THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF GENTA
INCORPORATED, (THE "COMPANY"). THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY
SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
GENTA INCORPORATED
No. B-2
AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE BRIDGE NOTE
$1,950,000 New York, New York
January 28, 1997, as
amended and restated
on June 23, 1997
Genta Incorporated, a Delaware corporation, (the "Company"),
for value received, hereby promises to pay to THE ARIES TRUST (the "Holder"), or
registered assigns, the principal sum of ONE MILLION NINE HUNDRED FIFTY THOUSAND
DOLLARS ($1,950,000), with interest from the date of original issuance of this
Senior Secured Convertible Bridge Note on the unpaid principal balance at a rate
equal to twelve percent (12%) per annum, on the earlier of (a) December 31,
1997, (b) September 30, 1997 if on or prior to such date the Company has not
received gross proceeds of at least $2,000,000 in respect of its offering of
Premium Preferred Units which was commenced in May, 1997 and (c) the date of any
decision, order or other determination adverse to the Company or any of its
directors by any court or other tribunal in any lawsuit or other proceeding
against the Company and/or any of its directors by any of the Company's
preferred stockholders, including, without limitation, any adverse result or
other determination in connection with an appeal of the decision rendered by the
Delaware Court of Chancery in May, 1997 in respect of the suit described in Item
3 of the Company's Form 10-K for the year ended December 31, 1996 (such earliest
date, the "Maturity Date"). Payment shall be made at such place as designated by
the Holder upon surrender of this Senior Secured Convertible Bridge Note, and
shall be in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months. This Senior Secured Convertible Bridge Note is one of a duly authorized
issue of Genta Incorporated 12% Senior Convertible Bridge Notes in an aggregate
principal amount of $3,000,000 (individually a "Note"
and collectively the "Notes") issued pursuant to a Note and Warrant Purchase
Agreement dated January 28, 1997 between the Company and the Holder (the
"Purchase Agreement"). The Senior Secured Convertible Bridge Notes shall be
senior to all other indebtedness of the Company ("Other Indebtedness") and all
Other Indebtedness shall be subordinated to the Senior Bridge Notes. These Notes
are secured pursuant to the Security Agreement dated as of January 28, 1997 by
and between the Company, Paramount Capital, Inc. and the Purchasers.
SECTION 1. PREPAYMENT.
This Note (including interest accrued on the principal hereof)
may be prepaid by the Company, at any time without penalty or premium provided
that the Company shall provide the holders of the Notes with at least 30 days
prior written notice of prepayment, and prior to such prepayment, the holders of
the Notes shall have the opportunity to exercise their optional conversion
rights pursuant to Section 2 hereof.
SECTION 2. OPTIONAL CONVERSION
(a) Right of Conversion. (i) Immediately, or, (ii) if the
rules of the Nasdaq National Market or any other law or regulation, require the
approval of the shareholders of the Company to permit convertibility of the
Notes, then upon the receipt of such approvals, the Notes shall be convertible,
in whole or in part, at the option of the holder thereof and upon notice to the
Corporation as set forth in paragraph 2(b) below, into the number of shares of
Series D Preferred Stock of the Company (the "Preferred Stock") equal to the
Conversion Amount divided by the then current Conversion Price (as defined
below). The Conversion Amount shall be the Liquidation Amount, or in the case of
a partial conversion, such lesser amount as designated by the converting holder.
The Liquidation Amount shall be the aggregate principal value of the Notes held
by such Holder plus any accrued and unpaid interest. The Conversion Price shall
initially be $50.00, subject to adjustment as provided below, representing an
initial conversion rate (subject to adjustment) of 200 shares of Preferred Stock
per $10,000 of Conversion Amount. Notwithstanding anything to the contrary
contained in this Note, no right of conversion shall exist if and only to the
extent that such conversion would result in the occurrence of a "Fundamental
Change" under Article IV of the Corporation's Restated Certificate of
Incorporation.
(b) Conversion Procedures. Any holder of Notes desiring to
convert such Notes into Preferred Stock shall surrender the Notes at the offices
of the Company, which Notes shall be accompanied by irrevocable written notice
to the Corporation that the holder elects so to convert such Notes and
specifying the name or names (with address) in which a certificate or
certificates evidencing shares of Preferred Stock are to be issued. The
Corporation will make a notation of the date that a notice of conversion is
received, which date shall be deemed to be the date of receipt for purposes
hereof.
The Corporation shall deliver to the holder converting the
Notes, or to the nominee or nominees of such person, certificates evidencing the
number of full shares of
2
Preferred Stock to which such person shall be entitled as aforesaid, together
with a cash adjustment of any fraction of a share as hereinafter provided.
Subject to the following provisions of this paragraph, such conversion shall be
deemed to have been made as of the date of such surrender of the Notes and the
person or persons entitled to receive the Preferred Stock deliverable upon
conversion of such Notes shall be treated for all purposes as the record holder
or holders of such Preferred Stock on such date; provided, however, that the
Corporation shall not be required to convert any Notes while the stock transfer
books of the Corporation are closed for any purpose, but the surrender of Notes
for conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books as if the
surrender had been made on the date of such reopening, and the conversion shall
be at the conversion rate in effect on such date.
All notices of conversion shall be irrevocable; provided,
however, that if the Corporation has sent notice of an event pursuant to
paragraph 2(e) hereof, a holder of Notes may, at its election, provide in its
notice of conversion that the conversion of its Notes shall be contingent upon
the occurrence of the record date or effectiveness of such event (as specified
by such holder), provided that such notice of conversion is received by the
Corporation prior to such record date or effective date, as the case may be.
(c) Protection From Dilution. (i) If, at any time or from time
to time after the date of this Note, the Company shall issue or distribute to
the holders of shares of Preferred Stock evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable solely to holders of Preferred Stock in shares of Preferred Stock,
referred to in Subsection (c)(ii), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof (any such non-excluded event being herein called a "SPECIAL
DIVIDEND"), the Conversion Price shall be adjusted by multiplying the Conversion
Price then in effect by a fraction, the numerator of which shall be the then
Current Market Price Per Share of Preferred Stock in effect on the record date
of such issuance or distribution less the fair market value (as determined in
good faith by the Company's Board of Directors) of the evidence of indebtedness,
cash, securities or property, or other assets issued or distributed in such
Special Dividend applicable to one share of Preferred Stock and the denominator
of which shall be the then Current Market Price Per Share of Preferred Stock in
effect on the record date of such issuance or distribution. An adjustment made
pursuant to this Subsection 2(a) shall become effective immediately after the
record date of any such Special Dividend. The then "CURRENT MARKET PRICE PER
SHARE OF PREFERRED STOCK" shall equal the then Current Market Price multiplied
by the then effective "conversion rate" (as defined and used in the Certificate
of Designation for the Preferred Stock).
The then Current Market Price per share (the "CURRENT MARKET PRICE") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
3
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or, if the Common Stock is not reported on
NASDAQ, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined in good faith by the Board of Directors.
(ii) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Preferred Stock, (ii)
subdivide its outstanding shares of Preferred Stock into a greater number of
shares, (iii) combine its outstanding shares of Preferred Stock into a smaller
number of shares or (iv) issue by reclassification of its Preferred Stock any
shares of capital stock of the Company (other than the Conversion Shares), the
Conversion Price shall be proportionately adjusted so that the Notes shall be
convertible into a number and kind of securities which the holders would have
been entitled to receive after any such event had they converted the Notes
immediately prior thereto. An adjustment made pursuant to this Subsection
2(c)(ii) shall become effective immediately after the record date in the case of
a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(iii) Except as provided in Subsections (c)(i) and (c)(iv), in
case the Company shall hereafter issue or sell any Preferred Stock, any
securities convertible into Preferred Stock, any rights, options or warrants to
purchase Preferred Stock or any securities convertible into Preferred Stock, in
each case for a price per share or entitling the holders thereof to purchase
Preferred Stock at a price per share (determined by dividing (i) the total
amount, if any, received or receivable by the Company in consideration of the
issuance or sale of such securities plus the total consideration, if any,
payable to the Company upon exercise or conversion thereof (the "TOTAL
CONSIDERATION") by (ii) the number of additional shares of Preferred Stock
issuable upon exercise or conversion of such securities) which is less than
either the then Current Market Price Per Share of Preferred Stock in effect on
the date of such issuance or sale or the Conversion Price, the Conversion Price
shall be adjusted as of the date of such issuance or sale by multiplying the
Conversion Price then in effect by a fraction, the numerator of which shall be
(x) the sum of (A) the number of shares of Preferred Stock outstanding on the
record date of such issuance or sale plus (B) the Total Consideration divided by
the Current Market Price Per Share of Preferred Stock or the current Conversion
Price, whichever is greater, and the denominator of which shall be (y) the
number of shares of Preferred Stock outstanding on the record date of such
issuance or sale plus the maximum number of additional shares of Preferred Stock
issued, sold or issuable upon exercise or conversion of such securities.
(iv) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as a entirety, or in the
case of any statutory exchange of securities with another corporation (including
any exchange effected in
4
connection with a merger of a third corporation into the Company), the Holder of
this Note shall have the right thereafter to receive on the conversion of this
Note the kind and amount of securities, cash or other property which the Holder
would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Note been converted immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 2 with respect to the rights and interests thereafter of
the Holder of this Note to the end that the provisions set forth in this Section
2 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the Note. The above provisions of this
Subsection (c)(iv) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The Company shall require the issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this Note
to be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Notes not less than
30 days prior to such event. A sale of all or substantially all of the assets of
the Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
(v) In case any event shall occur as to which the other
provisions of this Section 2 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the conversion rights
represented by this Note in accordance with the essential intent and principles
hereof then, in each such case, the Holders of Notes may appoint a firm of
independent public accountants of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to the adjustment,
if any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the conversion rights. Upon receipt of
such opinion, the Company will promptly mail a copy thereof to the Holder of
this Note and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
(vi) For purposes of the anti-dilution protection contained in
this Section (c), at all times following the conversion of all shares of
Preferred Stock into shares of Common Stock, the term Preferred Stock shall be
read to be Common Stock, context permitting, so that the anti-dilution
provisions will continue to protect the conversion rights represented by this
Note after the conversion of all the Preferred Stock into the Common Stock in
accordance with the essential intent and principles of this Section 3 (it being
understood that prior to such conversion, the anti-dilution provisions of the
Preferred Stock underlying this Note shall be applicable to any dilutive events
with respect to the Common Stock and protect the Holder from dilution of the
Common Stock).
5
(d) Reservation of Shares; Transfer Taxes; Etc. The
Corporation shall at all times reserve and keep available, out of its authorized
and unissued shares of Preferred Stock, solely for the purpose of effecting the
conversion of the Notes, such number of shares of its Preferred Stock free of
preemptive rights as shall be sufficient to effect the conversion of all Notes
from time to time outstanding. The Corporation shall use its best efforts from
time to time, in accordance with the laws of the State of Delaware, to increase
the authorized number of shares of Preferred Stock if at any time the number of
shares of Preferred Stock not outstanding shall not be sufficient to permit the
conversion of all the then-outstanding Notes.
The Corporation shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of shares of Preferred
Stock on conversion of the Notes. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Preferred Stock (or other securities or assets) in a
name other than that in which the Notes so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid.
(e) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or any
other distribution); or
(ii) the Corporation shall authorize the granting to
the holders of Preferred Stock of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any other
rights or warrants; or
(iii) of any reclassification of Preferred Stock (other than
a subdivision or combination of the outstanding Preferred Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value); or
(iv) of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of
the Corporation shall be required, or of the sale or transfer of all
or substantially all of the assets of the Corporation or of any
compulsory share exchange whereby the Preferred Stock is converted
into other securities, cash or other property; or
(v) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be mailed to the holders of Notes, at their
last addresses as they shall appear upon the books of the Corporation, at least
20 days prior to the applicable record date hereinafter specified, a notice
stating (x) the date on which a record (if any) is to be taken for the purpose
of such dividend, distribution or granting of rights or warrants or, if a record
is not to be taken, the date as of which the holders of Preferred Stock of
record to be
6
entitled to such dividend, distribution, rights or warrants are to be determined
and a description of the cash, securities or other property to be received by
such holders upon such dividend, distribution or granting of rights or warrants
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up or other
liquidation event is expected to become effective, the date as of which it is
expected that holders of Preferred Stock of record shall be entitled to exchange
their shares of Preferred Stock for securities or other property deliverable
upon such exchange, dissolution, liquidation or winding up or other liquidation
event and the consideration, including securities or other property, to be
received by such holders upon such exchange; provided, however, that no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice.
(f) Other Changes in Conversion Rate. The Corporation from
time to time may increase the Conversion Rate by any amount for any period of
time if the period is at least 20 days and if the increase is irrevocable during
the period. Whenever the Conversion Rate is so increased, the Corporation shall
mail to holders of record of Notes a notice of the increase at least 15 days
before the date the increased Conversion Rate takes effect, and such notice
shall state the increased Conversion Rate and the period it will be in effect.
The Corporation may make such increases in the Conversion
Rate, in addition to those required or allowed by this paragraph 4, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.
SECTION 3. DEFAULT CONVERSION.
(a) If this Note and all accrued interest shall not have been
paid in full on or before the Maturity Date or upon the occurrence of an Event
of Default (as defined in Section 7 hereof), the Holder shall have the right
(the "Default Conversion Right"), in addition to any other available remedies
set forth in Section 8 hereof or at law or in equity, to convert up to the
lesser of (i) the then outstanding principal amount of this Note or (ii) 10% of
the original principal amount of this Note, into the number of shares of Common
Stock of the Company ("Common Stock"), equal to the amount converted by the
Noteholder upon such Event of Default (the "Default Conversion Amount") divided
by $.001 (the "Default Conversion Price"). Upon conversion, the Company shall
pay all accrued and unpaid interest on the Default Conversion Amount.
(b) To exercise the Default Conversion Right, the Holder, on
or before the 60th day after the Maturity Date, but before payment in full of
the then outstanding principal and interest under this Note, shall deliver to
the Company, at its office at as set forth in section 11, or at such other place
as is designated in writing by the Company, a notice (the "Conversion Notice")
stating that the Holder is exercising the Default Conversion Right, the Default
7
Conversion Amount and the name or names in which the Holder wishes the
certificates for shares of Common Stock to be issued.
(c) To the extent permitted by applicable law, upon exercise
of the Default Conversion Right, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise (the
"Conversion Shares"), notwithstanding that the transfer books of the Company
shall then be closed or certificates representing such Conversion Shares shall
not then have been actually delivered to the Holder. As soon as practicable and
in any event within five (5) days after exercise of the Default Conversion
Right, the Company shall issue and deliver to the Holder a certificate or
certificates evidencing the Conversion Shares registered in the name of the
Holder or its designee, provided that the Company may require the holder, by
notice given to the Holder promptly after receipt of the Conversion Notice, as a
condition to the delivery of such certificate or certificates, to present this
Note to the Company for the placement hereon of a legend indicating that the
Default Conversion Right has been exercised to the extent of the Default
Conversion Amount, and this Note (unless thereby paid in full) shall be
immediately returned to the Holder.
(d) The issuance of any shares or other securities upon the
exercise of the Default Conversion Right, and the delivery of certificates or
other instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
(e) The Holder shall not have, solely on account of such
status as a Holder of this Note, any rights of a stockholder of the Company,
either at law or in equity, or any notice of meetings of stockholders or of any
other proceedings of the Company except as provided in this Note.
(f) The Company shall at all times following the Issuance
Date, reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of providing for the exercise of the
Default Conversion Right, such number of shares of Common Stock as shall, from
time to time, be sufficient for the exercise of the Default Conversion Right in
full. The Company covenants that all shares of Common Stock issuable upon
exercise of the Default Conversion Right shall be validly issued, fully paid and
nonassessable.
(g) The anti-dilution protections set forth in Section 2(c)
hereof shall apply as well to the Default Conversion Right and the adjustment of
the Default Conversion Price hereunder, provided, however, that for purposes of
such application all appropriate references to Preferred Stock shall be read as
references to Common Stock and all references to the Conversion Price shall be
read as references to the Default Conversion Price, so as to give the Default
8
Conversion Rights, as nearly as practicable, the anti-dilution and other
protections provided for in section 2(c) with respect to the Optional Conversion
Right.
SECTION 4. FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Optional and Default Conversion Right. If any fraction of a share would
be issuable on any exercise of the Optional or Default Conversion Right (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the closing price for the Common
Stock on the trading date immediately preceding the date of exercise of the
Optional or Default Conversion Right.
SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company covenants and agrees that until the payment in
full of this Note, the Company shall:
(a) Existence; Business. (i) Preserve, renew and keep in full
force and effect its legal existence and (ii) obtain, preserve, renew, extend
and keep in full force and effect the licenses, permits, authorizations,
patents, trademarks and trade names material to its business.
(b) Use of Proceeds. Use the proceeds of the Notes of this
issue solely as set forth in Section 7.7 of the Note and Warrant Purchase
Agreement between the Company and various purchasers dated the date hereof (the
"Purchase Agreement")
(c) Reports. Furnish to the Holder, at the time furnished to
the Company's stockholders, reports furnished generally to the Company's
stockholders, and copies of Current Reports on Form 8-K.
(d) Notice of Events of Default. Furnish to the Holder prompt
written notice of any Event of Default, specifying the nature and extent thereof
and corrective action, if any, proposed to be taken with respect thereto.
(e) Authorization of Stock Issuable Upon Conversion. No later
than the Maturity Date, authorize and reserve a sufficient number of its shares
for exercise of the Default Conversion Right.
SECTION 6. NEGATIVE COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Holder that until
the payment in full of this Note, the Company shall not:
9
(a) Indebtedness. Incur, create, assume or permit to exist any
indebtedness except (i) indebtedness represented by the Notes, (ii) indebtedness
which by its terms is subordinated to the Notes in an amount less than $25,000
in the aggregate (iii) indebtedness in an amount less than fifty thousand
dollars ($50,000) incurred in the ordinary course of business, and (iv)
indebtedness for borrowed money existing on the date hereof and disclosed in
writing to the Holder on or prior to the date hereof, but not any extensions,
renewals or replacements of such indebtedness;
(b) Liens. Create, incur, assume or permit to exist any lien
on any property or assets (including stock or other securities of any person)
now owned or hereafter acquired by the Company, except (i) liens for taxes not
yet due or which are being contested by appropriate proceedings; (ii) carriers',
warehousemen's, mechanic's, materialmen's, repairmen's or other like liens
arising in the ordinary course of business and securing obligations that are not
due or which are being contested; or (iii) liens of attachments, judgments or
awards against the Company (X) which could not reasonably be expected to have an
adverse material effect on the Company or (Y) with respect to which an appeal or
proceeding for review shall be pending or a stay of execution shall have been
obtained, or which are otherwise being contested in good faith and by
appropriate proceedings, or (iv) purchase money liens, equipment leases and
financings incurred in the ordinary course of business.
(c) Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent (including intellectual
property), lease or license such property or other property which it intends to
use for substantially the same purpose or purposes as the property being sold or
transferred.
(d) Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or a substantial part
of its assets (whether now owned or hereafter acquired) or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or a
substantial part of the assets of any other person.
(e) Dividends and Distributions. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock or directly or indirectly
redeem, purchase, retire or otherwise acquire for value any shares of any class
of its capital stock or set aside any amount for any such purpose, except as
permitted by Section 7.15 of the Note and Warrant Agreement.
(f) No Impairment. By amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as
10
may be necessary or appropriate in order to protect the rights of the Holder of
this Note against impairment.
SECTION 7. EVENTS OF DEFAULT DEFINED.
The following shall each constitute an "Event of Default"
hereunder:
(a) the failure of the Company to make any payment of
principal of or interest on this Note when due and payable;
(b) the failure of the Company to observe or perform any
covenant in this Note or in the Purchase Agreement, and such failure shall have
continued unremedied for a period of five (5) days;
(c) if the Company shall:
(1) admit in writing its inability to pay its
debts generally as they become due,
(2) file a petition in bankruptcy or a petition
to take advantage of any insolvency act,
(3) make an assignment for the benefit of its
creditors,
(4) consent to the appointment of a receiver of
itself or of the whole or any substantial
part of its property,
(5) on a petition in bankruptcy filed against,
be adjudicated a bankrupt, or
(6) file a petition or answer seeking
reorganization or arrangement under the
federal bankruptcy laws or any other
applicable law or statute of the United
States of America or any state thereof;
(d) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent of the Company, a receiver of
the Company or of the whole or any substantial part of its property, or
approving a petition filed against it seeking reorganization or arrangement of
the Company under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State thereof, and such order,
judgment or decree shall not be vacated or set aside or stayed within thirty
(30) days from the date of entry thereof;
11
(e) if, under the provisions of any other law for the relief
or aid of debtors, any court of competent jurisdiction shall assume custody or
control of the Company or the whole or any substantial part of its property and
such custody or control shall not be terminated or stayed within thirty (30)
days from the date of assumption of such custody or control;
(f) the liquidation, dissolution or winding up of the Company;
(g) the failure of the shareholders to authorize and approve
the issuance of these Notes or the issuance of the shares of Preferred Stock
underlying these Notes, the Bridge Warrants or the New Warrants (as such terms
are defined in the Purchase Agreement), or any Common Stock underlying the
foregoing to the extent such authorization is necessary pursuant to the rules of
the Nasdaq National Market or any other applicable law, rule or regulation.
(h) A default or event of default which remains uncured
following any applicable cure period under the Security Agreement; or
(i) A final judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction against
the Company and the same shall not be discharged (or provision shall not be made
for such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Company shall not, within
such 30-day period, or such longer period during which execution of the same
shall have been stayed, appeal xxxxxxxxx and cause the execution thereof to be
stayed during such appeal; or
SECTION 8. REMEDIES UPON EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default, (i) the entire
principal amount of, and all accrued and unpaid interest on, this Note shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company and (ii) additional interest shall begin to accrue, and
shall be considered immediately due and payable, on the unpaid principal amount
of this Note at the rate of eighteen percent (18%) per annum and shall continue
to accrue until the initial interest and additional interest is paid. In
addition, the Holder may take any action available to it under the Purchase
Agreement or at law or in equity or by statute or otherwise.
(b) No remedy herein conferred upon the Holder of this Note is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
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SECTION 9. NOTE REGISTER.
(a) The Company shall keep at its principal executive office a
register (herein sometimes referred to as the "Note Register"), in which,
subject to such reasonable regulations as it may prescribe, but at its expense
(other than transfer taxes, if any), the Company shall provide for the
registration and transfer of this Note.
(b) Whenever this Note shall be surrendered at the principal
executive office of the Company for transfer or exchange, accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the Holder hereof or his attorney duly authorized in writing,
the Company shall execute and deliver in exchange therefor a new Note or Notes,
as may be requested by such Xxxxxx, in the same aggregate unpaid principal
amount and payable on the same date as the principal amount of the Note or Notes
so surrendered; each such new Note shall be dated as of the date to which
interest has been paid on the unpaid principal amount of the Note or Notes so
surrendered and shall be in such principal amount and registered in such name or
names as such Holder may designate in writing.
(c) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note
and of indemnity reasonably satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note (in case of mutilation) the Company will make and
deliver in lieu of this Note a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on the unpaid
principal amount of this Note in lieu of which such new Note is made and
delivered.
SECTION 10. REGISTRATION UNDER SECURITIES ACT OF 1933.
The Holder of this Note shall have registration rights as
provided in Section 8 of the Purchase Agreement, with respect to the shares of
Common Stock underlying the Preferred Stock issuable upon conversion of the
Notes pursuant to the Optional and Default Conversion Right. If the Holder is
not a party to the Purchase Agreement, by acceptance of this Note, the Holder
agrees to comply with provisions of Section 8 of the Purchase Agreement to the
same extent as if it were a party thereto.
SECTION 11. MISCELLANEOUS.
(a) Amendments and Waivers. The holders of sixty-six and
two-thirds percent (66 2/3%) or more in principal amount of outstanding Notes of
this issue may waive or otherwise consent to the amendment of any of the
provisions hereof, provided that no such waiver or amendment may reduce the
principal amount of or interest on any of the Notes of this issue or change the
stated maturity of the principal or reduce the percentage of holders of Notes of
this issue necessary to waive or amend the provisions of this Note, without the
consent of each holder of any Note affected thereby.
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(b) Restrictions on Transferability. In addition to the
restrictions set forth in Section 9(a) of this Note, the securities represented
by this Note have been acquired for investment and have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state or other jurisdiction. Without such registration, such securities may not
be sold, pledged, hypothecated or otherwise transferred, except pursuant to
exemptions from the Securities Act of 1933, and the securities laws of any state
or other jurisdiction. Notwithstanding the above, the holder of this Note has
been provided the registration rights contained in Section 8 of the Purchase
Agreement with respect to the shares of the Company's Common Stock which may be
acquired upon exercise of the Optional and Default Conversion Right.
(c) Forbearance from Suit. No holder of Notes of this issue
shall institute any suit or proceeding for the enforcement of the payment of
principal or interest unless the holders of at least fifty-one percent (51%) in
principal amount of all of the outstanding Notes of this issue join in such suit
or proceeding.
(d) Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York, excluding the
body of law relating to conflict of laws. Notwithstanding anything to the
contrary contained herein, in no event may the effective rate of interest
collected or received by the Holder exceed that which may be charged, collected
or received by the Holder under applicable law.
(e) Interpretation. If any term or provision of this Note
shall be held invalid, illegal or unenforceable, the validity of all other terms
and provisions hereof shall in no way be affected thereby.
(f) Successors and Assigns. This Note shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of the
Holder and its successors and assigns.
(g) Notices. All notices, requests, consents and demands shall
be made in writing and shall be mailed postage prepaid, or delivered by hand, to
the Company or to the Holder thereof at their respective addresses set forth
below or to such other address as may be furnished in writing to the other party
hereto:
If to the Holder: At the address shown on Schedule A
attached hereto.
with a copy to: Paramount Capital, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
If to the Company: Genta Incorporated
3350 General Atomics Court
14
San Diego, CA 92121
Attention: Chief Executive Officer
(h) Saturdays, Sundays, Holidays. If any date that may at any
time be specified in this Note as a date for the making of any payment of
principal or interest under this Note shall fall on Saturday, Sunday or on a day
which in New York shall be a legal holiday, then the date for the making of that
payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
(i) Purchase Agreement. This Note is subject to the terms
contained in the Purchase Agreement dated the date hereof between the Company
and certain purchasers of the Senior Secured Convertible Bridge Notes and the
holder of this Note is entitled to the benefits of such Purchase Agreement and
may, in addition to any rights hereunder, enforce the agreements of the Company
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof.
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IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument on the date first above written by the duly authorized
representative of the Company.
ATTEST: GENTA INCORPORATED
_______________________ By: ________________________________
Name:
Its:
(Corporate Seal)
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