EXHIBIT 10.3
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-1
SENIOR SECURED CONVERTIBLE BRIDGE NOTE
$1,050,000 New York, New York
January 28, 1997
Genta Incorporated, a Delaware corporation, (the "Company"), for value
received, hereby promises to pay to THE ARIES DOMESTIC FUND, LP (the "Holder"),
or registered assigns, the principal sum of ONE MILLION FIFTY THOUSAND DOLLARS
($1,050,000), with interest from the date of 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) June 30, 1997 and (b) five
(5) business days following the completion of any equity offering or series of
equity offerings with gross proceeds in excess of $2,500,000 (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 of even date herewith 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 $5.00, subject to adjustment as provided below, representing an
initial conversion rate (subject to adjustment) of 2000 shares of Preferred
Stock per $10,000 of Conversion Amount.
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(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 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 Series D 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
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
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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 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.
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(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).
(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 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
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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
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.
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(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
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:
(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;
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(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 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,
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(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;
(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 Series D 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.
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.
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(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 Series D 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.
(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.
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(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
0000 Xxxxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
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: /s/ Xxxxxx X. Xxxxx
----------------------- -----------------------
Name: Xx. Xxxxxx X. Xxxxx
Its: President and Chief Executive Officer
(Corporate Seal)
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