banking firm, and serves in a similar capacity for certain
affiliated entities. He joined the companies in 1993. Prior to that, Mr. Weiss
was an attorney with Cravath, Swaine & Moore. Mr. Weiss also serves on the Board
of Directors of Pacific Pharmaceuticals, Inc., Palatin Technologies, Inc., AVAX
Technologies, Inc., as Secretary of Atlantic Pharmaceuticals, Inc. and as
Chairman of the Board of Procept Inc., all publicly-traded biotechnology
companies. Additionally, Mr. Weiss is a member of the board of directors of
several privately-held biopharmaceutical companies. Mr. Weiss received his J.D.
from Columbia University School of Law and a B.S. in Finance from the State
University of New York at Albany.
Robert E. Klem, Ph.D., has been a member of the Genta Board of Directors
since February 1991, a Vice President of the Company since October 1991 and is
currently the Company's Principal Accounting Officer and Principal Financial
Officer. 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.
- 12 -
<PAGE>
EXECUTIVE OFFICERS
Name Age
Lauren R. Brown, Ph.D.........................................................56
Kenneth G. Kasses, Ph.D.......................................................53
Robert E. Klem, Ph.D. ........................................................52
Lauren R. Brown, Ph.D., has been Vice President of the Company since
October 1991. He co-founded JBL in 1973 and since then has been President of
JBL. Dr. Brown received his Ph.D. in Organic Chemistry from the University of
California at Riverside. He is active in community affairs in San Luis Obispo
and presently serves on the board of directors of the YMCA and the Chamber of
Commerce.
David Hale resigned as a Class III director effective January 28, 1997.
On May 5, 1997, Thomas Adams resigned as a Class I director. On September 11,
1997, Sharon B. Webster resigned as a Class I director and Paul O.P. Ts'o
resigned as a Class II director.
The Board of Directors held 17 meetings during the year ended December
31, 1997. All directors attended at least 75% of the aggregate number of
meetings of the Board of Directors, except that Dr. Cooper did not attend one of
the two meetings held during the time he served as a director. Directors receive
no fees for their services, but non-employee directors are eligible for stock
options granted in consideration for their service as directors. See Proposals
Five and Six below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
CLASS I NOMINEES FOR DIRECTOR LISTED ABOVE.
Directors are elected by a plurality vote of the aggregate voting power of the
shares of outstanding Common Stock and Series D Preferred Stock, present in
person or represented by proxy, voting together as a single class.
- 13 -
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of April 1, 1998 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 April 1, 1998, each share of Series A Preferred Stock was
convertible at the option of the holder into approximately 7.26 shares of Common
Stock and each share of Series D Preferred Stock was convertible at the option
of the holder into approximately 105.96 shares of Common Stock. 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 Preferred Stock do not
have voting rights until conversion into Common Stock. The conversion price of
the Series A and the Series D Preferred Stock and the numbers of shares of
Common Stock issuable upon conversion thereof may be adjusted in the future,
based on the provisions in the Certificate of Incorporation.
<TABLE>
<CAPTION>
COMMON STOCK SERIES D PREFERRED STOCK
------------ ------------------------
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF AMOUNT AND NATURE OF PERCENT
OWNER BENEFICIAL OWNERSHIP(1) CLASS BENEFICIAL OWNERSHIP(1) OF CLASS
<S> <C> <C> <C> <C>
Lindsay A. Rosenwald, M.D. 15,865,232 (2) 73.8% (3) 83,826 (2) 35.6%
787 Seventh Avenue, 48th Floor
New York, NY 10019
Paramount Capital Asset 15,042,741 (4) 72.7% (3) 76,414 (4) 33.5%
Management, Inc.
787 Seventh Avenue
New York, NY 10019
United Congregations Mesora 1,109,600 (5) 16.2% 10,000 (5) 4.4%
c/o Aeta Realty
1 State Street Plaza
New York, NY 10004
Attn: Chana Adelstein
Branco Weiss 619,800 (6) 9.9% 5,000 (6) 2.2%
Hallwylstrasse 71
CH-8036 Zurich
SWITZERLAND
Diversified Fund Limited 554,800 (7) 8.8% 5,000 (7) 2.2%
CH-6904 Lugano
Via Zurigo 46
SWITZERLAND
Garo H. Armen 499,320 (8) 8.0% 4,500 (8) 2.0%
c/o Armen Partners, L.P.
630 Fifth Avenue, Suite 2100
New York, NY 10111
- 14 -
<PAGE>
COMMON STOCK SERIES D PREFERRED STOCK
------------ ------------------------
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF AMOUNT AND NATURE OF PERCENT
OWNER BENEFICIAL OWNERSHIP(1) CLASS BENEFICIAL OWNERSHIP(1) OF CLASS
Mark Bercuvitz 388,360 (9) 6.3% 3,500 (9) 1.5%
1310 Sreene Ave. Suite 660
Westmount, Quebec
CANADA H3Z 2B2
Michael S. Weiss 148,354 (10) 2.5% 1,337 (10) 0.6%
Robert E. Klem, Ph.D. 28,711 (11) 0.5% 0 0%
Lawrence J. Kessel, M.D. 27,740 (12) 0.5% 250 (12) 0.1%
Peter Salomon, M.D. 500 (13) 0% 0 0%
Glenn L. Cooper, M.D. 0 0% 0 0%
Donald G. Drapkin 0 0% 0 0%
Kenneth G. Kasses, Ph.D. 0 0% 0 0%
Bobby W. Sandage, Jr., Ph.D. 0 0% 0 0%
Andrew J. Stein 0 0% 0 0%
Harlan J. Wakoff 0 0% 0 0%
Thomas H. Adams, Ph.D. 61,132 (14) 1.1% 0 0%
Lauren Brown, Ph.D. 23,363 (15) 0.4% 0 0%
Zofia E. Dziewanowska 12,333 (16) 0.2% 0 0%
Guy Van De Winckel 0 0.0% 0 0%
All directors and executive 302,133 5.1% 1,587 0.7%
officers as a group (14 persons)
</TABLE>
(1) The number of shares beneficially owned is determined under rules
promulgated by 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 of April 1, 1998, through the
exercise or conversion 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) Dr. Rosenwald may be deemed to have shared voting and investment power over
the 15,042,741 shares of Common Stock which may be deemed to be
beneficially owned by Paramount Capital Asset Management, Inc. ("PCAM") of
which Dr. Rosenwald is the sole stockholder. See Footnote 4 below. In
addition, Dr. Rosenwald may be deemed to have sole voting and investment
power over approximately 822,491 shares of Common Stock which he may be
deemed beneficially to own, consisting of approximately 785,429 shares of
Common Stock issuable upon conversion of approximately 7,412 shares of
Series D Preferred Stock issuable upon exercise of Unit Purchase Warrants
and approximately 37,062 shares of Common Stock issuable upon exercise of
Class D Warrants issuable upon exercise of Unit Purchase Warrants. Dr.
Rosenwald's beneficial ownership excludes approximately 1,951,801 and
92,101 shares of Common Stock issuable, respectively, upon conversion and
exercise of approximately 18,420 shares of Series D Preferred Stock and
Class D Warrants issuable upon exercise of Unit Purchase Warrants, which
are not exercisable within 60 days of April 1, 1998.
- 15 -
<PAGE>
(3) The outstanding shares of Series D Preferred Stock of the Company are
entitled to vote together with the holders of Common Stock on all matters
submitted to a vote of stockholders of the company. Dr. Rosenwald may be
deemed beneficially to own (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934 (the "1934 Act"), as amended) 37.8% of the
aggregate voting power of the Common Stock and Series D Preferred Stock
outstanding. Similarly, PCAM, Inc. may be deemed beneficially to own 36.6%
of the aggregate voting power of the Common Stock and Series D Preferred
Stock outstanding.
(4) PCAM may be deemed to have shared voting and investment power over the
5,253,866 and 9,788,875 shares of Common Stock, respectively, which may be
deemed to be beneficially owned by the Aries Domestic Fund, L.P. (the
"Aries Domestic Fund") and The Aries Fund, a Cayman Islands Trust (the
"Aries Trust" and, together with the Aries Domestic Fund, the "Aries
Funds"), for which PCAM is the General Partner and Investment Advisor,
respectively. PCAM's beneficial ownership includes: 27,450 and 64,050
shares of Common Stock held by Aries Domestic Fund and Aries Trust,
respectively; 2,833,907 and 5,262,940 shares of Common Stock issuable upon
conversion of approximately 26,745 and 49,669 shares of Series D Preferred
Stock (including 350 and 650 shares of Series D Preferred Stock issuable
upon exercise of Unit Purchase Warrants) held by Aries Domestic Fund and
Aries Trust, respectively; 19,250 and 35,750 shares of Common Stock
issuable upon exercise of Class D Warrants (including 1,750 and 3,250 Class
D Warrants issuable upon exercise of Unit Purchase Warrants) held by Aries
Domestic Fund and Aries Trust, respectively; approximately 130,593 and
261,185 shares of Common Stock issuable upon exercise of 18,000 and 36,000
shares of Series A Preferred Stock held by Aries Domestic Fund and Aries
Trust, respectively; Bridge Warrants held by Aries Domestic Fund and Aries
Trust to purchase approximately 2,225,166 and 4,132,450 shares of Common
Stock, respectively; and Line of Credit Warrants held by Aries Domestic
Fund and Aries Trust to purchase 17,500 and 32,500 shares of Common Stock,
respectively.
(5) United Congregations Mesora's beneficial ownership consists of 10,000
shares of Series D Preferred Stock, which are convertible into
approximately 1,059,600 shares of Common Stock, and Class D Warrants to
purchase up to 50,000 shares of Common Stock. This information is derived
from United Congregations Mesora's Schedule 13D, as amended, dated July 11,
1997, filed with the SEC.
(6) Mr. Branco Weiss' beneficial ownership consists of 5,000 shares of Series D
Preferred Stock, which are convertible into approximately 529,800 shares of
Common Stock, Class D Warrants to purchase up to 25,000 shares of Common
Stock and 65,000 shares of Common Stock. This information is derived from
Mr. Weiss' Schedule 13D dated October 9, 1997, filed with the SEC.
(7) Diversified Fund Limited's ("Diversified's") beneficial ownership consists
of 5,000 shares of Series D Preferred Stock, which are convertible into
approximately 529,800 shares of Common Stock, and Class D Warrants to
purchase up to 25,000 shares of Common Stock. Carlo Pagani, in his capacity
as President of Diversified, shares voting and dispositive power with
respect to such securities and may be deemed to be the beneficial owner of
such securities. This information is derived from Diversified's Schedule
13D dated March 2, 1998, filed with the SEC.
(8) Dr. Armen's beneficial ownership consists of 4,500 shares of Series D
Preferred Stock, which are convertible into approximately 476,820 shares of
Common Stock, and Class D Warrants to purchase up to 22,500 shares of
Common Stock. The Series D Preferred Stock and the Class D Warrants are
held by (a) Armen Partners, L.P., an investment limited partnership, of
which Dr. Armen and Armen Capital Management Corp., a corporation of which
Dr. Armen is the principal, are the general partners, (b) Armen Partners
Offshore Fund, Ltd., an offshore investment fund to which Armen Capital
Management Corp. acts as investment manager, and (c) GHA Management
Corporation, a corporation wholly-owned by Dr.
- 16 -
<PAGE>
Armen. This information is derived from Dr. Armen's Schedule 13D dated July
24, 1997, filed with the SEC.
(9) Mr. Bercuvitz's beneficial ownership consists of 3,500 shares of Series D
Preferred Stock, which are convertible into approximately 370,860 shares of
Common Stock, and Class D Warrants to purchase up to 17,500 shares of
Common Stock. This information is derived from Mr. Bercuvitz's Schedule 13D
dated March 2, 1998, filed with the SEC.
(10) Mr. Michael Weiss' beneficial ownership consists of approximately 15,894
shares of Common Stock issuable upon conversion of 150 shares of Series D
Preferred Stock; 750 shares of Common Stock issuable upon exercise of Class
D Warrants; and approximately 125,775 and 5,935 shares of Common Stock
issuable, respectively, upon conversion and exercise of approximately 1,187
shares of Series D Preferred Stock and Class D Warrants issuable upon
exercise of Unit Purchase Warrants. Mr. Weiss' beneficial ownership
excludes 502,993 and 23,735 shares of Common Stock issuable, respectively,
upon conversion and exercise of approximately 4,747 shares of Series D
Preferred Stock and Class D Warrants issuable upon exercise of Unit
Purchase Warrants, which are not exercisable within 60 days of April 1,
1998, that are held by an entity of which Mr. Weiss is the managing member.
Mr. Weiss' business address is 787 Seventh Avenue, New York, NY 10019.
(11) Dr. Klem's beneficial ownership consists of 23,358 shares of Common Stock
and options to purchase 5,353 shares of Common Stock. Dr. Klem's Common
Stock holdings include 1,875 shares of Common Stock held by a trust for Dr.
Klem's children, as to which Dr. Klem has shared voting and investment
power, and 150 shares of Common Stock owned by Dr. Klem's wife, as to which
he disclaims beneficial ownership.
(12) Dr. Kessel's beneficial ownership consists of 250 shares of Series D
Preferred Stock, which are convertible into approximately 26,490 shares of
Common Stock, and Class D Warrants to purchase up to 1,250 shares of Common
Stock.
(13) Dr. Salomon's beneficial ownership consists of 500 shares of Common Stock.
(14) Dr. Adams' beneficial ownership consists of 38,333 shares of Common Stock
and options to purchase 22,799 shares of Common Stock. Dr. Adams' Common
Stock holdings include 8,000 shares of Common Stock held in several trusts
for Dr. Adams' children, as to which Dr. Adams has shared voting and
investment power, and 30,333 shares of Common Stock jointly owned by Dr.
Adams and Dr. Adams' wife, as to which Dr. Adams has shared voting and
investment power. Dr. Adams' options shown in the table exclude options to
purchase 100,000 shares of Common Stock that were granted to him in May
1998 pursuant to a consulting services agreement. See Footnote 2 to the
Summary Compensation Table, below.
(15) Dr. Brown's beneficial ownership consists of 20,078 shares of Common Stock
and options to purchase 3,285 shares of Common Stock.
(16) Dr. Dziewanowska's beneficial ownership consists of options to purchase
12,333 shares of Common Stock.
LEGAL PROCEEDINGS
LBC Capital Resources, Inc. ("LBC"), a Philadelphia-based broker/dealer,
has asserted claims against the Company and others, including Paramount Capital
Inc., of which Dr. Rosenwald is the sole stockholder and Mr.
- 17 -
<PAGE>
Weiss is a Senior Managing Director, and various related entities and persons.
LBC's claims relate to the alleged breach by the Company of certain letter
agreements, allegedly entered into by LBC and the Company in 1995 and 1996 with
respect to brokerage and/or investment banking services, particularly in
connection with a $3 million investment, for which LBC is seeking a fee. In
April 1998, a Complaint was filed in the United States District Court for the
Southern District of New York (98 Civ. 2491) by LBC against the Company and the
same other parties. The Company is currently engaged in settlement discussions
with LBC.
On June 4, 1998, the Company's statutory process agent received a
Summons and Complaint in a lawsuit brought by Johns Hopkins against the Company
in Maryland Circuit Court for Baltimore City (Case No. 98120110). Johns Hopkins
alleges in the Complaint that the Company has breached the Johns Hopkins
Agreement (as defined below) and owes it licensing royalty fees and related
expenses in the amount of $308,832.24. Johns Hopkins also alleges the existence
of a separate March 1993 letter agreement wherein the Company agreed to support
a fellowship program at the Johns Hopkins School of Hygiene and Public Health
and the Company's breach thereof, with damages of $326,829.00. The Company is
currently in the process of retaining Maryland counsel so that it can properly
evaluate these lawsuit documents and respond.
EXECUTIVE COMPENSATION
The following table sets forth compensation for services in all
capacities to the Company, for the fiscal years ended December 31, 1995, 1996
and 1997, of: (i) those persons who were, respectively, the Company's Chief
Executive Officer for any time period during 1997 and up to four of the other
most highly compensated executive officers of the Company who were serving as
executive officers at December 31, 1997 whose total annual salary and bonus for
the fiscal year ending December 31, 1997 exceeded $100,000; and (ii) up to two
additional individuals who would have been two of such other four most highly
compensated executive officers if such individuals had served as executive
officers for the entire fiscal year (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------- --------------------------
Name and Other Annual Securities Underlying
Principal Position Year Salary ($) Bonus ($) Compensation Options (#)
- ------------------ ---- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. 1997 $285,000(1) -- -- 100,000(2)
Chairman of the Board and 1996 285,000(3) -- -- 2,799(3)
Chief Executive Officer 1995 285,000(3) -- -- 20,000(4)
Kenneth G. Kasses, Ph.D. 1997 62,500(5) -- -- --
President and
Chief Executive Officer
Zofia E. Dziewanowska 1997 $216,601(6) -- -- --
Ph.D., M.D., Senior Vice 1996 235,000(3) -- -- 1,574(3)
President, Global Clinical 1995 235,000(3) -- 14,759(7) 12,000(4)
Affairs
Guy Van de Winckel 1997 $170,000(8) -- -- --
Vice President, European 1996 170,000 -- -- --
Operations and President of 1995 170,000 -- -- --
Genta Pharmaceuticals
Europe, S.A.
- 18 -
<PAGE>
Robert E. Klem, Ph.D. 1997 $170,000(9) -- -- --
Vice President, Chairman of 1996 155,000(3) -- 2,580(10) 853(3)
the Board of JBL 1995 161,458(3)(11) -- 2,580(10) 4,500(4)
Lauren Brown, Ph.D. 1997 144,000(9) -- -- --
President JBL 1996 131,000(3) -- 3,000(10) 1,285(3)
1995 131,000(3) -- 3,000(10) 2,000(4)
</TABLE>
(1) Dr. Adams resigned as Chief Executive Officer and Chairman of the Board and
a Director on May 5, 1997. Pursuant to severance and consulting agreements
with the Company, the Company agreed to continue to pay Dr. Adams' salary
at the then-current rate of $285,000 per year for a one-year period, agreed
to continue eligibility for coverage under the Company's health insurance
plan for a one-year period and agreed to grant options to purchase 100,000
shares of Common Stock exercisable at $3.00 per share (100% of the fair
market value of such stock on May 5, 1997) as consideration for consulting
services of at least 24 days.
(2) See Footnote 1 above. These options were granted to Dr. Adams in May 1998.
(3) 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 in 1995 and 1996. The portions of salaries so deferred are
included in the 1995 salary figures in this table, consisting of $23,750,
$9,792, $6,458 and $10,916 for Drs. Adams, Dziewanowska, Klem and Brown,
respectively, and in the 1996 salary figures in this table, consisting of
$11,875, $9,791, $6,458 and $5,458 for Drs. Adams, Dziewanowska, Klem and
Brown, respectively.
(4) These options (the "New Options") were granted in exchange for unexercised
options granted prior to April 20, 1995 with an exercise price above $22.50
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 Options' vesting schedule, unless the
holder was terminated involuntarily without cause prior to April 20, 1997.
None of these options have been exercised to date.
(5) Salary payments commenced on October 1, 1997. See "Compensation of
President and Chief Executive Officer" below.
(6) Dr. Dziewanowska resigned as Senior Vice President of Global Clinical
Affairs on July 31, 1997. Pursuant to severance agreements with the
Company, the Company agreed to continue to pay Dr. Dziewanowska's salary at
the then-current rate of $235,000 per year for the first month and at
one-half the then-current rate for the next ten months. In addition, the
Company agreed to continue eligibility for coverage under the Company's
dental insurance plan and to pay Dr. Dziewanowska monthly dollar amounts
equal to the group medical premiums under the Company's health insurance
plan for an eleven-month period.
(7) Represents payments for expenses incurred in connection with relocation
including applicable tax gross-ups.
(8) Mr. Van de Winckel resigned as Vice President of European Operations and
President of Genta Pharmaceuticals Europe, S.A. on April 15, 1997. Pursuant
to a severance arrangement with the Company, the Company continued to pay
Mr. Van de Winckel's salary at the then-current rate of $170,000 per year
and agreed to continue eligibility for coverage under the Company's health
insurance plan for a nine-month period.
(9) This amount does not include the payment in 1997 of the full salary amounts
deferred from 1995 and 1996, as discussed in Footnote 3 above.
- 19 -
<PAGE>
(10) Represents payments for insurance policies covering Drs. Klem and Brown.
(11) Represents 25 bimonthly pay periods during 1995 that resulted from Dr.
Klem's having been transferred from the Company's payroll calendar to JBL's
payroll calendar.
COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to a Letter Agreement dated September 4, 1997, between Michael
Weiss, then the Interim Chairman of the Board of the Company (and presently the
Vice Chairman), and Dr. Kasses (the "Letter Agreement"), Dr. Kasses was
appointed President and Chief Executive Officer of the Company, effective
October 1, 1997, subject to Board ratification. Among other items, the Letter
Agreement provided the following:
1. Dr. Kasses would receive a base salary of $300,000 per annum, subject
to semi-annual review commencing on October 1, 1998. In the event Dr. Kasses is
terminated without cause or terminates his employment for cause, Dr. Kasses
would become entitled to receive this amount as severance for one year following
such termination, subject to set-off for amounts earned from alternative
employment. At the end of Dr. Kasses' first year of employment, he would become
entitled to a bonus of $100,000, assuming he is then employed by the Company.
Dr. Kasses would also be entitled to an additional bonus of up to $100,000,
subject to achievement of agreed-upon milestones.
2. Dr. Kasses would be entitled to receive, subject to stockholder
approval, a grant of stock options to purchase 5% of the fully diluted Common
Stock of the Company outstanding as of an agreed-upon date, with quarterly
vesting over four years (assuming continued employment).
3. Dr. Kasses and his dependents would receive such medical, long-term
disability, life insurance and such other health benefits as the Company makes
available to its other senior officers and directors.
The Letter Agreement contemplated that these and certain other
provisions would be incorporated into an employment agreement between Dr. Kasses
and the Company.
The Company is seeking stockholder approval of a stock option plan at
this Annual Meeting of Stockholders (see Proposal Five) pursuant to which the
stock options referred to in the Letter Agreement would be granted. (The
Company's current stock option plan has insufficient shares to permit such
grant.)
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 and receive annual grants of stock options under
the Company's 1991 Stock Option Plan. The Company is seeking stockholder
approval of stock option plans at this Annual Meeting of Stockholders (see
Proposals Five and Six) pursuant to which directors will be eligible to receive
stock option grants.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the Company's fiscal year ended December 31, 1997, the Company had
no Compensation Committee. The entire Board of Directors participated in
discussions regarding compensation matters. None of the directors or executive
officers of the Company had any "interlock" relationship to report during the
Company's fiscal year ended December 31, 1997. See "Certain Relationships and
Related Transactions" for a description of certain arrangements between the
Company and Genta Jago. Genta's Vice Chairman of the Board is a managing
director of Genta Jago.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
- 20 -
<PAGE>
STOCK OPTIONS
No stock options were issued to any Chief Executive Officer, Named
Executive Officer or Director by the Company in 1997. See Footnotes 1 and 2 to
the Summary Compensation Table.
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year End(#) Fiscal Year End($)(1)
------------------ ---------------------
Shares Acquired Value
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. -- -- 22,799 --(2) -- --
Kenneth G. Kasses, Ph.D. -- -- -- -- -- --
Zofia E. Dziewanowska,
Ph.D., M.D. -- -- 12,333 1,240 -- --
Guy Van de Winckel -- -- -- -- -- --
Robert E. Klem, Ph.D. -- -- 5,353 -- -- --
Lauren Brown, Ph.D. 3,285 -- -- --
</TABLE>
(1) Calculated on the basis of the fair market value of the underlying
securities as of December 31, 1997 ($.781 per share), minus the exercise
price.
(2) Does not include options to purchase 100,000 shares of Common Stock which
were granted to Dr. Adams in May 1998 pursuant to a consulting services
agreement.
BOARD REPORT TO STOCKHOLDERS ON COMPENSATION
OVERVIEW
During 1997 the Board of Directors had no Compensation Committee.
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
- 21 -
<PAGE>
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 executives 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.
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 are designed to be competitive within a
range that the Board of Directors or the Compensation Committee determines to be
reasonable in light of the aforementioned factors. 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 its
employees 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. See Proposal Five.
COMPENSATION OF EXECUTIVE OFFICERS
In making compensation decisions for 1997, the Board of Directors took
into account the Company's limited cash resources, its weakened financial
condition, the general financial performance of the Company during 1996 and 1997
and the importance of retaining the Company's cash to finance its development
programs. The Board of Directors also considered the importance to the Company
of retaining highly qualified key personnel due
- 22 -
<PAGE>
to the complex and technologically sophisticated nature of the Company's
business. In light of these factors, it was decided not to grant bonuses to any
executive officer but to increase the base salary of Drs. Klem and Brown based
on JBL's performance during 1996 and, in the case of Dr. Klem, in recognition of
his increased management responsibilities at Genta during 1997. The salary of
Dr. Kenneth G. Kasses, who was hired as the Company's President and Chief
Executive Officer effective October 1, 1997, was determined through negotiation
with the Interim Chairman of the Board. See "Compensation of President and Chief
Executive Officer" above.
CODE SECTION 162(M)
In 1993, the Internal Revenue Code (the "Code") was amended to add
Section 162(m). Section 162(m) places a limit of $1,000,000 on the amount of
compensation that may be deducted by a public company in any year with respect
to certain of the company's higher paid executives. Certain performance based
compensation that has been approved by shareholders is not subject to the
deduction limitation. The 1998 cash compensation of the Company's executives was
well below the level where this limitation would apply. See Proposal Five,
"Limitations on the Company's Compensation Deduction" for discussions of the
applicability of Section 162(m) to the Company's 1998 Stock Incentive Plan.
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, as amended, or under the 1934 Act,
as amended, except to the extent the Company specifically incorporates this
report by reference, and shall not otherwise be deemed filed under such Acts.
Glenn L. Cooper, M.D.
Donald G. Drapkin
Kenneth G. Kasses, Ph.D.
Lawrence J. Kessel, M.D.
Robert E. Klem, Ph.D.
Peter Salomon, M.D.
Bobby W. Sandage, Jr., Ph.D.
Andrew J. Stein
Harlan J. Wakoff
Michael S. Weiss
- 23 -
<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"). 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 31, December 31, December 31,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Genta Incorporated....... $100 $81.94 $57.70 $25.33 $4.93 $0.88
Nasdaq Composite........ 100 115.76 112.28 157.69 198.10 236.22
Nasdaq Pharmaceutical... 100 89.43 67.08 122.72 123.08 127.18
</TABLE>
Assumes a $100 investment on December 31, 1992 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.
- 24 -
<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
acids and oligonucleotides, including methylphosphonates, as pharmaceutical
agents. Dr. Ts'o was a Director of the Company until September 11, 1997 and is 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 such agreement,
together with the Ts'o/Miller Agreement, being referred to herein 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 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 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. On May 15, 1997, Johns Hopkins sent the Company a letter stating
that the Johns Hopkins Agreement was terminated. On November 26, 1997 the
Ts'o/Miller Partnership sent the Company a letter claiming that the Company was
in material breach of the Ts'o/Miller Agreement for failing to pay royalties
from 1995 through 1997. This notice further advised that if the alleged breach
were not cured within 90 days of the notice the license would be terminated. On
June 4, 1998, the Company's statutory process agent received a Summons and
Complaint in a lawsuit brought by Johns Hopkins against the Company in Maryland
Circuit Court for Baltimore City (Case No. 98120110). Johns Hopkins alleges in
the Complaint that the Company has breached the Johns Hopkins Agreement and owes
it licensing royalty fees and related expenses in the amount of $308,832.24.
Johns Hopkins also alleges the existence of a separate March 1993 letter
agreement wherein the Company agreed to support a fellowship program at the
Johns Hopkins School of Hygiene and Public Health and the Company's breach
thereof, with damages of $326,829.00. The Company is currently in the process of
retaining Maryland counsel so that it can properly evaluate these lawsuit
documents and respond. See "Business -- Anticode(TM) Brand of Antisense
Oligonucleotide Programs --Oligonucleotide Collaborative and Licensing
Agreements -- Ts'o/Miller/Hopkins" in the Company's Annual Report on Form 10-K,
as amended, for the year ended December 31, 1997. The Company is currently
engaged in settlement discussions with Johns Hopkins and the Ts'o/Miller
partnership.
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 and a
Director of the Company and Chairman of the Board of JBL. The current aggregate
monthly payment under such leases is approximately $32,000.
Dr. Thomas H. Adams resigned as the Chief Executive Officer and Chairman
of the Board of the Company on May 5, 1997. As of May 6, 1997, the Company
entered into a consulting agreement with Dr. Adams, pursuant to which the
Company has granted options to purchase 100,000 shares of Common Stock
exercisable at $3.00 per share as consideration for Dr. Adams' performing
consulting services of at least 24 days. These options will vest over a two-year
period commencing on May 5, 1997, except that the vesting will terminate if Dr.
Adams fails to fulfill his obligations under the agreement or if the Company
terminates the agreement for cause. In addition, Dr. Adams' previously granted
options will continue to vest until the end of the 90-day post-termination grace
period for the options which commenced on May 5, 1998. See Footnote 1 to the
Summary Compensation Table for a description of Dr. Adams' severance agreement
with the Company.
As of August 1, 1997, the Company entered into a consulting agreement
with Dr. Zofia E. Dziewanowska (a former executive officer of the Company),
pursuant to which Dr. Dziewanowska would be compensated for any work performed
at a rate of $150 per hour through January 31, 1998 and $300 per hour
thereafter. In addition, Dr. Dziewanowska's options continued to vest until the
end of the 90-day post-termination exercise grace period
- 25 -
<PAGE>
for the options, which commenced on January 31, 1998. See Footnote 6 to the
Summary Compensation Table for a description of Dr. Dziewanowska's severance
agreement with the Company.
As of August 27, 1997, the Company entered into separate consulting
agreements with each of Drs. Paul Ts'o and Sharon Webster (both former directors
of the Company), pursuant to which the Company issued 15,400 shares of Common
Stock to Dr. Ts'o and 15,500 shares of Common Stock to Dr. Webster, paid $4,000
to Dr. Webster and retained each of Drs. Ts'o and Webster to serve as
consultants to the Company for a one-year period at a fee of $12,000.
In February 1997, the Company raised gross proceeds of $3 million in a
private placement, to the Aries Funds, of 12% Senior Secured Convertible Notes
("Convertible Notes") and Bridge Warrants. The Convertible Notes, together with
accrued interest thereon, were converted pursuant to their terms into an
aggregate of 65,415 shares of Series D Preferred Stock, which in turn are
convertible, at $0.94375 per share, into 6,931,391 shares of Common Stock. The
Bridge Warrants permit the purchase of up to an aggregate of 6,357,616 shares of
Common Stock at an exercise price of $0.471875 per share (subject to adjustment
upon the occurrence of certain events). Pursuant to the Note and Warrant
Purchase Agreement in connection with such private placement, the Company could
be required to issue Penalty Warrants to the Aries Funds. See "Proposal One:
Approval of Reverse Stock Splits of the Company's Outstanding Common Stock --
Capitalization." Also pursuant to the Note and Warrant Purchase Agreement, the
Aries Funds were granted the right to designate nominees constituting a majority
of the members of the Board of Directors of the Company, subject to certain
conditions. The Aries Funds designated Michael S. Weiss as a nominee for
Director and he was appointed by the Board and elected Interim Chairman of the
Company's Board of Directors. On September 11, 1997, the Aries Funds designated
Glenn L. Cooper, M.D., Donald G. Drapkin, Bobby W. Sandage, Jr., Ph.D. and
Andrew J. Stein as nominees to the Board of Directors of the Company (the
"Board"), such persons were elected as Directors of the Company, Michael S.
Weiss stepped down as Interim Chairman and the Board elected Mr. Drapkin
Chairman and Mr. Weiss Vice Chairman.
On June 6, 1997, the Aries Funds entered into a Line of Credit Agreement
with the Company pursuant to which the Aries Funds provided the Company with a
line of credit of up to $500,000, which subsequently was repaid, in
consideration for warrants (the "Line of Credit Warrants") to purchase 50,000
shares of Common Stock exercisable at $2.50 per share, subject to adjustment
upon the occurrence of certain events.
On June 30, 1997, the Company sold a total of 161.58 Premium Preferred
Units(TM) ("Units") in a private placement (the "Private Placement") for which
Paramount Capital, Inc. acted as placement agent. Each unit sold in the Private
Placement consisted of 1,000 shares of Series D Preferred Stock and Class D
Warrants to purchase 5,000 shares of Common Stock at any time prior to the fifth
anniversary of the final closing date. A total of $16,158,000 was raised. The
net proceeds to the Company were $14,036,772. The conversion price of the Series
D Preferred Stock and the exercise price of the Class D Warrants are both
$0.94375 per share, subject to adjustment upon the occurrence of certain events.
The Aries Funds purchased, for an aggregate of $870,000, Class D Warrants and
Series D Preferred Stock in the Private Placement presently exercisable and
convertible for aggregates of 50,000 and 1,059,603 shares of Common Stock,
respectively. In connection with the Private Placement, Paramount Capital, Inc.
received cash commissions equal to 9% of the gross sales price and a
non-accountable expense allowance equal to 4% of the gross sales price, and
received warrants (the "Placement Warrants") to purchase up to 10% of the Units
sold in the Private Placement for 110% of the offering price per Unit.
Furthermore, the Company has agreed to enter into a financial advisory agreement
with Paramount Capital, Inc. pursuant to which Paramount Capital, Inc. shall
receive certain cash fees and has received warrants (the "Advisory Warrants"
and, together with the Placement Warrants, the "Unit Purchase Warrants") to
purchase up to 15% of the Units sold in the Private Placement for 110% of the
offering price per Unit. Michael S. Weiss, Vice Chairman of the Board of the
Company, is a Senior Managing Director of Paramount Capital, Inc. David R.
Walner, the Secretary of the Company, is an Associate Director and Secretary of
Paramount Capital Asset Management, Inc. ("PCAM"). PCAM is the investment
manager and general partner of Aries Trust and Aries Domestic Fund,
respectively. The Aries Funds currently do not hold a controlling block of
voting stock of the Company, although the Aries Funds have the present right to
convert and exercise their securities into a significant portion of the
outstanding Common Stock, as described herein. Dr. Lindsay A. Rosenwald, the
President and sole stockholder of PCAM, is also the President and sole
stockholder of Paramount Capital, Inc., the Company's financial advisor and the
placement agent for the Private Placement. In connection with the Private
Placement, Paramount Capital, Inc. and their designees received Unit Purchase
Warrants to purchase an aggregate of 40,395 shares of Series D Preferred Stock
and
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201,975 Class D Warrants as compensation for services as placement agent and
financial advisor. Paramount Capital, Inc. allocated to Mr. Weiss and an entity
of which Mr. Weiss is the managing member, Unit Purchase Warrants to purchase an
aggregate of 5,934 shares of Series D Preferred Stock and 29,670 Class D
Warrants.
In December 1992, the Company and Jagotec formed Genta Jago Technologies
B.V. ("Genta Jago"), a 50/50 joint venture to develop and commercialize
therapeutic products on a worldwide basis. In 1996, SkyePharma acquired Jagotec.
Michael Weiss 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, 1997, the Company had advanced
working capital loans of approximately $15,800,000 to Genta Jago, net of
principal repayments and credits, which amount fully satisfied what the Company
believes is the loan commitment established by the parties through December 31,
1997. 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 $350,000 in 1997,
were recorded by the Company as related party contract revenue. Terms of the
arrangement also grant the Company an option to purchase Jagotec's interest in
Genta Jago exercisable from December 1998 through December 2000.
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PROPOSAL FIVE
ADOPTION OF THE 1998 STOCK INCENTIVE PLAN
AND
GRANTS OF OPTIONS UNDER THE PLAN
The Board of Directors believes that the Company's existing Stock Option
Plan is inadequate to provide sufficient incentives for the successful
recruitment and retention of key personnel. The Board of Directors has adopted,
and is submitting to the stockholders for approval, the Company's 1998 Stock
Incentive Plan (the "1998 Plan"), the full text of which is set forth in Exhibit
D hereto. Directors, officers and other employees of the Company and its
subsidiaries, as well as consultants to the Company and its subsidiaries, are
eligible to participate under the 1998 Plan. Stockholder approval of Proposal
Five is necessary, inter alia, to comply with the listing maintenance standards
of Nasdaq, to comply with the provisions of the performance-based compensation
exemption from the tax deduction limit imposed by Section 162(m) of the Internal
Revenue Code (the "Code") to the extent permitted by said provisions, as well as
to ensure that incentive stock options are available for issuance.
The main features of the 1998 Plan are outlined below, but the outline
is qualified by reference to the complete text of the plan.
GENERAL
As of May 28, 1998, the Company's Board of Directors adopted, subject to
stockholder approval, the 1998 Plan. The 1998 Plan provides for the issuance of
authorized and unissued shares of Common Stock, treasury shares and/or shares
acquired by the Company for purposes of the 1998 Plan up to a maximum of
6,750,000 shares (which is approximately 15% of the Common Stock on a
fully-diluted basis, excluding options and warrants with an exercise price of
$2.00 or more); provided, however, that such maximum number of shares may be
increased at any time or from time to time, at the discretion of the Board of
Directors, by an aggregate amount up to the product of (x) 0.15 and (y) the sum
of (1) the difference between (A) the number of shares of Common Stock which may
be obtained upon conversion of the Series D Preferred Stock, after giving effect
to any modification in the conversion price effected by the provision, for
adjusting (the "Reset") such conversion price upon the occurrence of a Reset
Event, of the fifth paragraph of Subsection 4(a) of the Certificate of
Designations for the Series D Preferred Stock, as amended from time to time, or
any contractual modification to such Reset (collectively, the "Reset") and (B)
the number of shares of Common Stock obtainable upon conversion of the Series D
Preferred Stock immediately prior to such Reset and (2) the number of shares of
Common Stock which may be obtained upon the exercise of any Penalty Warrants.
The total number of incentive stock options, however, which may be granted under
the 1998 Plan may not exceed 5,000,000 shares. Generally, shares subject to an
award that remain unissued upon expiration or cancellation of the award are
available for other awards under the 1998 Plan. In the event of a stock
dividend, stock split, reverse stock split, combination or reclassification of
the Common Stock or the like, the Board of Directors or the Compensation
Committee of the Board of Directors (the "Committee") will equitably adjust the
aggregate number of shares subject to the 1998 Plan, the number of shares
subject to each outstanding award, and the exercise price of each outstanding
option.
Awards under the 1998 Plan may be made in the form of (i) incentive
stock options, (ii) non-qualified stock options (incentive and non-qualified
stock options are collectively referred to as "options"), (iii) stock
appreciation rights, (iv) restricted stock, (v) restricted stock units, (vi)
dividend equivalent rights and (vii) other stock-based awards. Awards may be
made to such directors, officers and other employees of the Company and its
subsidiaries (including prospective employees who become employees), and to such
consultants, advisors and other independent contractors of the Company and its
subsidiaries, as the Committee shall in its discretion select (collectively,
"key persons").
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ADMINISTRATION
The 1998 Plan may be administered by the Board or the Committee,
composed of not fewer than two directors. To the extent required for
transactions under the 1998 Plan to qualify for the exemptions available under
Rule 16b-3 promulgated under the 1934 Act ("Rule 16b-3"), all actions relating
to awards to persons subject to Section 16 of the 1934 Act shall be taken by the
Board unless each person who serves on the Committee is a "non-employee
director" within the meaning of Rule 16b-3 or such actions are taken by a
sub-committee of the Committee (or the Board) comprised solely of "non-employee
directors". To the extent required for compensation realized from awards under
the Plan to be deductible by the Company pursuant to Section 162(m) of the Code,
the members of the Committee shall be "outside directors" within the meaning of
Section 162(m). The Board and Committee are authorized to construe, interpret
and implement the provisions of the 1998 Plan, to select the key persons to whom
awards will be granted, to determine the terms and provisions of such awards,
and to amend outstanding awards. The determinations of the Board and Committee
are made in their sole discretion and are conclusive. The Committee presently
consists of Glenn L. Cooper, M.D., Chairman, Andrew J. Stein and Michael S.
Weiss. (As used herein, "Committee" refers to the Committee and/or the Board, as
appropriate).
GRANTS UNDER THE 1998 PLAN
Stock Options
Unless the Committee expressly provides otherwise, an option will become
exercisable as to 25% of the shares subject thereto on each of the first through
fourth anniversaries of the grant. The purchase price per share payable upon the
exercise of an option (the "option exercise price") will be established by the
Committee, provided that the option exercise price shall be no less than 100% of
the fair market value of a share of the Common Stock on the date of grant in the
case of an incentive stock option. However, to the extent required under Section
422 of the Code, an incentive option granted to an individual who, at the time
the option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of his employer corporation or of its
parent or subsidiary must satisfy the following conditions: (a) at the time such
option is granted, the option exercise price shall be no less than 110% of the
fair market value of a share of the Common Stock on the date of grant and (b)
the option by its terms is not exercisable after the expiration of five years
from the date it is granted. The option exercise price is payable in cash, or,
with the consent of the Committee, by surrender of shares of Common Stock having
a fair market value on the date of the exercise equal to part or all of the
option exercise price, or by such other payment method as the Committee may
prescribe.
Stock Appreciation Rights
Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the 1998 Plan. Generally,
no stock appreciation right will be exercisable at a time when any option to
which it relates is not exercisable. The grantee of a stock appreciation right
has the right to surrender the stock appreciation right and to receive from the
Company an amount equal to the aggregate appreciation (since the date of the
grant, or over the option exercise price if the stock appreciation right is
granted in connection with an option) in the shares of Common Stock in respect
of which such stock appreciation right is being exercised. Payment due upon
exercise of a stock appreciation right may be in cash, in Common Stock, or
partly in each, as determined by the Committee in its discretion.
Individual Limitation on Stock Options and Stock Appreciation Rights
The total number of shares of Common Stock with respect to which options
and stock appreciation rights may be granted to any one employee during any
two-year period may not exceed 8,000,000.
Restricted Stock
The Committee may grant or sell restricted shares of Common Stock to
such key persons, in such amounts, and subject to such terms and conditions
(which may depend upon or be related to performance goals and other conditions)
as the Committee shall determine in its discretion. Certificates for the shares
of Common Stock covered by a restricted stock award will remain in the
possession of the Company until such shares are free of restrictions. Subject to
the applicable restrictions, the grantee has the rights of a stockholder with
respect to the restricted stock.
Restricted Stock Units
The Committee may grant restricted stock units to such key persons, in
such amounts, and subject to such terms and conditions as the Committee shall
determine in its discretion. Restricted stock units are intended to give the
recipient the economic equivalent of actual restricted shares of stock, while
postponing the tax consequences.
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<PAGE>
A restricted stock unit is an unsecured promise to transfer an unrestricted
share of stock at a specified future maturity date (which can be later than the
vesting date at which the right to receive the shares becomes nonforfeitable)
selected by the recipient of the unit at the time of grant or subsequent
thereto.
Dividend Equivalent Rights
The Committee may include in any award a dividend equivalent right
entitling the recipient to receive amounts equal to the ordinary dividends that
would have been paid, during the time such award is outstanding, unexercised or
not vested, on the shares of Common Stock covered by such award if such shares
were then outstanding.
Other Stock Based-Awards
The 1998 Plan permits the Committee to grant other stock based awards,
such as performance shares or unrestricted stock, subject to such terms and
conditions as the Committee deems appropriate.
TERMINATION OF EMPLOYMENT OR SERVICE
Options and Stock Appreciation Rights
Unless the Committee otherwise specifies: (i) all options and stock
appreciation rights not yet exercised shall terminate upon termination of the
grantee's employment or service by reason of discharge for cause; (ii) if a
grantee's employment or service terminates for reasons other than cause or
death, the grantee's options and/or stock appreciation rights generally will be
exercisable for 90 days (or one year if the termination is by reason of
disability) after termination to the extent that they were exercisable at
termination, but not after the expiration date of the award; and (iii) if a
grantee dies while in the Company's employ or service or during the
aforementioned post-employment exercise period, the grantee's options and/or
stock appreciation rights will, to the extent exercisable immediately prior to
death, generally remain exercisable for one year after the date of death, but
not after the expiration date of the award.
Restricted Stock
If a grantee's employment or service terminates for any reason during
the 120 days following the employee's termination date, the Company will have
the right to require forfeiture of restricted shares then subject to
restrictions on transfer in exchange for any amount paid by the grantee for such
shares.
Right of Recapture
If at any time within one year after the date of a "realization event"
(as defined in Section 2.10 of the 1998 Plan), the grantee is terminated for
cause or engages in any activity determined in the discretion of the Committee
to be in competition with any activity of the Company, or otherwise inimical,
contrary or harmful to the interests of the Company (including, but not limited
to, accepting employment with or serving as a consultant, adviser or in any
other capacity to an entity that is in competition with or acting against the
interests of the Company), then any gain realized by the grantee from the
realization event shall be paid by the grantee to the Company. Such gain shall
be determined as of the date of the realization event, regardless of any
subsequent change in the fair market value of a share of Common Stock. The
Company shall have the right to offset such gain against any amounts otherwise
owed to the grantee by the Company (whether as wages, vacation pay, or pursuant
to any benefit plan or other compensatory arrangement).
OTHER FEATURES OF THE 1998 PLAN
The Committee may amend any outstanding award, including, without
limitation, by amendment which would accelerate the time or times at which the
award becomes unrestricted or may be exercised, or waive or amend any goals,
restrictions or conditions on the award. The Board of Directors may, without
stockholder approval, suspend, discontinue, revise or amend the 1998 Plan at any
time or from time to time; provided, however, that stockholder approval shall be
obtained to the extent necessary to comply with Section 422 of the Code
(relating to the grant of incentive stock options) and other applicable law.
Unless sooner terminated by the Board of Directors, the provisions of the 1998
Plan respecting the grant of incentive stock options shall terminate on the
tenth anniversary of the adoption of the 1998 Plan by the Board of Directors.
All awards made under the 1998 Plan prior to its termination shall remain in
effect until they are satisfied or terminated.
In the event of a change in control of the Company (as defined in
Section 3.7 of the 1998 Plan), (i) any then outstanding stock option or stock
appreciation right will become fully vested and immediately exercisable upon the
subsequent termination of employment of the grantee by the Company or its
successors without cause within one year of the change in control, unless the
applicable plan agreement otherwise provides, and (ii) the Committee
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<PAGE>
in its discretion may amend any outstanding award, including by amendments which
advance the dates upon which any or all outstanding awards of any type
terminate. In the event of a proposed liquidation or dissolution of the Company,
outstanding awards will terminate immediately prior to the consummation of the
action, unless otherwise provided by the Committee, which in its discretion may
accelerate the date on which any award becomes fully vested and/or declare that
any award will terminate as of a specified date. In the event of a merger or
consolidation of the Company with or into any other corporation or entity,
outstanding awards shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Committee determines, in the exercise of its
sole discretion, to accelerate the date on which an award becomes exercisable or
fully vested. In the absence of an assumption or substitution of awards, awards
shall, to the extent not exercised, terminate as of the date of the closing of
the merger.
GRANT OF OPTIONS TO CEO
Pursuant to the provisions of the Letter Agreement described under the
caption "Executive Compensation --Compensation of President and Chief Executive
Officer," the Board of Directors, as of May 28, 1998 (the "Grant Date"), granted
to Kenneth G. Kasses, Ph.D., the Company's President and Chief Executive
Officer, subject to stockholder approval of this Proposal Five, a stock option
(the "Kasses Option") to purchase, at an initial exercise price of $0.94375 per
share, 2,236,263 shares of Common Stock, having a market value of approximately
$1,747,080 as of June 17, 1998 and representing approximately 5% of the
Fairly-Diluted Common Stock (as defined below) as of the Grant Date, excluding
Penalty Warrants. "Fairly-Diluted Common Stock" means, as of a specified date,
the number of shares of Common Stock that would be outstanding on such date
assuming: (i) the conversion into Common Stock on such date of all preferred
stock of the Company outstanding on the Grant Date or issuable upon exercise of
warrants outstanding on the Grant Date; and (ii) the exercise on such date of
all warrants of the Company outstanding on the Grant Date or contractually
required to be issued pursuant to an agreement in effect on the Grant Date, in
each case having an exercise price per share of Common Stock of less than $2.00
on the Grant Date, including, but not limited to, Penalty Warrants. As of May
28, 1998, there were 44,725,266 shares of Fairly-Diluted Common Stock (exclusive
of any Penalty Warrants which may be issued). The exercise price and the number
of shares subject to the Kasses Option are subject to adjustment if the number
of shares of Fairly-Diluted Common Stock on February 26, 1999 (the "Adjustment
Date") is other than 44,725,266 shares (subject to proportional adjustment for
any stock split or reverse stock split of the Common Stock) as a result of any
issuance of Penalty Warrants or alteration of the conversion price of the Series
D Preferred Stock pursuant to the Reset or any contractual modification to such
Reset (such Reset, and, if contractually modified by at least a majority of the
holders of the Series D Preferred Stock, as so modified, the "Series D Reset")
occurring prior to the Adjustment Date (the "Covered Events"), in which case the
Kasses Option shall automatically be adjusted: (x) to adjust the number of
shares of Common Stock covered to the extent necessary to equal the sum of: (a)
2,236,263 shares of Common Stock (subject to proportional adjustment for any
stock split or reverse stock split of the Common Stock); and (b) 5% of any
additional shares of Fairly-Diluted Common Stock as of the Adjustment Date that
are attributable to Covered Events (subject to proportional adjustment for any
stock split or reverse stock split of the Common Stock); and (y) to adjust the
exercise price so that the exercise price per share is equal to the per-share
conversion price of the Series D Preferred Stock immediately after the Series D
Reset. See "Proposal One: Approval of Reverse Stock Splits of the Company's
Outstanding Common Stock" for a description of the Series D Reset and the
Penalty Warrants. The Kasses Option becomes exercisable in 16 substantially
equal installments on the last day of each calendar quarter after October 1,
1997, provided that adjustments to the number of options as provided above shall
be prorated over the remaining quarterly periods after the adjustment. The
Kasses Option expires on the tenth anniversary of the Grant Date; provided that,
if earlier, the Kasses Option shall expire one year after the termination of Dr.
Kasses' employment with the Company.
TAX CONSEQUENCES
The following description of the tax consequences of awards under the
1998 Plan is based on present Federal tax laws, and does not purport to be a
complete description of the tax consequences of the 1998 Plan.
There are generally no Federal tax consequences either to the optionee
or to the Company upon the grant of a stock option. On exercise of an incentive
stock option, the optionee will not realize any income, and the
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Company will not be entitled to a deduction for tax purposes, although such
exercise may give rise to liability for the optionee under the alternative
minimum tax provisions of the Code. However, if the optionee disposes of shares
acquired upon exercise of an incentive stock option within two years of the date
of grant or one year of the date of exercise, the optionee will recognize
compensation income, and the Company will be entitled to a deduction in the
amount of the excess of the fair market value of the shares of Common Stock on
the date of exercise over the option exercise price (or the gain on sale, if
less); the remainder of any gain to the optionee will be treated as capital
gain. On exercise of a non-qualified stock option, the amount by which the fair
market value of the Common Stock on the date of exercise exceeds the option
exercise price will generally be taxable to the optionee as compensation income
and will generally be deductible for tax purposes by the Company.
The grant of a stock appreciation right or restricted stock unit award
will not result in income for the grantee or in a tax deduction for the Company.
Upon the settlement of such a right or award, the grantee will include in gross
income an amount equal to the fair market value of any shares of Common Stock
and/or any cash received, and the Company will be entitled to a tax deduction in
the same amount. An award of restricted shares of Common Stock will not result
in income for the grantee or in a tax deduction for the Company until such time
as the shares are no longer subject to forfeiture unless the grantee elects
otherwise. At that time, the grantee generally will include in gross income an
amount equal to the fair market value of the shares less any amount paid for
them, and the Company will be entitled to a tax deduction in the same amount.
LIMITATIONS ON THE COMPANY'S COMPENSATION DEDUCTION
Section 162(m) of the Code limits the deduction which the Company may
take for otherwise deductible compensation payable to certain executive officers
to the extent that the yearly compensation paid to such officers exceeds $1.0
million, unless such compensation meets certain criteria. The Company believes
that compensation realized from stock options and stock appreciation rights
granted under the 1998 Plan generally will satisfy the requirements of Section
162(m) of the Code if the options or stock appreciation rights are granted by a
committee of "outside directors" (as defined under Section 162(m)) and are
granted at fair market value; however, there is no assurance that such awards
will satisfy such requirements. In addition, because other awards under the 1998
Plan will generally not meet the requirements of Section 162(m) of the Code, the
deduction attributable to any compensation realized under any such awards to the
affected executive officers may be limited. The Kasses Option does not satisfy
the requirements of Section 162(m) of the Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL FIVE.
Approval of Proposal Five will require the affirmative vote of a majority of the
aggregate voting power of the shares of Common Stock and Series D Preferred
Stock present in person or represented by proxy, voting together as a single
class.
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PROPOSAL SIX
ADOPTION OF THE NON-EMPLOYEE DIRECTORS' 1998 STOCK OPTION PLAN
AND
GRANTS OF OPTIONS UNDER THE PLAN
The Non-Employee Directors' 1998 Stock Option Plan (the "Directors'
Plan") was adopted by the Board of Directors as of May 28, 1998, subject to
approval by the Company's stockholders. The purpose of the Directors' Plan is to
provide an incentive to the Company's non-employee directors to serve on the
Board of Directors and to maintain and enhance the Company's long-term
performance. Stockholder approval of Proposal Six is necessary, inter alia, to
comply with the listing maintenance standards of Nasdaq.
The following summary of the main features of the Directors' Plan is
qualified by reference to the complete text of the plan, which is attached as
Exhibit E hereto.
GENERAL
The Directors' Plan provides for the issuance of authorized and unissued
shares of Common Stock, treasury shares and/or shares acquired by the Company
for purposes of the Directors' Plan up to a maximum of 3,000,000 shares (which
is approximately 6.7% of the Fairly-Diluted Common Stock as of May 28, 1998)
plus the number of shares underlying the options referred to below under the
caption "Initial Grant of Options to Present Non-Employee Directors." Generally,
shares subject to an option that remain unissued upon expiration or cancellation
of the option are available for other options under the Directors' Plan. In the
event of any change in the Common Stock by reason of a stock dividend,
recapitalization, merger, consolidation or the like, the Board of Directors will
adjust the number and kind of shares issuable, the number of shares subject to
options then outstanding or subsequently granted under the Directors' Plan and
the exercise price of such options.
INITIAL GRANTS OF OPTIONS TO PRESENT NON-EMPLOYEE DIRECTORS
Pursuant to the Directors' Plan, as of May 28, 1998 (the "Grant Date"),
the Board of Directors granted to each non-employee director of the Company,
subject to stockholder approval of this Proposal Six, stock options to purchase
the following respective numbers of shares of Common Stock at an initial
exercise price of $0.94375 per share, subject to adjustment as described below,
representing an aggregate of approximately 4% of the Fairly-Diluted Common Stock
as of May 28, 1998 (the "Grant Date"): Donald G. Drapkin, 675,000 shares; Glenn
L. Cooper, M.D. and Bobby W. Sandage, Jr., Ph.D., 337,500 shares each; and
Lawrence J. Kessel, M.D., Peter Salomon, M.D., Andrew J. Stein, Harlan J. Wakoff
and Michael S. Weiss, 75,000 shares each. The exercise price and number of
shares underlying such stock options shall be subject to adjustment if the
number of shares of Fairly-Diluted Common Stock as of the Adjustment Date is
other than 44,725,266 shares (subject to proportional adjustment for any stock
split or reverse stock split of the Common Stock) as a result of any and all
Covered Events occurring prior to such Adjustment Date, in which case (x) the
number of shares of Common Stock covered by the stock option shall increase by a
number of shares equal to the following respective percentages of the number of
shares of Fairly-Diluted Common Stock as of the Adjustment Date in excess of
44,725,266 that are attributable to Covered Events: Donald G. Drapkin, 1.5%;
Glenn L. Cooper, M.D. and Bobby W. Sandage, Jr., Ph.D., .75% each; and Lawrence
J. Kessel, M.D., Peter Salomon, M.D., Andrew J. Stein, Harlan J. Wakoff and
Michael S. Weiss, .167% each, and (y) the per-share exercise price shall be
adjusted to equal the conversion price of the Series D Preferred Stock
immediately after the Series D Reset.
Each of the options described above has a term of ten years and becomes
exercisable in 16 substantially equal installments on the last day of each
calendar quarter after October 1, 1997 provided that adjustments to the number
of options as provided above shall be prorated over the remaining quarterly
periods after the adjustment.
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In the event of a change in control of the Company (as defined in Section 8(d)
of the Directors' Plan), the options described above will become fully vested
and immediately exercisable (i) upon the termination of the director's status as
an Eligible Director under the Directors' Plan as a result of the removal of
such person from the Board (other than for cause) by shareholder action within
one year of such change in control or (ii) in the case of any liquidation of the
Company or sale or disposition of all or substantially all of the Company's
assets, immediately upon the consummation thereof.
ANNUAL OPTION GRANTS
The Directors' Plan provides for grants, at each annual meeting of
stockholders of the Company commencing with the Annual Meeting in 1999, of
nonqualified stock options to purchase 50,000 shares of Common Stock to each
non-employee director, excluding any director who is then receiving a grant
under any other equity-based plan or arrangement of the Company in connection
with his or her initial election or appointment to the Board of Directors,
provided that the director has served on the Board of Directors for at least six
months prior to the date of the annual meeting (such annual options, the "Annual
Options"). Each Annual Option granted under the Directors' Plan will have a term
of ten years and will become exercisable in full on the date of the annual
meeting next following the date of grant. The exercise price of each Annual
Option granted under the Directors' Plan will equal the fair market value of a
share of Common Stock on the date of the relevant Annual Meeting.
TERMINATION OF SERVICE
If a non-employee director's service on the Board terminates for any
reason other than death or disability, options granted under the Directors' Plan
will be exercisable for six months after termination to the extent they were
exercisable at the time of termination, but not after the expiration date of the
option. If a director dies or becomes disabled while serving on the Board or
during the aforementioned post-service exercise period, the options granted
under the Directors' Plan will, to the extent exercisable immediately prior to
death or disability, remain exercisable for one year after the date of death or
disability, but not after the expiration date of the option.
OTHER FEATURES OF THE DIRECTORS' PLAN
In the event of a merger or consolidation of the Company with or into
any other corporation or entity, outstanding awards shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation.
The Board may amend the Directors' Plan at any time or from time to
time; provided, that no amendment may impair any material rights or increase any
material obligations under any outstanding option without the optionee's
consent. Stockholder approval of any amendment shall be obtained to the extent
necessary to comply with any applicable law, rule or regulation.
Unless sooner terminated by the Board, the Directors' Plan will
terminate on the date when no more shares are available for issuance thereunder.
All options granted under the Directors' Plan prior to its termination will
continue in effect until exercised or terminated.
FEDERAL INCOME TAX CONSEQUENCES
The following description of the tax consequences of awards of options
under the Directors' Plan is based on present Federal tax laws, and does not
purport to be a complete description of the tax consequences of the Directors'
Plan.
There are generally no federal tax consequences either to the optionee
or to the Company upon the grant of a stock option. On exercise of a
non-qualified stock option, the amount by which the fair market value of the
Common Stock on the date of exercise exceeds the option exercise price will
generally be taxable to the optionee as compensation income and will generally
be deductible for tax purposes by the Company.
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<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL SIX.
Approval of Proposal Six will require the affirmative vote of a majority of the
aggregate voting power of the shares of Common Stock and Series D Preferred
Stock present in person or represented by proxy, voting together as a single
class.
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<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 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 February 22, 1999 [120 days before the date of this proxy
statement plus one year] 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
Section 16(a) of the 1934 Act, as amended, requires the directors and
executive officers of the Company and persons who beneficially own more than ten
percent of the Company's Common Stock (collectively, the "Reporting Persons") to
report their ownership of and transactions in the Company's Common Stock to the
SEC. Copies of these reports are also required to be supplied to the Company.
The Company believes, upon a review of the copies of such reports received by
the Company, written representations furnished by the Reporting Persons to the
Company and SEC filings, that during the year ended December 31, 1997 the
Reporting Persons complied with all applicable Section 16(a) reporting
requirements, except as follows: Mr. Michael Weiss did not file a Form 3 on a
timely basis to report his appointment as a director of the Company.
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,
/s/ Kenneth G. Kasses, Ph.D.
----------------------------
Kenneth G. Kasses, Ph.D.
President and
Chief Executive Officer
Dated: June 22, 1998
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<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
GENTA INCORPORATED
GENTA INCORPORATED, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Genta
Incorporated, resolutions were duly adopted setting forth proposed amendments of
the Restated Certificate of Incorporation of the corporation, and declaring that
such amendments are advisable and that such amendment should be submitted to the
stockholders of the corporation for approval. The resolutions setting forth the
proposed amendments are as follows:
A. Two-for-Three Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall have been
filed subsequent to July 14, 1998 effecting a reverse stock split of the Common
Stock, Article IV of the Company's Restated Certificate of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into
two-thirds (2/3) of a share of the Company's Common Stock, par value
$.001 per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the "Old
Certificates") shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificate") representing the
number of whole shares of the New Common Stock determined by dividing
the number of shares of Old Common Stock represented by such Old
Certificate(s) immediately prior to the time this amendment becomes
effective by three halves (3/2) and rounding such number up to the next
whole integer. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates pursuant to the
provisions hereof. No certificates or scrip representing fractional
share interests in New Common Stock will be issued. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old Certificates so
surrendered. In the event that the Company's Transfer Agent determines
that a holder of Old Certificates has not tendered all his certificates
for exchange, the Transfer Agent shall carry forward any fractional
share until all certificates of that holder have been presented for
exchange such that rounding up for fractional shares to any one person
shall not exceed one share. If any New Certificate is to be issued in a
name other than that in which the Old Certificates surrendered for
exchange are issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer, and the
person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of
the Transfer Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the shares of the
New Common Stock into which and for which the shares of the Old Common
Stock are reclassified under the terms hereof shall be the same as the
amount of capital represented by the shares
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<PAGE>
of Old Common Stock so reclassified, until thereafter reduced or
increased in accordance with applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
two-for-three Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
B. One-for-Two Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall have been
filed subsequent to July 14, 1998 effecting a reverse stock split of the Common
Stock, Article IV of the Company's Restated Certificate of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into one
half (1/2) of a share of the Company's Common Stock, par value $.001 per
share (the "New Common Stock"), subject to the treatment of fractional
share interests as described below. Each holder of a certificate or
certificates which immediately prior to the Effective Date represented
outstanding shares of Old Common Stock (the "Old Certificates") shall be
entitled to receive upon surrender of such Old Certificates to the
Company's Transfer Agent for cancellation, a certificate or certificates
(the "New Certificate") representing the number of whole shares of the
New Common Stock determined by dividing the number of shares of Old
Common Stock represented by such Old Certificate(s) immediately prior to
the time this amendment becomes effective by two (2) and rounding such
number up to the next whole integer. From and after the Effective Date,
Old Certificates shall represent only the right to receive New
Certificates pursuant to the provisions hereof. No certificates or scrip
representing fractional share interests in New Common Stock will be
issued. If more than one Old Certificate shall be surrendered at one
time for the account of the same stockholder, the number of full shares
of New Common Stock for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares represented by
the Old Certificates so surrendered. In the event that the Company's
Transfer Agent determines that a holder of Old Certificates has not
tendered all his certificates for exchange, the Transfer Agent shall
carry forward any fractional share until all certificates of that holder
have been presented for exchange such that rounding up for fractional
shares to any one person shall not exceed one share. If any New
Certificate is to be issued in a name other than that in which the Old
Certificates surrendered for exchange are issued, the Old Certificates
so surrendered shall be properly endorsed and otherwise in proper form
for transfer, and the person or persons requesting such exchange shall
affix any requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent that such taxes are not payable. From
and after the Effective Date the amount of capital represented by the
shares of the New Common Stock into which and for which the shares of
the Old Common Stock are reclassified under the terms hereof shall be
the same as the amount of capital represented by the shares of Old
Common Stock so reclassified, until thereafter reduced or increased in
accordance with applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
one-for-two Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
C. Two-for-Five Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall
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<PAGE>
have been filed subsequent to July 14, 1998 effecting a reverse stock split of
the Common Stock, Article IV of the Company's Restated Certificate of
Incorporation be amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into
two-fifths (2/5) of a share of the Company's Common Stock, par value
$.001 per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the "Old
Certificates") shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificate") representing the
number of whole shares of the New Common Stock determined by dividing
the number of shares of Old Common Stock represented by such Old
Certificate(s) immediately prior to the time this amendment becomes
effective by five halves (5/2) and rounding such number up to the next
whole integer. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates pursuant to the
provisions hereof. No certificates or scrip representing fractional
share interests in New Common Stock will be issued. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old Certificates so
surrendered. In the event that the Company's Transfer Agent determines
that a holder of Old Certificates has not tendered all his certificates
for exchange, the Transfer Agent shall carry forward any fractional
share until all certificates of that holder have been presented for
exchange such that rounding up for fractional shares to any one person
shall not exceed one share. If any New Certificate is to be issued in a
name other than that in which the Old Certificates surrendered for
exchange are issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer, and the
person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of
the Transfer Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the shares of the
New Common Stock into which and for which the shares of the Old Common
Stock are reclassified under the terms hereof shall be the same as the
amount of capital represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in accordance with
applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
two-for-five Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
- 3 -
<PAGE>
D. One-for-Three Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall have been
filed subsequent to July 14, 1998 effecting a reverse stock split of the Common
Stock, Article IV of the Company's Restated Certificate of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into
one-third (1/3) of a share of the Company's Common Stock, par value
$.001 per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the "Old
Certificates") shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificate") representing the
number of whole shares of the New Common Stock determined by dividing
the number of shares of Old Common Stock represented by such Old
Certificate(s) immediately prior to the time this amendment becomes
effective by three (3) and rounding such number up to the next whole
integer. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates pursuant to the
provisions hereof. No certificates or scrip representing fractional
share interests in New Common Stock will be issued. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old Certificates so
surrendered. In the event that the Company's Transfer Agent determines
that a holder of Old Certificates has not tendered all his certificates
for exchange, the Transfer Agent shall carry forward any fractional
share until all certificates of that holder have been presented for
exchange such that rounding up for fractional shares to any one person
shall not exceed one share. If any New Certificate is to be issued in a
name other than that in which the Old Certificates surrendered for
exchange are issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer, and the
person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of
the Transfer Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the shares of the
New Common Stock into which and for which the shares of the Old Common
Stock are reclassified under the terms hereof shall be the same as the
amount of capital represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in accordance with
applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
one-for-three Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
E. One-for-Four Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall have been
filed subsequent to July 14, 1998 effecting a reverse stock split of the Common
Stock, Article IV of the Company's Restated Certificate of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into one
quarter (1/4) of a share of the Company's Common Stock, par value $.001
per share (the "New Common Stock"), subject to the treatment of
fractional share
- 4 -
<PAGE>
interests as described below. Each holder of a certificate or
certificates which immediately prior to the Effective Date represented
outstanding shares of Old Common Stock (the "Old Certificates") shall be
entitled to receive upon surrender of such Old Certificates to the
Company's Transfer Agent for cancellation, a certificate or certificates
(the "New Certificate") representing the number of whole shares of the
New Common Stock determined by dividing the number of shares of Old
Common Stock represented by such Old Certificate(s) immediately prior to
the time this amendment becomes effective by four (4) and rounding such
number up to the next whole integer. From and after the Effective Date,
Old Certificates shall represent only the right to receive New
Certificates pursuant to the provisions hereof. No certificates or scrip
representing fractional share interests in New Common Stock will be
issued. If more than one Old Certificate shall be surrendered at one
time for the account of the same stockholder, the number of full shares
of New Common Stock for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares represented by
the Old Certificates so surrendered. In the event that the Company's
Transfer Agent determines that a holder of Old Certificates has not
tendered all his certificates for exchange, the Transfer Agent shall
carry forward any fractional share until all certificates of that holder
have been presented for exchange such that rounding up for fractional
shares to any one person shall not exceed one share. If any New
Certificate is to be issued in a name other than that in which the Old
Certificates surrendered for exchange are issued, the Old Certificates
so surrendered shall be properly endorsed and otherwise in proper form
for transfer, and the person or persons requesting such exchange shall
affix any requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent that such taxes are not payable. From
and after the Effective Date the amount of capital represented by the
shares of the New Common Stock into which and for which the shares of
the Old Common Stock are reclassified under the terms hereof shall be
the same as the amount of capital represented by the shares of Old
Common Stock so reclassified, until thereafter reduced or increased in
accordance with applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
one-for-four Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
F. One-for-Five Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall have been
filed subsequent to July 14, 1998 effecting a reverse stock split of the Common
Stock, Article IV of the Company's Restated Certificate of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into one
fifth (1/5) of a share of the Company's Common Stock, par value $.001
per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the "Old
Certificates") shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificate") representing the
number of whole shares of the New Common Stock determined by dividing
the number of shares of Old Common Stock represented by such Old
Certificate(s) immediately prior to the time this amendment becomes
effective by five (5) and rounding such number up to the next whole
integer. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates pursuant to the
provisions hereof. No certificates or scrip representing fractional
share interests in New Common Stock will be issued. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old Certificates so
surrendered. In the event that
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<PAGE>
the Company's Transfer Agent determines that a holder of Old
Certificates has not tendered all his certificates for exchange, the
Transfer Agent shall carry forward any fractional share until all
certificates of that holder have been presented for exchange such that
rounding up for fractional shares to any one person shall not exceed one
share. If any New Certificate is to be issued in a name other than that
in which the Old Certificates surrendered for exchange are issued, the
Old Certificates so surrendered shall be properly endorsed and otherwise
in proper form for transfer, and the person or persons requesting such
exchange shall affix any requisite stock transfer tax stamps to the Old
Certificates surrendered, or provide funds for their purchase, or
establish to the satisfaction of the Transfer Agent that such taxes are
not payable. From and after the Effective Date the amount of capital
represented by the shares of the New Common Stock into which and for
which the shares of the Old Common Stock are reclassified under the
terms hereof shall be the same as the amount of capital represented by
the shares of Old Common Stock so reclassified, until thereafter reduced
or increased in accordance with applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
one-for-five Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
G. One-for-Seven Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall have been
filed subsequent to July 14, 1998 effecting a reverse stock split of the Common
Stock, Article IV of the Company's Restated Certificate of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into one
seventh (1/7) of a share of the Company's Common Stock, par value $.001
per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the "Old
Certificates") shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificate") representing the
number of whole shares of the New Common Stock determined by dividing
the number of shares of Old Common Stock represented by such Old
Certificate(s) immediately prior to the time this amendment becomes
effective by seven (7) and rounding such number up to the next whole
integer. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates pursuant to the
provisions hereof. No certificates or scrip representing fractional
share interests in New Common Stock will be issued. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old Certificates so
surrendered. In the event that the Company's Transfer Agent determines
that a holder of Old Certificates has not tendered all his certificates
for exchange, the Transfer Agent shall carry forward any fractional
share until all certificates of that holder have been presented for
exchange such that rounding up for fractional shares to any one person
shall not exceed one share. If any New Certificate is to be issued in a
name other than that in which the Old Certificates surrendered for
exchange are issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer, and the
person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of
the Transfer Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the shares of the
New Common Stock into which and for which the shares of the Old Common
Stock are reclassified under the terms hereof shall be the same as the
amount of capital represented by the shares
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<PAGE>
of Old Common Stock so reclassified, until thereafter reduced or
increased in accordance with applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
one-for-seven Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
H. One-for-Ten Reverse Stock Split.
RESOLVED, that, prior to the Company's next Annual Meeting of
Stockholders following the 1998 Annual Meeting, on the condition that no other
amendment to the Company's Restated Certificate of Incorporation shall have been
filed subsequent to July 14, 1998 effecting a reverse stock split of the Common
Stock, Article IV of the Company's Restated Certificate of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall automatically and without any action on
the part of the holder thereof be reclassified as and changed into one
tenth (1/10) of a share of the Company's Common Stock, par value $.001
per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the "Old
Certificates") shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificate") representing the
number of whole shares of the New Common Stock determined by dividing
the number of shares of Old Common Stock represented by such Old
Certificate(s) immediately prior to the time this amendment becomes
effective by ten (10) and rounding such number up to the next whole
integer. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates pursuant to the
provisions hereof. No certificates or scrip representing fractional
share interests in New Common Stock will be issued. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old Certificates so
surrendered. In the event that the Company's Transfer Agent determines
that a holder of Old Certificates has not tendered all his certificates
for exchange, the Transfer Agent shall carry forward any fractional
share until all certificates of that holder have been presented for
exchange such that rounding up for fractional shares to any one person
shall not exceed one share. If any New Certificate is to be issued in a
name other than that in which the Old Certificates surrendered for
exchange are issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer, and the
person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of
the Transfer Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the shares of the
New Common Stock into which and for which the shares of the Old Common
Stock are reclassified under the terms hereof shall be the same as the
amount of capital represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in accordance with
applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
one-for-ten Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the stockholders of the Company, the board of directors may abandon
such proposed amendment without further action by the stockholders.
SECOND: Thereafter, pursuant to resolutions of the corporation's Board
of Directors, the amendments were 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 Kenneth G. Kasses, Ph.D., its President, and by Robert E. Klem, Ph.D.,
its Vice President, as of this ___ day of __________________.
GENTA INCORPORATED
By_______________________
Kenneth G. Kasses, Ph.D.
President
Attest:
- ---------------------------
Robert E. Klem, Ph.D.
Vice President
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<PAGE>
EXHIBIT B
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 sentence of Article XI of the Restated
Certificate of Incorporation, as amended, of the Company be, and hereby is,
deleted.
SECOND: Thereafter, pursuant to resolutions of the corporation's Board
of Directors, the amendment was submitted to the stockholders of the corporation
for approval at a Meeting of Stockholders, and such meeting was called and held
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware. The necessary number of shares as required by statute were
voted in favor of the amendment.
THIRD: The said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by Kenneth G. Kasses, Ph.D., its President, and by Robert E. Klem, Ph.D.,
its Vice President, as of this ___ day of __________________.
GENTA INCORPORATED
By_______________________
Kenneth G. Kasses, Ph.D.
President
Attest:
- ---------------------------
Robert E. Klem, Ph.D.
Vice President
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<PAGE>
EXHIBIT C
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 Article X of the Certificate of Incorporation be
deleted and replaced with the following:
The number of directors which shall constitute the whole Board of
Directors of the corporation shall be determined in the by-laws as
provided therein. The directors of the corporation shall be elected by
the stockholders entitled to vote thereon at each annual meeting of
stockholders and shall hold office until the next annual meeting of
stockholders and until their respective successors shall have been
elected and qualified, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. The term of office
of each director in office at the time this amendment to Article X of
the Restated Certificate of Incorporation of the corporation becomes
effective shall expire at the time of the opening of the polls for the
election of directors at the next annual meeting of stockholders of the
corporation held after the time this amendment to Article X becomes
effective.
SECOND: Thereafter, pursuant to resolutions of the corporation's Board
of Directors, the amendment was submitted to the stockholders of the corporation
for approval at a Meeting of Stockholders, and such meeting was called and held
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware. The necessary number of shares as required by statute were
voted in favor of the amendment.
THIRD: The said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by Kenneth G. Kasses, Ph.D., its President, and by Robert E. Klem, Ph.D.,
its Vice President, as of this ___ day of __________________.
GENTA INCORPORATED
By_______________________
Kenneth G. Kasses, Ph.D.
President
Attest:
- ---------------------------
Robert E. Klem, Ph.D.
Vice President
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<PAGE>
EXHIBIT D
GENTA INCORPORATED
1998 STOCK INCENTIVE PLAN
<PAGE>
Table of Contents
Page
ARTICLE I
GENERAL
1.1 Purpose............................................................ 1
1.2 Administration..................................................... 1
1.3 Persons Eligible for Awards........................................ 2
1.4 Types of Awards Under Plan......................................... 2
1.5 Shares Available for Awards........................................ 2
1.6 Definitions of Certain Terms....................................... 4
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards....................................... 5
2.2 No Rights as a Shareholder......................................... 6
2.3 Grant of Stock Options, Stock Appreciation
Rights and Reload Options........................................ 6
2.4 Exercise of Options and Stock Appreciation Rights.................. 8
2.5 Termination of Employment; Death................................... 8
2.6 Grant of Restricted Stock.......................................... 9
2.7 Grant of Restricted Stock Units.................................... 10
2.8 Other Stock-Based Awards........................................... 10
2.9 Grant of Dividend Equivalent Rights................................ 11
2.10 Right of Recapture................................................. 11
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards...................... 11
3.2 Tax Withholding.................................................... 12
3.3 Restrictions....................................................... 12
3.4 Nonassignability................................................... 13
3.5 Requirement of Notification of Election
Under Section 83(b) of the Code.................................. 13
3.6 Requirement of Notification Upon Disqualifying Disposition Under
Section 421(b) of the Code....................................... 13
3.7 Change in Control, Dissolution, Liquidation, Merger................ 13
3.8 Right of Discharge Reserved........................................ 15
3.9 Nature of Payments................................................. 15
3.10 Non-Uniform Determinations......................................... 16
3.11 Other Payments or Awards........................................... 16
3.12 Section Headings................................................... 16
3.13 Effective Date and Term of Plan.................................... 16
3.14 Governing Law...................................................... 16
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ARTICLE I
GENERAL
1.1 Purpose
The purpose of the Genta Incorporated 1998 Stock Incentive Plan
(the "Plan") is to provide for officers, other employees and directors of, and
consultants to, Genta Incorporated (the "Company") and its subsidiaries an
incentive (a) to enter into and remain in the service of the Company, (b) to
enhance the long-term performance of the Company, and (c) to acquire a
proprietary interest in the success of the Company.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by
the Compensation Committee (the "Committee") of the board of directors of the
Company (the "Board"), which shall consist of not less than two directors. The
members of the Committee shall be appointed by, and serve at the pleasure of,
the Board. To the extent required for transactions under the Plan to qualify for
the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards
to persons subject to Section 16 of the 1934 Act shall be taken by the Board
unless each person who serves on the Committee is a "non-employee director"
within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of
the Committee (or the Board) comprised solely of "non-employee directors". To
the extent required for compensation realized from awards under the Plan to be
deductible by the Company pursuant to section 162(m) of the Internal Revenue
Code of 1986 (the "Code"), the members of the Committee shall be "outside
directors" within the meaning of section 162(m).
1.2.2 The Committee shall have the authority (a) to exercise all
of the powers granted to it under the Plan; (b) to construe, interpret and
implement the Plan and any plan agreements executed pursuant to Section 2.1; (c)
to prescribe, or amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations; (d) to make all determinations
necessary or advisable in administering the Plan; (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan; (f) to amend
the Plan to reflect changes in applicable law; (g) to determine whether, to what
extent and under what circumstances awards may be settled or exercised in cash,
Shares of Common Stock, other securities, other awards or other property, or
canceled, forfeited or suspended and the method or methods by which awards may
be settled, canceled, forfeited or suspended; and (h) to determine whether, to
what extent and under what circumstances cash, shares of Common Stock, other
securities, other awards or other property and other amounts payable with
respect to an award shall be deferred either automatically or at the election of
the holder thereof or of the Committee.
1.2.3 Actions of the Committee shall be taken by the vote of a
majority of its members. Any action may be taken by a written instrument signed
by a majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
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<PAGE>
1.2.4 The determination of the Committee on all matters relating
to the Plan or any plan agreement shall be final, binding and conclusive.
1.2.5 No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained herein:
(a) until the Board shall appoint the members of the Committee, the Plan shall
be administered by the Board; and (b) the Board may, in its sole discretion, at
any time and from time to time, grant awards or resolve to administer the Plan.
In either of the foregoing events, the Board shall have all of the authority and
responsibility granted to the Committee herein.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such directors (including
directors who are not employees), officers and other employees of the Company
and its subsidiaries (including prospective employees conditioned on their
becoming employees), and to such consultants, advisers and other independent
contractors of the Company and its subsidiaries (collectively, "key persons"),
as the Committee shall select in its discretion.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive
stock options (within the meaning of section 422 of the Code); (b) non-qualified
stock options; (c) stock appreciation rights; (d) dividend equivalent rights;
(e) restricted stock; (f) restricted stock units; and (g) other stock-based
awards, all as more fully set forth in Article II. The term "award" means any of
the foregoing. No incentive stock option (other than an incentive stock option
that may be assumed or issued by the Company in connection with a transaction to
which section 424(a) of the Code applies) may be granted to a person who is not
an employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 Total shares available. The total number of shares of
common stock of the Company, par value $.001 per share ("Common Stock"), which
may be transferred pursuant to awards granted under the Plan shall not exceed
6,750,000; provided, however, that such number of shares may be increased at any
time or from time to time, at the discretion of the Board of Directors, by an
aggregate amount up to the product of (x) .15 and (y) the sum of (1) the
difference between (A) the number of shares of Common Stock which may be
obtained upon conversion of the Series D Convertible Preferred Stock pursuant to
the modification in the conversion price effected by the Reset, as defined in
the fifth paragraph of Subsection 4 (a) of the Certificate of Designations for
the Series D Convertible Preferred Stock, as amended from time to time, or any
contractual modification to such Reset (collectively, the "Reset"); and (B) the
number of shares of Common Stock obtainable upon conversion of the Series D
Convertible Preferred Stock immediately prior to such Reset and (2) the number
of shares of Common Stock which may be obtained upon the exercise of any
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<PAGE>
Penalty Warrants (as defined in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997). Notwithstanding the foregoing, the total number
of incentive stock options (as defined in Section 1.6.2) which may be granted
may not exceed 5,000,000 shares. Such shares may be authorized but unissued
Common Stock or authorized and issued Common Stock held in the Company's
treasury or acquired by the Company for the purposes of the Plan. The Committee
may direct that any stock certificate evidencing shares issued pursuant to the
Plan shall bear a legend setting forth such restrictions on transferability as
may apply to such shares pursuant to the Plan. If, after the effective date of
the Plan, any award is forfeited or any award otherwise terminates or is
cancelled without the delivery of shares of Common Stock, then the shares
covered by such award or to which such award relates shall again become
available for transfer pursuant to awards granted or to be granted under this
Plan. Any shares of Common Stock delivered by the Company, any shares of Common
Stock with respect to which awards are made by the Company and any shares of
Common Stock with respect to which the Company becomes obligated to make awards,
through the assumption of, or in substitution for, outstanding awards previously
granted by an acquired entity, shall not be counted against the shares available
for awards under this Plan.
1.5.2 Individual Limit. The total number of shares of Common
Stock with respect to which stock options and stock appreciation rights may be
granted to any one employee of the Company or a subsidiary during any two-year
period shall not exceed 8,000,000 shares.
1.5.3 Adjustments. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding award, the number of shares available for awards, the number of
shares that may be subject to awards to any one employee, and the price per
share of Common Stock covered by each such outstanding award shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Committee, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein or in the applicable
plan agreement, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an award. After any adjustment made
pursuant to this Section 1.5.3, the number of shares subject to each outstanding
award shall be rounded to the nearest whole number.
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<PAGE>
1.5.4 Except as provided in this Section 1.5 and in Section
2.3.8, there shall be no limit on the number or the value of the shares of
Common Stock that may be subject to awards to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The "Fair Market Value" of a share of Common Stock on any
day shall be determined as follows.
(a) If the principal market for the Common Stock (the
"Market") is a national securities exchange or the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market or
Small Cap Market, the last sale price or, if no reported sales take place on the
applicable date, the average of the high bid and low asked price of Common Stock
as reported for such Market on such date or, if no such quotation is made on
such date, on the next preceding day on which there were quotations, provided
that such quotations shall have been made within the ten (10) business days
preceding the applicable date;
(b) If the Common Stock is actively traded but paragraph
(a) does not apply, the average of the high bid and low asked price for Common
Stock on the applicable date, or, if no such quotations shall have been made on
such date, on the next preceding day on which there were quotations, provided
that such quotations shall have been made within the ten (10) business days
preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor (b) shall
apply, the Fair Market Value of a share of Common Stock on any day shall be
determined in good faith by the Committee.
1.6.2 The term "incentive stock option" means an option that is
intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Code, as now constituted or subsequently amended, or
pursuant to a successor provision of the Code, and which is so designated in the
applicable plan agreement. Any option that is not specifically designated as an
incentive stock option shall under no circumstances be considered an incentive
stock option. Any option that is not an incentive stock option is referred to
herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of an
award under the Plan who is not an employee of the Company, the grantee's
association with the Company or a subsidiary as a director, consultant, adviser,
other independent contractor or otherwise.
1.6.4 A grantee shall be deemed to have a "termination of
employment" upon ceasing to be employed by the Company and all of its
subsidiaries or by a corporation assuming awards in a transaction to which
section 424(a) of the Code applies. The Committee may in its discretion
determine (a) whether any leave of absence constitutes a termination of
employment for purposes of the Plan; (b) the impact, if any, of any such leave
of absence
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<PAGE>
on awards theretofore made under the Plan; and (c) when a change in a
non-employee's association with the Company constitutes a termination of
employment for purposes of the Plan. The Committee shall have the right to
determine whether a grantee's termination of employment is a dismissal for cause
and the date of termination in such case, which date the Committee may
retroactively deem to be the date of the action that is cause for dismissal.
Such determinations of the Committee shall be final, binding and conclusive.
1.6.5 The term "cause," when used in connection with termination
of a grantee's employment, shall have the meaning set forth in any
then-effective employment agreement between the grantee and the Company or a
subsidiary thereof. In the absence of such an employment agreement provision,
"cause" means: (a) conviction of any crime (whether or not involving the Company
or its subsidiaries) constituting a felony in the jurisdiction involved; (b)
engaging in any act which, in each case, subjects, or if generally known would
subject, the Company or its subsidiaries to public ridicule or embarrassment;
(c) material violation of the Company's or a subsidiary's policies, including,
without limitation, those relating to sexual harassment or the disclosure or
misuse of confidential information; (d) serious neglect or misconduct in the
performance of the grantee's duties for the Company or a subsidiary or willful
or repeated failure or refusal to perform such duties; in each case as
determined by the Committee, which determination shall be final, binding and
conclusive.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan (except an award of
unrestricted stock) shall be evidenced by a written agreement ("plan agreement")
which shall contain such provisions as the Committee in its discretion deems
necessary or desirable. Such provisions may include, without limitation, a
requirement that the grantee become a party to a shareholders' agreement with
respect to any shares of Common Stock acquired pursuant to the award, a
requirement that the grantee acknowledge that such shares are acquired for
investment purposes only, and a right of first refusal exercisable by the
Company in the event that the grantee wishes to transfer any such shares. The
Committee may grant awards in tandem with or in substitution for any other award
or awards granted under this Plan or any award granted under any other plan of
the Company or any subsidiary. Payments or transfers to be made by the Company
or any subsidiary upon the grant, exercise or payment of an award may be made in
such form as the Committee shall determine, including cash, shares of Common
Stock, other securities, other awards or other property and may be made in a
single payment or transfer, in installments or on a deferred basis, in each case
in accordance with rules established by the Committee. By accepting an award
pursuant to the Plan, a grantee thereby agrees that the award shall be subject
to all of the terms and provisions of the Plan and the applicable plan
agreement.
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<PAGE>
2.2 No Rights as a Shareholder
No grantee of an option or stock appreciation right (or other
person having the right to exercise such award) shall have any of the rights of
a shareholder of the Company with respect to shares subject to such award until
the issuance of a stock certificate to such person for such shares. Except as
otherwise provided in Section 1.5.3, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
2.3 Grant of Stock Options, Stock Appreciation
Rights and Reload Options
2.3.1 The Committee may grant incentive stock options and
nonqualified stock options (collectively, "options") to purchase shares of
Common Stock from the Company, to such key persons, in such amounts and subject
to such terms and conditions, as the Committee shall determine in its
discretion, subject to the provisions of the Plan.
2.3.2 The Committee may grant stock appreciation rights to such
key persons, in such amounts and subject to such terms and conditions, as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock
appreciation right granted in connection with a nonqualified stock option may be
granted at or after the time of grant of such option. A stock appreciation right
granted in connection with an incentive stock option may be granted only at the
time of grant of such option.
2.3.3 The grantee of a stock appreciation right shall have the
right, subject to the terms of the Plan and the applicable plan agreement, to
receive from the Company an amount equal to (a) the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over (b) the exercise price of such right as set forth in the
plan agreement (or over the option exercise price if the stock appreciation
right is granted in connection with an option), multiplied by (c) the number of
shares with respect to which the stock appreciation right is exercised. Payment
upon exercise of a stock appreciation right shall be in cash or in shares of
Common Stock (valued at their Fair Market Value on the date of exercise of the
stock appreciation right) or both, all as the Committee shall determine in its
discretion. Upon the exercise of a stock appreciation right granted in
connection with an option, the number of shares subject to the option shall be
correspondingly reduced by the number of shares with respect to which the stock
appreciation right is exercised. Upon the exercise of an option in connection
with which a stock appreciation right has been granted, the number of shares
subject to the stock appreciation right shall be correspondingly reduced by the
number of shares with respect to which the option is exercised.
2.3.4 Each plan agreement with respect to an option shall set
forth the amount (the "option exercise price") payable by the grantee to the
Company upon exercise of the
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<PAGE>
option evidenced thereby. The option exercise price per share shall be
determined by the Committee in its discretion; provided, however, that the
option exercise price of an incentive stock option shall be at least 100% of the
Fair Market Value of a share of Common Stock on the date the option is granted
(except as permitted in connection with the assumption or issuance of options in
a transaction to which section 424(a) of the Code applies), and provided further
that in no event shall the option exercise price be less than the par value of a
share of Common Stock.
2.3.5 Each plan agreement with respect to an option or stock
appreciation right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be
determined by the Committee in its discretion; provided, however, that no
incentive stock option (or a stock appreciation right granted in connection with
an incentive stock option) shall be exercisable more than 10 years after the
date of grant.
2.3.6 The Committee may in its discretion include in any plan
agreement with respect to an option (the "original option") a provision that an
additional option (the "additional option") shall be granted to any grantee who,
pursuant to Section 2.4.3(b), delivers shares of Common Stock in partial or full
payment of the exercise price of the original option. The additional option
shall be for a number of shares of Common Stock equal to the number thus
delivered, shall have an exercise price equal to the Fair Market Value of a
share of Common Stock on the date of exercise of the original option, and shall
have an expiration date no later than the expiration date of the original
option. In the event that a plan agreement provides for the grant of an
additional option, such Agreement shall also provide that the exercise price of
the original option be no less than the Fair Market Value of a share of Common
Stock on its date of grant, and that any shares that are delivered pursuant to
Section 2.4.3(b) in payment of such exercise price shall have been held for at
least six months.
2.3.7 To the extent that the aggregate Fair Market Value
(determined as of the time the option is granted) of the stock with respect to
which incentive stock options granted under this Plan and all other plans of the
Company and any subsidiary are first exercisable by any employee during any
calendar year shall exceed the maximum limit (currently, $100,000), if any,
imposed from time to time under section 422 of the Code, such options shall be
treated as nonqualified stock options.
2.3.8 Notwithstanding the provisions of Sections 2.3.4 and 2.3.5,
to the extent required under section 422 of the Code, an incentive stock option
may not be granted under the Plan to an individual who, at the time the option
is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of his employer corporation or of its parent or
subsidiary corporations (as such ownership may be determined for purposes of
section 422(b)(6) of the Code) unless (a) at the time such incentive stock
option is granted the option exercise price is at least 110% of the Fair Market
Value of the shares subject thereto and (b) the incentive stock option by its
terms is not exercisable after the expiration of five (5) years from the date it
is granted.
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<PAGE>
2.4 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or
stock appreciation right granted under the Plan shall be exercisable as follows:
2.4.1 Unless the applicable plan agreement otherwise provides, an
option or stock appreciation right shall become exercisable in four
substantially equal installments, on each of the first, second, third and fourth
anniversaries of the date of grant, and each installment, once it becomes
exercisable, shall remain exercisable until expiration, cancellation or
termination of the award.
2.4.2 Unless the applicable plan agreement otherwise provides, an
option or stock appreciation right may be exercised from time to time as to all
or part of the shares as to which such award is then exercisable (but, in any
event, only for whole shares). A stock appreciation right granted in connection
with an option may be exercised at any time when, and to the same extent that,
the related option may be exercised. An option or stock appreciation right shall
be exercised by the filing of a written notice with the Company, on such form
and in such manner as the Committee shall prescribe.
2.4.3 Any written notice of exercise of an option shall be
accompanied by payment for the shares being purchased. Such payment shall be
made: (a) by certified or official bank check (or the equivalent thereof
acceptable to the Company) for the full option exercise price; or (b) unless the
applicable plan agreement provides otherwise, by delivery of shares of Common
Stock (which, if acquired pursuant to exercise of a stock option, were acquired
at least six months prior to the option exercise date) and having a Fair Market
Value (determined as of the exercise date) equal to all or part of the option
exercise price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full option exercise
price; or (c) at the discretion of the Committee and to the extent permitted by
law, by such other method as the Committee may from time to time prescribe.
2.4.4 Promptly after receiving payment of the full option
exercise price, or after receiving notice of the exercise of a stock
appreciation right for which payment will be made partly or entirely in shares,
the Company shall, subject to the provisions of Section 3.3 (relating to certain
restrictions), deliver to the grantee or to such other person as may then have
the right to exercise the award, a certificate or certificates for the shares of
Common Stock for which the award has been exercised. If the method of payment
employed upon option exercise so requires, and if applicable law permits, an
optionee may direct the Company to deliver the certificate(s) to the optionee's
stockbroker.
2.5 Termination of Employment; Death
2.5.1 Except to the extent otherwise provided in Section 2.5.2 or
2.5.3 or in the applicable plan agreement, all options and stock appreciation
rights not theretofore exercised shall terminate upon termination of the
grantee's employment for any reason (including death).
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2.5.2 Except to the extent otherwise provided in the applicable
plan agreement, if a grantee's employment terminates for any reason other than
death or dismissal for cause, the grantee may exercise any outstanding option or
stock appreciation right on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was entitled to exercise the award
on the date of employment termination; and (b) exercise must occur within ninety
(90) days after employment terminates, except that this ninety day period shall
be increased to one year if the termination is by reason of disability, but in
no event after the expiration date of the award as set forth in the plan
agreement. In the case of an incentive stock option, the term "disability" for
purposes of the preceding sentence shall have the meaning given to it by section
422(c)(6) of the Code.
2.5.3 Except to the extent otherwise provided in the applicable
plan agreement, if a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which the
grantee's awards are exercisable pursuant to Section 2.5.2, any outstanding
option or stock appreciation right shall be exercisable on the following terms
and conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of death; and (b) exercise must occur
by the earlier of the first anniversary of the grantee's death or the expiration
date of the award. Any such exercise of an award following a grantee's death
shall be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such exercise
shall be made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the preceding
sentence, such representative or recipient shall be bound by all the terms and
conditions of the Plan and the applicable plan agreement which would have
applied to the grantee.
2.6 Grant of Restricted Stock
2.6.1 The Committee may grant restricted shares of Common Stock
to such key persons, in such amounts, and subject to such terms and conditions
as the Committee shall determine in its discretion, subject to the provisions of
the Plan. Restricted stock awards may be made independently of or in connection
with any other award under the Plan. A grantee of a restricted stock award shall
have no rights with respect to such award unless such grantee accepts the award
within such period as the Committee shall specify by executing a plan agreement
in such form as the Committee shall determine and, if the Committee shall so
require, makes payment to the Company by certified or official bank check (or
the equivalent thereof acceptable to the Company) in such amount as the
Committee may determine.
2.6.2 Promptly after a grantee accepts a restricted stock award,
the Company shall issue in the grantee's name a certificate or certificates for
the shares of Common Stock covered by the award. Upon the issuance of such
certificate(s), the grantee shall have the rights of a shareholder with respect
to the restricted stock, subject to the non-transferability restrictions and
Company repurchase rights described in Sections 2.6.4 and 2.6.5 and to such
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other restrictions and conditions as the Committee in its discretion may include
in the applicable plan agreement.
2.6.3 Unless the Committee shall otherwise determine, any
certificate issued evidencing shares of restricted stock shall remain in the
possession of the Company until such shares are free of any restrictions
specified in the applicable plan agreement.
2.6.4 Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in this Plan or the applicable plan agreement. The
Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance goals and other conditions)
on which the non-transferability of the restricted stock shall lapse. Unless the
applicable plan agreement provides otherwise, additional shares of Common Stock
or other property distributed to the grantee in respect of shares of restricted
stock, as dividends or otherwise, shall be subject to the same restrictions
applicable to such restricted stock.
2.6.5 During the 120 days following termination of the grantee's
employment for any reason, the Company shall have the right to require the
return of any shares to which restrictions on transferability apply, in exchange
for which the Company shall repay to the grantee (or the grantee's estate) any
amount paid by the grantee for such shares.
2.7 Grant of Restricted Stock Units
2.7.1 The Committee may grant awards of restricted stock units to
such key persons, in such amounts, and subject to such terms and conditions as
the Committee shall determine in its discretion, subject to the provisions of
the Plan. Restricted stock units may be awarded independently of or in
connection with any other award under the Plan.
2.7.2 At the time of grant, the Committee shall specify the date
or dates on which the restricted stock units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. In the event of the termination of the grantee's employment by the
Company and its subsidiaries for any reason, restricted stock units that have
not become nonforfeitable shall be forfeited and cancelled.
2.7.3 At the time of grant, the Committee shall specify the
maturity date applicable to each grant of restricted stock units, which may be
determined at the election of the grantee. Such date may be later than the
vesting date or dates of the award. On the maturity date, the Company shall
transfer to the grantee one unrestricted, fully transferable share of Common
Stock for each restricted stock unit scheduled to be paid out on such date and
not previously forfeited. The Committee shall specify the purchase price, if
any, to be paid by the grantee to the Company for such shares of Common Stock.
2.8 Other Stock-Based Awards
The Committee may grant other types of stock-based awards
(including the grant of unrestricted shares) to such key persons, in such
amounts and subject to such terms
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and conditions, as the Committee shall in its discretion determine, subject to
the provisions of the Plan. Such awards may entail the transfer of actual shares
of Common Stock to Plan participants, or payment in cash or otherwise of amounts
based on the value of shares of Common Stock.
2.9 Grant of Dividend Equivalent Rights
The Committee may in its discretion include in the plan agreement
with respect to any award a dividend equivalent right entitling the grantee to
receive amounts equal to the ordinary dividends that would be paid, during the
time such award is outstanding and unexercised, on the shares of Common Stock
covered by such award if such shares were then outstanding. In the event such a
provision is included in a plan agreement, the Committee shall determine whether
such payments shall be made in cash, in shares of Common Stock or in another
form, whether they shall be conditioned upon the exercise of the award to which
they relate, the time or times at which they shall be made, and such other terms
and conditions as the Committee shall deem appropriate.
2.10 Right of Recapture
2.10.1 If at any time within one year after the date on which a
participant exercises an option or stock appreciation right, or on which
restricted stock vests, or which is the maturity date of restricted stock units,
or on which income is realized by a participant in connection with any other
stock-based award (each of which events is a "realization event"), the
participant (a) is terminated for cause or (b) engages in any activity
determined in the discretion of the Committee to be in competition with any
activity of the Company, or otherwise inimical, contrary or harmful to the
interests of the Company (including, but not limited to, accepting employment
with or serving as a consultant, adviser or in any other capacity to an entity
that is in competition with or acting against the interests of the Company),
then any gain realized by the participant from the realization event shall be
paid by the participant to the Company upon notice from the Company. Such gain
shall be determined as of the date of the realization event, without regard to
any subsequent change in the Fair Market Value of a share of Common Stock. The
Company shall have the right to offset such gain against any amounts otherwise
owed to the participant by the Company (whether as wages, vacation pay, or
pursuant to any benefit plan or other compensatory arrangement).
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time suspend, discontinue,
revise or amend the Plan in any respect whatsoever, except that no such
amendment shall materially impair any rights or materially increase any
obligations under any award theretofore made under the Plan without the consent
of the grantee (or, after the grantee's death, the person having the right to
exercise the award). For purposes of this Section 3.1, any action of the
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Board or the Committee that alters or affects the tax treatment of any award
shall not be considered to materially impair any rights of any grantee.
3.1.2 Shareholder approval of any amendment shall be obtained to
the extent necessary to comply with section 422 of the Code (relating to
incentive stock options) or other applicable law or regulation.
3.1.3 The Committee may amend any outstanding plan agreement,
including, without limitation, by amendment which would accelerate the time or
times at which the award becomes unrestricted or may be exercised, or waive or
amend any goals, restrictions or conditions set forth in the Agreement. However,
any such amendment (other than an amendment pursuant to Section 3.7.2, relating
to change in control) that materially impairs the rights or materially increases
the obligations of a grantee under an outstanding award shall be made only with
the consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award).
3.2 Tax Withholding
3.2.1 As a condition to the receipt of any shares of Common Stock
pursuant to any award or the lifting of restrictions on any award, or in
connection with any other event that gives rise to a federal or other
governmental tax withholding obligation on the part of the Company relating to
an award (including, without limitation, FICA tax), the Company shall be
entitled to require that the grantee remit to the Company an amount sufficient
in the opinion of the Company to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation is a
transfer of shares of Common Stock, then, unless otherwise specified in the
applicable plan agreement, the grantee may satisfy the withholding obligation
imposed under Section 3.2.1 by electing to have the Company withhold shares of
Common Stock having a Fair Market Value equal to the amount of tax to be
withheld. For this purpose, Fair Market Value shall be determined as of the date
on which the amount of tax to be withheld is determined (and any fractional
share amount shall be settled in cash).
3.3 Restrictions
3.3.1 If the Committee shall at any time determine that any
consent (as hereinafter defined) is necessary or desirable as a condition of, or
in connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action a "plan action"), then such plan action shall not
be taken, in whole or in part, unless and until such consent shall have been
effected or obtained to the full satisfaction of the Committee.
3.3.2 The term "consent" as used herein with respect to any plan
action means (a) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (b) any and all written agreements and
representations by the grantee with respect to the disposition of
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shares, or with respect to any other matter, which the Committee shall deem
necessary or desirable to comply with the terms of any such listing,
registration or qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made and (c) any and all
consents, clearances and approvals in respect of a plan action by any
governmental or other regulatory bodies.
3.4 Nonassignability
Except to the extent otherwise provided in the applicable plan
agreement, no award or right granted to any person under the Plan shall be
assignable or transferable other than by will or by the laws of descent and
distribution, and all such awards and rights shall be exercisable during the
life of the grantee only by the grantee or the grantee's legal representative.
3.5 Requirement of Notification of
Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of
shares of Common Stock under the Plan, make the election permitted under section
83(b) of the Code (that is, an election to include in gross income in the year
of transfer the amounts specified in section 83(b)), such grantee shall notify
the Company of such election within ten (10) days of filing notice of the
election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under the authority of Code
section 83(b).
3.6 Requirement of Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code
If any grantee shall make any disposition of shares of Common
Stock issued pursuant to the exercise of an incentive stock option under the
circumstances described in section 421(b) of the Code (relating to certain
disqualifying dispositions), such grantee shall notify the Company of such
disposition within 10 days thereof.
3.7 Change in Control, Dissolution, Liquidation, Merger
3.7.1 For purposes of this Section 3.7, a "change in control"
shall have occurred if:
(a) any "person", as such term is used in Sections 13(d)
and 14(d) of the 1934 Act (other than (i) the shareholders of the Company as of
the effective date of the Plan (the "Current Shareholders", such term to include
their heirs or estates, or trusts or other entities the primary beneficiaries of
which are the Current Shareholders or persons designated by them), (ii) the
Company or any subsidiary of the Company, (iii) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, or (iv) any company owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as their
ownership of stock of
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the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company's then
outstanding securities without the prior written consent of the Committee or the
Board; or
(b) during any period of twenty-four (24) consecutive
months, individuals who at the effective date of the Plan constitute the Board
and any new director whose election by the Board or nomination for election by
the Company shareholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(c) the shareholders of the Company approve a merger or
consoli- dation of the Company with any other company (other than a wholly-owned
subsidiary of the Company), other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) 50% or more of the
combined voting power of voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or (ii) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" (as defined in Section 3.7.1(a)
above with the exceptions noted in section 3.7.1(a)) acquires more than 50% of
the combined voting power of the Company's then outstanding securities; or
(d) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
3.7.2 Upon the happening of a change in control:
(a) notwithstanding any other provision of this Plan, any
option or stock appreciation right then outstanding shall become fully vested
and immediately exercisable upon the subsequent termination of employment of the
grantee by the Company or its successors without cause within one year of such
change in control unless the applicable plan agreement expressly provides
otherwise;
(b) to the fullest extent permitted by law, the Committee
may, in its sole discretion, amend any plan agreement in such manner as it deems
appropriate, including, without limitation, by amendments that advance the dates
upon which any or all outstanding awards of any type shall terminate.
3.7.3 In the event of the proposed dissolution or liquidation of
the Company, all outstanding awards will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, accelerate the date on which any award
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becomes exercisable or fully vested and/or declare that any award shall
terminate as of a specified date.
3.7.4 In the event of a merger or consolidation ("merger") of the
Company with or into any other corporation or entity ("successor corporation"),
outstanding awards shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Committee determines, in the exercise of its
sole discretion, to accelerate the date on which an award becomes exercisable or
fully vested. In the absence of an assumption or substitution of awards, awards
shall, to the extent not exercised, terminate as of the date of the closing of
the merger. For the purposes of this Section 3.7.4, an award shall be considered
assumed if, for every share of Common Stock subject thereto immediately prior to
the merger, the grantee has the right, following the merger, to acquire the
consideration received in the merger transaction by holders of shares of Common
Stock (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its parent, the Committee
may, with the consent of the successor corporation and the participant, provide
for the consideration to be acquired pursuant to the award, for each share of
Common Stock subject thereto, to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger. For purposes
hereof, the term "merger" shall include any transaction in which another
corporation acquires all of the issued and outstanding Common Stock of the
Company.
3.8 Right of Discharge Reserved
Nothing in the Plan or in any plan agreement shall confer upon
any grantee the right to continue in the employ of the Company or any subsidiary
or affect any right which the Company or any subsidiary may have to terminate
such employment.
3.9 Nature of Payments
3.9.1 Any and all grants of awards and issuances of shares of
Common Stock under the Plan shall be in consideration of services performed for
the Company by the grantee.
3.9.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose of
determining any benefits under any pension, retirement, profit-sharing, bonus,
life insurance or other benefit plan of the Company or of any subsidiary or
under any agreement with the grantee, unless such plan or agreement specifically
provides otherwise.
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3.10 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan agreements, as
to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan and (c) the treatment of leaves of absence
pursuant to Section 1.6.4.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit
or restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.12 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
3.13 Effective Date and Term of Plan
3.13.1 The Plan was adopted by the Board on May 28, 1998 (the
"effective date"), subject to approval by the Company's shareholders. All awards
under the Plan prior to such shareholder approval are subject in their entirety
to such approval. If such approval is not obtained prior to the first
anniversary of the date of adoption of the Plan, the Plan and all awards
thereunder shall terminate on that date.
3.13.2 Unless sooner terminated by the Board, the provisions of
the Plan respecting the grant of incentive stock options shall terminate on the
day before the tenth anniversary of the effective date of the Plan, and no
incentive stock option awards shall thereafter be made under the Plan. All
awards made under the Plan prior to its termination shall remain in effect until
such awards have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable plan agreements.
3.14 Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflict of laws.
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EXHIBIT E
GENTA INCORPORATED
NON-EMPLOYEE DIRECTORS' 1998 STOCK OPTION PLAN
1. Purpose
The purpose of the Genta Incorporated Non-Employee Directors'
1998 Stock Option Plan (the "Plan") is to provide an incentive to those
directors of Genta Incorporated (the "Company") who are not employees of the
Company to serve on the board of directors of the Company (the "Board") and to
maintain and enhance the Company's long-term performance.
2. Administration
The terms of the stock options to be awarded under the Plan are
set forth herein and may not be varied other than by amendment of the Plan in
accordance with Section 10. To the extent that any administrative action is
required in connection with the Plan, such action shall be taken by the Board,
whose determination in such case shall be final, binding and conclusive.
3. Shares Available for Awards
The total number of shares of common stock of the Company, par
value $.001 per share ("Common Stock"), which may be transferred upon the
exercise of options granted under the Plan shall not exceed 3,000,000 shares
plus the number of shares underlying the options referred to in Section 5(c) (as
adjusted as provided therein). Such shares may be authorized and unissued
shares, treasury shares or shares acquired by the Company for the purposes of
the Plan. Any shares of Common Stock that are subject to a stock option under
the Plan and that have not been transferred at the time such option is cancelled
or terminated shall again be available for options under the Plan.
4. Persons Eligible for Stock Options
Stock options shall be granted under the Plan only to persons who
are members of the Board and are not employees of the Company or any subsidiary
thereof ("Eligible Directors").
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5. Grant of Stock Options
(a) Every option granted under the Plan shall be subject to the
terms and conditions set forth in the Plan, and shall be evidenced by an option
agreement which shall not be inconsistent with the provisions of the Plan.
(b) As of the close of each annual meeting of the Company's
shareholders ("Annual Meeting"), commencing with the Annual Meeting in 1999,
each individual who qualifies as an Eligible Director at the conclusion of such
meeting, excluding any Eligible Director who is then receiving a grant under the
Company's 1998 Stock Incentive Plan or any other stock-based compensation plan
or arrangement of the Company in connection with his or her initial election or
appointment to the Board, shall be granted an option to purchase 50,000 shares
of Common Stock, provided that the Eligible Director has served as a director of
the Company for at least six months prior to the date of such Annual Meeting.
(c) Each Eligible Director serving as a director on May 28, 1998
shall be granted stock options to purchase the number of shares of Common Stock
set forth below under the heading "Number of Initial Shares" at an exercise
price of $.94375 per share (subject to proportional adjustment for any stock
split or reverse stock split of the Common Stock). The exercise price and number
of shares subject to such stock options shall be subject to adjustment if the
number of shares of Fairly-Diluted Common Stock (as defined below) as of
February 26, 1999 (the "Adjustment Date") is other than 44,725,266 shares
(subject to proportional adjustment for any stock split or reverse stock split
of the Common Stock) as a result of any and all Covered Events (as defined
below) occurring prior to such time, in which case (x) the number of shares of
Common Stock covered by the stock option shall increase by a number of shares
equal to the percentage set forth below under the caption "Applicable
Percentage" of the number of shares of Fairly-Diluted Common Stock as of the
Adjustment Date in excess of 44,725,266 that are attributable to Covered Events
and (y) the per share exercise price shall be adjusted to equal the conversion
price of the Company's Series D Convertible Preferred Stock immediately after
the Reset (as defined in the fifth paragraph of Subsection 4(a) of the
Certificate of Designations for the Series D Convertible Preferred Stock, as
amended from time to time) as modified by any contractual modification to such
Reset agreed to by at least a majority of the holders of Series D Preferred
Stock. "Fairly-Diluted Common Stock" shall mean, as of a specified date, the
number of shares of Common Stock that would be outstanding on such date assuming
(i) the conversion into Common Stock on such date of all preferred stock of the
Company outstanding on May 28, 1998 or issuable upon exercise of warrants
outstanding on May 28, 1998; and (ii) the exercise of all warrants of the
Company outstanding on May 28, 1998 or contractually required to be issued
pursuant to an agreement in effect on May 28, 1998, in each case having an
exercise price per share of Common Stock of less than $2.00 on May 28, 1998
(subject to proportional adjustment for any stock split or reverse stock split
of the Common Stock) including, but not limited to, any Penalty Warrants (as
defined in the Company's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1997) that may be issued. "Covered Events" mean any issuance
of Penalty Warrants or alteration of the conversion price of the Series D
Preferred Stock pursuant to the Reset referred to above or any contractual
modification thereof.
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Applicable
Director Number of Initial Shares Percentage (%)
Drapkin 675,000 1.5
Cooper 337,500 .75
Sandage 337,500 .75
Kessel 75,000 .167
Salomon 75,000 .167
Stein 75,000 .167
Wakoff 75,000 .167
Weiss 75,000 .167
6. Terms of Stock Options
(a) The exercise price per share of Common Stock under each
option granted under Section 5(b) shall be equal to the "Fair Market Value" per
share of Common Stock on the date of option grant. For purposes of the Plan, the
"Fair Market Value" of a share of Common Stock on any day shall be as follows:
(i) if the principal market for the Common Stock (the "Market") is a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") National Market or SmallCap Market, the last sale
price or, if no reported sales take place on the applicable date, the average of
the high bid and low asked price of Common Stock as reported for such Market on
such date or, if no such quotation is made on such date, on the next preceding
day on which there were quotations, provided that such quotations shall have
been made within the ten (10) business days preceding the applicable date; (ii)
If the Common Stock is actively traded but clause (i) does not apply, the
average of the high bid and low asked price for Common Stock on the applicable
date, or, if no such quotations shall have been made on such date, on the next
preceding day on which there were quotations, provided that such quotations
shall have been made within the ten (10) business days preceding the applicable
date; or (iii) In the event that neither clause (i) or (ii) shall apply, the
Fair Market Value of a share of Common Stock on any day shall be determined in
good faith by the Board. The exercise price of each option granted under Section
5(c) shall be $0.94375 per share, subject to adjustment as provided in Section
5(c).
(b) Each option granted under the Plan shall have a term of ten
years, and shall not be exercisable after the tenth anniversary of the date of
grant.
(c) Each option granted under Section 5(b) shall become
exercisable in full on the date of the Annual Meeting next following the date of
grant provided that the optionee continues to serve as a member of the Board of
Directors immediately following such Annual Meeting. Each option granted under
Section 5(c) shall become exercisable in 16 substantially equal installments on
the last day of each calendar quarter after October 1, 1997 provided
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that adjustments to the number of options contemplated by Section 5(c) shall be
pro-rated as to vesting over the remaining quarterly periods after the
adjustment. An option may be exercised from time to time for all or part of the
shares as to which it is then exercisable (but, in any event, only for whole
shares).
7. Exercise of Options
(a) An option shall be exercised by the filing of a written
notice with the Company, on such form and in such manner as the Company shall
prescribe, accompanied by payment for the shares being purchased. Such payment
shall be made: (i) by certified or official bank check (or the equivalent
thereof acceptable to the Company) for the full option exercise price; (ii) by
delivery of shares of Common Stock (which, if acquired pursuant to the exercise
of a stock option, were acquired at least six months prior to the option
exercise date) and having a Fair Market Value (determined as of the exercise
date) equal to all or part of the option exercise price and a certified or
official bank check (or the equivalent thereof acceptable to the Company) for
any remaining portion of the full option exercise price; or (iii) at the
discretion of the Board and to the extent permitted by law, by such other method
as the Board may authorize, including, without limitation, at the discretion of
the Board, by the withholding of shares (valued at their Fair Market Value on
the date of exercise) underlying the Option.
(b) Promptly after receiving payment of the full option exercise
price, the Company shall deliver to the Eligible Director, or to such other
person as may then have the right to exercise the option, a certificate for the
shares of Common Stock for which the option has been exercised.
(c) The holder of a stock option (or other person having the
right to exercise the option) shall have none of the rights of a shareholder of
the Company with respect to the shares subject to the option until the issuance
of a stock certificate to such person for such shares. Except as otherwise
provided in Section 9, no adjustment shall be made for dividends, distributions
or other rights (whether ordinary or extraordinary, and whether in cash,
securities or other property) for which the record date is prior to the date
such stock certificate is issued.
8. Termination of Directorship; Change of Control
(a) If an optionee's membership on the Board terminates for any
reason other than death, the optionee may exercise any outstanding option to the
extent that the optionee was entitled to exercise it on the date of termination.
Exercise must occur within six months after termination, except that the
six-month period shall be increased to one year if the termination is by reason
of disability, but in no event after the expiration date of the option.
(b) If an optionee dies while serving on the Board, or during the
period in which an option is exercisable pursuant to paragraph (a) of this
Section 8, any outstanding option shall be exercisable to the extent that the
optionee was entitled to exercise it on the
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date of death. Exercise must occur by the earlier of the first anniversary of
death or the expiration date of the option. Such exercise shall be made only by
the optionee's executor or administrator, unless the optionee's will
specifically disposes of the option, in which case exercise shall be made only
by the recipient of such specific disposition. If an optionee's personal
representative or the recipient of a specific disposition under the optionee's
will shall be entitled to exercise any award pursuant to the preceding sentence,
such representative or recipient shall be bound by all the terms and conditions
of the Plan and the applicable agreement which would have applied to the
optionee including, without limitation, the provisions of Section 11 hereof.
(c) Upon expiration of the applicable six-month or one-year
period described in paragraph (a) or (b) of this Section 8, any unexercised
option shall be null and void.
(d) Upon the happening of a change in control (as hereinafter
defined) notwithstanding any other provision of this Plan, any option granted
under Section 5(c) then outstanding shall become fully vested and immediately
exercisable (i) upon the termination of the Eligible Director's status as an
Eligible Director as a result of the removal of such person from the Board
(other than for cause) by shareholder action within one year of such change in
control or (ii) in the case of any liquidation, sale, disposition or other
transaction described in clause (D) of the next sentence, immediately upon the
consummation of such liquidation, sale, disposition or other transaction. A
"change in control" shall have occurred if: (A) any "person", as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") (other than (i) the shareholders of the Company as of
the effective date of the Plan (the "Current Shareholders", such term to include
their heirs or estates, or trusts or other entities the primary beneficiaries of
which are the Current Shareholders or persons designated by them, (ii) the
Company or any subsidiary of the Company, (iii) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, or (iv) any company owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities
of the Company representing more than 50% of the combined voting power of the
Company's then outstanding securities without the prior written consent of the
Board; or (B) during any period of twenty-four (24) consecutive months,
individuals who at the effective date of the Plan constitute the Board and any
new director whose election by the Board or nomination for election by the
Company shareholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation of the Company
with any other company (other than a wholly-owned subsidiary of the Company),
other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) 50% or more of the combined voting power of
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation
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<PAGE>
or (ii) a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no "person" (as defined in clause
(A) above with the exceptions noted in said clause (A)) acquires more than 50%
of the combined voting power of the Company's then outstanding securities; or
(D) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any transaction having a similar
effect).
(e) In the event of a merger or consolidation ("merger") of the
Company with or into any other corporation or entity ("successor corporation"),
outstanding awards granted under this Plan shall be assumed or an equivalent
option or right shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. For the purposes of this paragraph
(e), an award shall be considered assumed if, for every share of Common Stock
subject thereto immediately prior to the merger, the grantee has the right,
following the merger, to acquire the consideration received in the merger
transaction by holders of shares of Common Stock (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares); provided, however, that if such
consideration received in the merger was not solely common stock of the
successor corporation or its parent, the Board may, with the consent of the
successor corporation and the participant, provide for the consideration to be
acquired pursuant to the award, for each share of Common Stock subject thereto,
to be solely common stock of the successor corporation or its parent equal in
fair market value to the per share consideration received by holders of Common
Stock in the merger. For purposes hereof, the term "merger" shall include any
transaction in which another corporation acquires all of the issued and
outstanding Common Stock of the Company.
9. Change in Capitalization
In the event of any change in the Common Stock by reason of a
stock split, reverse stock split, stock dividend, recapitalization,
reclassification, merger, consolidation, split-up, combination, exchange of
shares or the like, the Board shall appropriately adjust the number and kind of
shares authorized for issuance under the Plan, the number of shares subject to
each option then outstanding or subsequently granted under the Plan and the
exercise price of each such option. The Board's determination as to what, if
any, adjustments shall be made shall be final, binding and conclusive on the
Company and on all Eligible Directors who receive option grants under the Plan.
10. Amendment of the Plan
(a) The Board may from time to time suspend, discontinue, revise
or amend the Plan in any respect whatsoever; provided, however, that no such
amendment shall impair any material rights or increase any material obligations
under any option theretofore granted under the Plan without the consent of the
optionee (or, after the optionee's death, the person having the right to
exercise the option). For purposes of this Section 10, any action of the Board
that alters or affects the tax treatment of any option shall not be considered
to materially impair any rights of any optionee.
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<PAGE>
(b) Shareholder approval shall be required with respect to any
amendment if the failure to obtain such approval would adversely affect the
compliance of the Plan with the requirements of any applicable law, rule or
regulation.
11. Restrictions
(a) If the Board shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any option under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Board.
(b) The term "Consent" as used herein with respect to any Plan
Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (ii) any and all written agreements and
representations by the optionee with respect to the disposition of shares, or
with respect to any other matter, which the Board shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (iii) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies.
12. Nonassignability
No award or right granted to any person under the Plan shall be
assignable or transferable other than by will or by the laws of descent and
distribution, and all such awards and rights shall be exercisable during the
life of the grantee only by the grantee or the grantee's legal representative.
13. No Right to Re-election
Nothing in the Plan shall be deemed to create any obligation on
the part of the Board to nominate any of its members for re-election by the
Company's shareholders, nor confer upon any Eligible Director the right to
remain a member of the Board for any period of time or at any particular rate of
compensation.
14. No Limitation on Corporate Actions
This Plan shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any
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<PAGE>
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
15. Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
16. Effective Date and Term of Plan
The Plan was adopted by the Board on May 28, 1998, subject to
approval by the Company's shareholders. Unless sooner terminated by the Board,
the Plan shall terminate on the date when no more shares are available for
transfer under the Plan. Options outstanding upon Plan termination shall
continue in effect in accordance with their terms.
17. Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflict of laws.
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<PAGE>
GENTA INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON JULY 14, 1998.
The undersigned stockholder of Genta Incorporated (the "Company")
acknowledges receipt of the Notice of Annual Meeting of Stockholders and the
Proxy Statement each dated June 22, 1998 and the undersigned revokes all prior
proxies and appoints Kenneth G. Kasses, Ph.D., Robert E. Klem, Ph.D. or either
of them, as proxies for the undersigned, with full power of substitution to
each, to vote all shares of Common Stock and/or Series D Preferred Stock of the
Company which the undersigned is entitled to vote at the Company's Annual
Meeting of Stockholders to be held at the Harborside Hyatt Conference Center &
Hotel, 101 Harborside Drive, Boston, Massachusetts, at 11:00 a.m., local time,
on July 14, 1998 and at any postponement or adjournment thereof, and the
undersigned authorizes and instructs said proxies or their substitutes to vote
as follows:
<PAGE>
1. APPROVAL OF REVERSE STOCK SPLITS OF THE COMPANY'S OUTSTANDING COMMON STOCK:
To approve the Company's proposed Reverse Stock Splits:
FOR |_| AGAINST |_| ABSTAIN |_|
2. AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO REMOVE THE STOCKHOLDER
MEETING REQUIREMENT: To remove the requirement from the Company's Restated
Certificate of Incorporation, as amended, that stockholder action be taken at a
meeting:
FOR |_| AGAINST |_| ABSTAIN |_|
3. AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO ELIMINATE THE CLASSIFICATION
OF THE BOARD OF DIRECTORS: To remove the classification of the Board of
Directors from the Company's Restated Certificate of Incorporation, as amended.
FOR |_| AGAINST |_| ABSTAIN |_|
4. ELECTION OF CLASS I DIRECTORS: To elect the nominees listed below to Class I
of the Board of Directors for a term of three years:
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(except as marked to the contrary below) |_| to vote for all nominees
listed below |_|
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
KENNETH G. KASSES, Ph.D. |_| PETER SALOMON, M.D. |_|
ANDREW J. STEIN |_| HARLAN J. WAKOFF |_|
5. ADOPTION OF THE 1998 STOCK INCENTIVE PLAN AND GRANTS OF OPTIONS UNDER THE
PLAN: To adopt the Company's 1998 Stock Incentive Plan and to approve grants of
options under such plan:
FOR |_| AGAINST |_| ABSTAIN |_|
6. ADOPTION OF THE NON-EMPLOYEE DIRECTORS' 1998 STOCK OPTION PLAN AND GRANTS OF
OPTIONS UNDER THE PLAN: To adopt the Non-Employee Directors' 1998 Stock Option
Plan and to approve grants of options under such plan.
FOR |_| AGAINST |_| ABSTAIN |_|
and in their discretion, upon any other matters that may properly come before
the meeting or any adjournments thereof.
(Continued and to be dated and signed on the other side.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IN THE ABSENCE OF DIRECTION, THIS PROXY
WILL BE VOTED FOR APPROVAL OF REVERSE STOCK SPLITS OF THE COMPANY'S OUTSTANDING
COMMON STOCK, FOR AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO REMOVE THE
STOCKHOLDER MEETING REQUIREMENT, FOR AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO ELIMINATE THE CLASSIFICATION OF THE BOARD OF DIRECTORS, FOR THE
ELECTION OF ALL NOMINEES FOR CLASS I DIRECTOR, FOR ADOPTION OF THE 1998 STOCK
INCENTIVE PLAN AND GRANTS OF OPTIONS UNDER THE PLAN, FOR ADOPTION OF THE
NON-EMPLOYEE DIRECTORS' 1998 STOCK OPTION PLAN AND GRANTS OF OPTIONS UNDER THE
PLAN AND, IN ACCORDANCE WITH THE JUDGMENT OF THE PROXIES, FOR OR AGAINST ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY
ADJOURNMENT THEREOF.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and
Annual Report of the Company accompanying the same is hereby acknowledged.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Dated: _______________________, 1998
------------------------------------
(Signature of Stockholder)
------------------------------------
(Signature of Stockholder)
Please sign exactly as your
name(s) appears on your stock
certificate. If signing as
attorney, executor,
administrator, trustee or
guardian, please indicate the
capacity in which signing.
When signing as joint
tenants, all parties to the
joint tenancy must sign. When
the proxy is given by a
corporation, it should be
signed by an authorized
officer.
