CONSENT AND AMENDMENT AGREEMENT
This Consent
and Amendment Agreement (this “Agreement”) shall be
effective as of the Effective Date (as defined below), by and among Genta
Incorporated, a Delaware corporation (the “Company”), and the
undersigned parties whose names are set forth on Exhibit A attached
hereto (each a “Holder” and
collectively the “Holders”). Capitalized
terms used but not defined herein shall have the meanings given to such terms in
the April 2009 Consent Agreement.
Whereas,
in order to facilitate the consummation of one or more financing transactions,
which may include private placements or public offerings, under which the
Company desires to raise an aggregate in all such transactions of up to
$10,000,000 through the sale of securities consisting of (i) up to $7,000,000 in
principal amount of Senior Unsecured Convertible Notes (the “July 2009 Notes”),
(ii) up to $3,000,000 of common stock of the Company (the “Common Stock”) and
(iii) related warrants (the “Financing”), on
substantially the terms described in that certain term sheet attached hereto as
Exhibit B (the
“Term Sheet”),
the parties desire to enter into this Agreement; and
Whereas,
the undersigned Holders represent at least two-thirds of the currently
outstanding principal amount of the 2008 Notes currently held by the Purchasers
(as defined in the 2008 Purchase Agreement), at least two-thirds of the
currently outstanding principal amount of the April 2009 Notes currently held by
the Purchasers (as defined in the April 2009 Purchase Agreement) and at least
two-thirds of the currently outstanding and unexercised Purchase Rights (as
defined in the April 2009 Consent Agreement) and the currently outstanding
principal amount of New Notes (as defined in the April 2009 Consent Agreement)
issued upon exercise of the Purchase Rights (together, as one class), which
constitutes the required threshold necessary to amend or waive any provision of
the 2008 Purchase Agreement, the April 2009 Purchase Agreement, the April 2009
Notes and the April 2009 Consent Agreement (the “Requisite
Holders”).
Now,
Therefore, in consideration of the premises and mutual covenants herein
below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Definitions.
(a) “April 2009 Consent
Agreement” means that certain Consent Agreement dated as of April 2,
2009, among the Company and the Purchasers listed on Exhibit A thereto, as
amended.
(b) “April 2009 Notes”
means the Company’s Senior Secured Convertible Promissory Notes Due April 2,
2012.
(c) “April 2009 Purchase
Agreement” means that certain Securities Purchase Agreement dated April
2, 2009, by and among the Company and the Purchasers listed on Exhibit A
thereto.
1.
(d) “Expiration Date” shall mean the date the Company consummates a public
offering and issues registered July 2009 Notes and registered shares of Common
Stock pursuant to the S-1 registration statement (File No. 333-153278) in an
aggregate amount of $7,000,000.
(e) “Notes” means the 2008
Notes and the April 2009 Notes and those certain notes issued in lieu of
interest to be paid under the Notes (“PIK Notes”).
(f) “Security Agreement”
means that certain Amended and Restated Security Agreement dated as of April 2,
2009, by and between the Company and Tang Capital Partners, L.P., as Agent,
including the corresponding Amended and Restated Intellectual Property Security
Agreement of even date therewith.
(g) “Trading Day” shall
have the meaning set forth in the Notes.
(h) “2008 Notes” means the
Company’s Senior Secured Convertible Promissory Notes Due June 9,
2010.
(i) “2008 Purchase
Agreement” means that certain Securities Purchase Agreement dated June 5,
2008, by and among the Company and the Purchasers listed on Exhibit A
thereto.
(j) “4.999% Ownership
Limitation” means that for purpose of the conversion of Notes and July
2009 Notes under this Agreement, no Holder shall be required to convert any
portion of the Notes or July 2009 Notes if the number of shares of Common Stock
to be issued pursuant to such issuance or conversion would exceed, when
aggregated with all other shares of Common Stock owned by the Holder at such
time and all shares of Common Stock that the Holder is then the beneficial owner
of (as determined in accordance with Section 13(d) of the Exchange Act and the
rules thereunder), the number of shares of Common Stock that would result in the
Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) more than 4.999% of the then issued
and outstanding shares of Common Stock.
2. Consent to
Financing. The undersigned Holders, constituting the Holders
of at least two-thirds of the currently outstanding and unexercised Purchase
Rights and the currently outstanding principal amount of New Notes (as defined
in the April 2009 Consent Agreement referring to additional April 2009 Notes
that may be issued) issued upon exercise of the Purchase Rights (together, as
one class), hereby irrevocably consent, for all purposes and in all respects,
including for the purpose of Section 6(a) of the April 2009 Consent Agreement,
to the Financing. The Company hereby agrees that prior to the
consummation of the Second Closing of the Financing, without first obtaining the
consent of at least two-thirds of the currently outstanding and unexercised
Purchase Rights and the currently outstanding principal amount of New Notes
issued upon exercise of the Purchase Rights (together, as one class), the
Company shall not enter or agree to any debt or equity financing or any other
capital raising transaction or transactions with any person, other than the
Financing.
2.
3. Waiver of Participation
Rights. The Requisite Holders, hereby prospectively and
retrospectively waive all rights to receive notice of and participate in the
sale and issuance of up to $2,100,000 in principal amount of July 2009 Notes and
$900,000 of Common Stock at the First Closing (as defined in the Term Sheet) of
the Financing in a private placement on July 6, 2009, contained in Section 6(b)
of the April 2009 Consent Agreement and Section 3.15(a) of the April 2009
Purchase Agreement, as applicable, and so long as each Holder of the Purchase
Rights has the opportunity to participate in the Second Closing of the Financing
(as contemplated by Exhibit B), then the Requisite Holders hereby prospectively
and retrospectively waive all rights to receive notice of the Second
Closing. Upon the earlier of the Second Closing (as defined in the
Term Sheet) and the Expiration Date, the rights set forth in Section 6(b) of the
April 2009 Consent Agreement and Section 3.15(a) of the April 2009 Purchase
Agreement shall terminate.
4. Covenants of the
Holders. Each Holder of a 2008 Note, and each Holder of an
April 2009 Note, hereby agrees that such Holder will convert all 2008 Notes held
by such Holder and all 2009 Notes held by such Holder into shares of Common
Stock, including any PIK Notes, and any 2008 Notes or 2009 Notes issuable upon
exercise of any Purchase Options, Purchase Rights and any other right to acquire
2008 Notes or 2009 Notes on or before the fifth Trading Day following the
receipt by such Holder of the written request of the Company (the “Conversion Notice”)
in the event that on the date that the Conversion Notice is sent by the Company,
the Daily VWAP has exceeded $0.01 (for the avoidance of
doubt, this price has not been adjusted for the stock split of the Company’s
Common Stock announced in June 2009, and shall be appropriately adjusted for
such stock split as well as any other stock splits, stock dividends,
reorganizations, recapitalizations, stock combinations and the like) for each of
the ten (10) consecutive prior Trading Days ending on the Trading Day
immediately prior to such date; provided that the Equity Conditions (as defined
in the April 2009 Notes) shall have been satisfied and the Common Stock shall
have been Tradable (as defined in the Notes) on each Trading Day during the
period beginning on the first day of such ten (10) day period and ending on the
date of the delivery of such shares of Common Stock pursuant to such
conversion.
5. Conversion of Outstanding
Notes.
(a) Each
Holder agrees to convert the outstanding principal amount of all Notes and July
2009 Notes purchased in the Financing, subject to the 4.999% Ownership
Limitation, two business days prior to the record date (the “Initial Conversion
Date”) set for the Company’s annual meeting, and agrees to deliver on
such date a Notice of Conversion, which notice of conversion shall be
irrevocable and shall constitute their irrevocable instruction to convert, on
the date that is 2 business days prior to the record date set for the Company’s
annual meeting, the entire outstanding principal amount of their Notes and July
2009 Notes, subject to the 4.999% Ownership Limitation.
(b) To
the extent any of the principal amount of any Notes or July 2009 Notes remains
outstanding following the Initial Conversion Date, each Holder further agrees to
convert any additional outstanding principal amount of such Notes and July 2009
Notes, subject to 4.999% Ownership Limitations, on the date that is one business
day prior to the record date (the “Second Conversion
Date”) set for the Company’s annual meeting. To effect such
conversion, each Holder agrees to deliver, one business day prior to the record
date, a Notice of Conversion, which notice of conversion shall be irrevocable,
shall be effective as of the Second Conversion Date and shall constitute each
such Holder’s irrevocable instruction to convert, on the Second Conversion Date,
the entire outstanding principal amount of their Notes and July 2009 Notes,
subject to the 4.999% Ownership Limitation; and
3.
(c) Each
Holder agrees not to sell, assign or transfer any shares of Common Stock then
held by such Holder, including, without limitation, any of the shares of Common
Stock received upon conversion of their Notes and July 2009 Notes in accordance
with Sections 5(a) and (b) above, or any interest therein, during the period
beginning on the Initial Conversion Date and ending the date that is two
business days following the record date.
6. Outstanding Notes and
Purchase Rights. Each undersigned Holder represents and
warrants that as of the Effective Date, such Holder holds the Notes and Purchase
Rights in the principal amounts set forth on such Holder’s signature page
hereto.
7. Amendment to April 2009
Consent Agreement. Section 6(a) of the of the April
2009 Consent Agreement is hereby deleted in its entirety and replaced with the
following
“(a)
Negative
Covenants. Before December 1, 2009, without the prior written
consent of the Holders of at least two-thirds of the then outstanding and
unexercised Purchase Rights and the then outstanding principle amount of New
Notes issued upon exercise of the Purchase Rights (together, as one
class):
(i) No
Liens. Other than Permitted Liens the Company shall not, and
shall not permit its Subsidiaries to, enter into, create, incur, assume or
suffer to exist any Liens on or with respect to any of its assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom,
except that nothing in this provision shall restrict the sublicensing for
consideration or any other license of intellectual property and related assets
for the purpose of entering into development or commercial partnerships of the
Company’s pharmaceutical assets.
(ii) Compliance with this
Agreement. The Company shall not, and shall not permit any Subsidiary to,
fail to comply with its and their obligations under this Agreement.
(iii) Compliance with Law.
The Company shall not, and shall not permit any Subsidiary to, fail to comply
with law and duly observe and conform in all material respects to all valid
requirements of governmental authorities relating to the conduct of its and
their business or to its and their properties or assets.
4.
(iv) Transactions with
Affiliates. The Company shall not, and shall not permit its Subsidiaries
to, engage in any transactions with any officer, director, employee or any
Affiliate of the Company, including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $50,000, other than (i) for payment of reasonable salary for services
actually rendered, as approved by the Board of Directors of the Company as fair
in all respects to the Company, (ii) reimbursement for expenses incurred on
behalf of the Company and (iii) as otherwise contemplated by this
Agreement.
(v) Payment of Taxes,
Etc. The Company shall not, and shall not permit any Subsidiary to, fail
to promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company and the
Subsidiaries, except for such failures to pay that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company or such Subsidiaries shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Company and such Subsidiaries will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefor.
(vi) Corporate Existence.
The Company shall not, and shall not permit any Subsidiary to, fail to maintain
in full force and effect its corporate existence, rights and franchises and all
licenses and other rights to use property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
(vii) Investment Company
Act. The Company shall not conduct its businesses in a manner so that it
will become subject to the Investment Company Act of 1940, as
amended.
(viii) Charter Documents.
The Company shall not modify, alter, repeal or amend the charter documents of
the Company or any Subsidiary of the Company.”
8. Note Seniority and Release
of Liens. The Holders hereby agree that the security
interests securing their obligations under the Notes will become unsecured;
provided, that, at all times, the principal amount then outstanding
under the Notes, retain their seniority in time and right of payment over all
other material indebtedness for borrowed money of the Company, with such release
of security interest to be effective as of December 1,
2009. The Company and the Agent shall cooperate with each other , and
use their commercially reasonable efforts to provide the
Holders with subordination agreements or other evidence of subordination in
respect of such other indebtedness then existing reasonably satisfactory to Tang
Capital Partners, L.P., as Agent (as defined in the Security
Agreement). In furtherance of the foregoing, each
such Holder shall take, or cause Tang Capital Partners, L.P., as Agent, to take,
any and all actions necessary to release such security
interests.
5.
9. Acknowledgement.
(a) For
the purpose of clarification, the parties hereby confirm that notwithstanding
Section 3.5(c) of the 2008 Notes the Conversion Price (as defined in the 2008
Notes) adjustment set forth in Section 3.5(a)(vi) of the 2008 Notes resulting
from the First Closing of the Financing shall cause the Conversion Price of the
2008 Notes to be adjusted such that, for each $1,000 in principal amount of the
2008 Notes, the holder thereof shall be issued 500,000 shares, (for the
avoidance of doubt, this price has not been adjusted for the stock split of the
Company’s Common Stock announced in June 2009, and shall be appropriately
adjusted for such stock split as well as any other stock splits, stock
dividends, reorganizations, recapitalizations, stock combinations and the like)
subject to future adjustment as set forth in the 2008 Notes.
(b) For
the purpose of clarification, the parties hereby confirm that notwithstanding
Section 3.5(c) of the April 2009 Notes the Conversion Price (as defined in the
April 2009 Notes) adjustment set forth in Section 3.5(a)(vi) of the April 2009
Notes resulting from the First Closing of the Financing shall cause the
Conversion Price of the April 2009 Notes to be adjusted such that, for each
$1,000 in principal amount of the April 2009 Notes, the holder thereof shall be
issued 500,000 shares, (for the avoidance of doubt, this price has not been
adjusted for the stock split of the Company’s Common Stock announced in June
2009, and shall be appropriately adjusted for such stock split as well as any
other stock splits, stock dividends, reorganizations, recapitalizations, stock
combinations and the like) subject to future adjustment as set forth in the
April 2009 Notes.
(c) For
purposes of clarification, at all times after the Effective Date, the amount of
consideration received for Additional Shares of Common Stock, as determined in
accordance with Section 3.5(a)(vi) of the 2008 Notes and April 2009 Notes,
respectively, shall not include the value of any additional securities or other
rights received in connection with such issuance of Additional Shares of Common
Stock (ie. warrants, rights of first refusal or other similar
rights).
10. Specific Performance;
Consent to Jurisdiction; Venue.
(a) The
Company and the Holders acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement or
the other Transaction Documents and to enforce specifically the terms and
provisions hereof or thereof without the requirement of posting a bond or
providing any other security, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
6.
(b) The
parties agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New York,
and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue. The parties irrevocably
consent to personal jurisdiction in the state and federal courts of the state of
New York. The Company and each Holder consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 10(b) shall affect or limit any right to
serve process in any other manner permitted by law. The Company and the Holders
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to the this Agreement or the other Transaction Documents,
shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party. The parties hereby waive all rights to a trial by
jury.
11. Entire Agreement;
Amendment. This Agreement contains the entire understanding and agreement
of the parties with respect to the matters covered hereby and, except as
specifically set forth herein, neither the Company nor any Holder make any
representation, warranty, covenant or undertaking with respect to such matters,
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended other than by a written instrument signed by the
Company and the Holders of at least two-thirds of the then outstanding and
unexercised Purchase Rights and the then outstanding principal amount of New
Notes issued upon exercise of the Purchase Rights (together, as one
class). The Holders acknowledge that any amendment or waiver effected
in accordance with this section shall be binding upon each Holder (and their
permitted assigns) and the Company, including, without limitation, an amendment
or waiver that has an adverse effect on any or all Holders.
12. Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery by
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
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If
to the Company or its Subsidiaries:
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Genta
Incorporated
000
Xxxxxxx Xxxxx
Xxxxxxxx
Xxxxxxx, XX 00000
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Attention:
Xxxxxxx X. Xxxxxxx, Xx., M.D.
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Telephone
No.: (000) 000-0000
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Telecopy
No.: (000) 000-0000
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7.
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with
copies to:
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Xxxxxx,
Xxxxx & Xxxxxxx LLP
000
Xxxxxxxx Xxxxxx
Xxxxxxxxx,
XX 00000
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Attention:
Xxxxxx Xxxxxx
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Telephone
No.: (000) 000-0000
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Telecopy
No.: (000) 000-0000
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If
to any Holder:
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At
the address of such Holder set forth on Exhibit A to
this Agreement, with copies to Holder’s counsel as set forth on Exhibit A or as
specified in writing by such Holder, with a copy to:
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With
a copy to:
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Xxxxxx
Godward Kronish LLP
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0000
Xxxxxxxx Xxxx
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Xxx
Xxxxx, XX 00000
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Attention:
Xxxxx Xxxxxxxxxxx
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Telephone
No.: (000) 000-0000
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Telecopy
No.: (000)
000-0000
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Any party
hereto may from time to time change its address for notices by giving written
notice of such changed address to the other party hereto.
13. Waivers. No waiver by
a party of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
14. Headings. The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose and
shall not be deemed to limit or affect any of the provisions
hereof.
15. Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and assigns. The Holders may assign the rights
under this Agreement without the consent of the Company.
16. No Third Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.
17. Governing Law. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts of
law principles which would result in the application of the substantive law of
another jurisdiction. This Agreement shall not be interpreted or construed with
any presumption against the party causing this Agreement to be
drafted.
8.
18. Counterparts. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.
19. Publicity. The
Company agrees that it will not disclose, and will not include in any public
announcement, the names of the Holders without the consent of the Holders, which
consent shall not be unreasonably withheld or delayed, or unless and until such
disclosure is required by law, rule or applicable regulation, and then only to
the extent of such requirement. Notwithstanding the foregoing, the Holders
consent to being identified in any filings the Company makes with the SEC to the
extent required by law or the rules and regulations of the SEC.
20. Severability. The
provisions of this Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
21. Further Assurances.
From and after the date of this Agreement, upon the request of the Holders or
the Company, the Company and each Holder shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
22. Effectiveness of this
Agreement. This Agreement shall be contingent on and effective
only as of and concurrently with the First Closing (as defined in the Term
Sheet); if the First Closing does not occur on or before 6:00 pm EDT on Tuesday
July 7, 2009, this Agreement shall automatically terminate and be of no further
force and effect and the rights of the parties shall revert to those rights held
by such parties prior to the effectiveness of this Agreement, as if this
Agreement had never been executed. The date and time of the
consummation of the First Closing shall be referred to herein as the “Effective
Date.”
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
9.
In Witness
Whereof, the parties have caused this Consent
Agreement to be executed as of the Effective Date.
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GENTA
INCORPORATED
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By:
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Name:
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Xxxxxxx
X. Xxxxxxx, Xx., M.D.
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Title:
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Chairman
and Chief Executive
Officer
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[SIGNATURE
PAGES CONTINUE]
[HOLDER
SIGNATURE PAGES TO CONSENT AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Consent Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
Name of
Holder:
__________________________________________________________________________
Signature of Authorized Signatory of
Holder: ____________________________________________________
Name of
Authorized Signatory:
______________________________________________________________________
Title of
Authorized Signatory:
_______________________________________________________________________
Email
Address of
Holder:__________________________________________________________________
Fax
Number of Holder:
__________________________________________________________________
Principal
Amount of Purchase Rights Currently Held:
Principal
Amount of 2008 Notes Currently Held:
Principal
Amount of April 2009 Notes Currently Held:
Address
for Notice of Holder:
Address
for Delivery of Securities for Holder (if not same as address for
notice):
[SIGNATURE
PAGES CONTINUE]
Exhibit
A
Holders
Exhibit
B
Term
Sheet
