UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY IN RE GENTA, INC. SECURITIES LITIGATION : : : : Civil Action No. 04 CV 2123 (JAG) CLASS ACTION NOTICE OF PENDENCY OF CLASS ACTION AND PROPOSED SETTLEMENT, MOTION FOR ATTORNEYS FEES AND SETTLEMENT FAIRNESS HEARING If you purchased Genta, Inc. ( Genta ) common stock or call options on Genta common stock or you sold (wrote) put options on Genta common stock during the period between December 14, 2000 and May 3, 2004, inclusive, and were damaged thereby, then you could get a payment from a class action settlement. A federal court authorized this notice. This is not a solicitation from a lawyer. The settlement will provide a settlement fund consisting of $18 million in cash and provide 2 million shares of Genta common stock for the benefit of investors who bought Genta common stock or call options on Genta common stock or who sold put options on Genta common stock during the period between December 14, 2000 and May 3, 2004, inclusive, and were damaged thereby. The settlement resolves a lawsuit over Genta s disclosures to investors about the development of its lead investigational drug during the Class Period. Your legal rights are affected whether you act or do not act. Read this notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT: SUBMIT A CLAIM FORM BY The only way to get a payment. FEBRUARY 2, 2008 EXCLUDE YOURSELF BY Get no payment. This is the only option that allows you to ever be part of any other JANUARY 28, 2008 lawsuit against Defendants and the other Released Parties about the Settled Claims. OBJECT BY JANUARY 28, 2008 Write to the Court about why you do not like the settlement. GO TO A HEARING ON Ask to speak in Court about the settlement. MARCH 3, 2008 DO NOTHING Get no payment. Give up rights. These rights and options - and the deadlines to exercise them - are explained in this notice. The Court in charge of this case still has to decide whether to approve the settlement. Payments will be made if the Court approves the settlement and after appeals are resolved. Please be patient. Statement of Plaintiff Recovery SUMMARY NOTICE Pursuant to the settlement described herein, a Gross Settlement Fund consisting of $18 million in cash, plus interest, has been established and 2 million Settlement Shares of Genta common stock will be provided for the benefit of the Class. Plaintiffs estimate that there were approximately 81.5 million shares of Genta common stock traded during the Class Period which may have been damaged. Plaintiffs estimate that the average recovery per damaged share of Genta common stock under the settlement is 16.9 in cash and 0.0245 Settlement Shares per damaged share 1 before deduction of Court-awarded attorneys fees and expenses. Class Members who transacted in options on Genta common stock can also receive payment from the settlement and represent potentially 24% of the Class s damages, but the various terms of those options and available records concerning such option transactions do not permit a useful estimate of the recovery per option on those option transactions. A Class Member s actual recovery will be a proportion of the net settlement 1 An allegedly damaged share might have been traded more than once during the Class Period, and the indicated average recovery would be the total for all purchasers of that share.
proceeds determined by that claimant s Recognized Claim as compared to the total Recognized Claims of all Class Members who submit acceptable Proofs of Claim. See the Plan of Allocation beginning on page 10 for more information on your Recognized Claim. Statement of Potential Outcome of Case The parties disagree on both liability and damages and do not agree on the average amount of damages per share that would be recoverable if Plaintiffs were to have prevailed on each claim alleged. The issues on which the parties disagree include (a) the appropriate economic model for determining the amount by which Genta common stock, and options on Genta common stock, were allegedly artificially inflated (if at all) during the Class Period; (b) the amount by which Genta common stock, and options on Genta common stock, were allegedly artificially inflated (if at all) during the Class Period; (c) the effect of various market forces influencing the trading prices of Genta common stock, and options on Genta common stock, at various times during the Class Period; (d) the extent to which external factors, such as general market and industry conditions, influenced the trading prices of Genta common stock, and options on Genta common stock, at various times during the Class Period; (e) the extent to which the various matters that Plaintiffs alleged were materially false or misleading influenced (if at all) the trading prices of Genta common stock, and options on Genta common stock, at various times during the Class Period; (f) the extent to which the various allegedly adverse material facts that Plaintiffs alleged were omitted influenced (if at all) the trading prices of Genta common stock, and options on Genta common stock, at various times during the Class Period; and (g) whether the statements made or facts allegedly omitted were material or otherwise actionable under the federal securities laws. The Defendants deny that they are liable to the Plaintiffs or the Class and deny that Plaintiffs or the Class have suffered any damages as a result of any misconduct by Genta. Statement of Attorneys Fees and Costs Sought Plaintiffs Counsel are moving the Court to award attorneys fees not to exceed twenty-five percent (25%) of the Gross Settlement Fund and Settlement Shares, and for reimbursement from the cash fund of their expenses incurred in connection with the prosecution of this Action in the approximate amount of $450,000. The requested fees and expenses would amount to an average of 4.77 in cash and 0.006 Settlement Shares per damaged share in total for fees and expenses. Plaintiffs Counsel have expended considerable time and effort in the prosecution of this litigation on a contingent fee basis, and have advanced the expenses of the litigation, in the expectation that if they were successful in obtaining a recovery for the Class they would be paid from such recovery. In this type of litigation it is customary for counsel to be awarded a percentage of the common fund recovery as their attorneys fees. Further Information Further information regarding the Action and this Notice may be obtained by contacting Plaintiffs Lead Counsel: Neil Fraser, Esq., Milberg Weiss LLP, One Pennsylvania Plaza, New York, New York 10119-0165, Telephone (212) 594-5300. Reasons for the Settlement For the Plaintiffs, the principal reason for the settlement is the benefit to be provided to the Class now. This benefit must be compared to the risk that no recovery might be achieved after a contested trial and likely appeals, possibly years into the future, particularly in light of the company s limited liquid financial resources. For the Defendants, who deny all allegations of wrongdoing or liability whatsoever, the principal reason for the settlement is to eliminate the expense, risks, and uncertain outcome of the litigation. [END OF COVER PAGE] 2
WHAT THIS NOTICE CONTAINS Table of Contents Page SUMMARY NOTICE... 1 Statement of Plaintiff Recovery... 1 Statement of Potential Outcome of Case... 2 Statement of Attorneys Fees and Costs Sought... 2 Further Information... 2 Reasons for the Settlement... 2 BASIC INFORMATION... 4 1. Why did I get this notice package?... 4 2. What is this lawsuit about?... 4 3. Why is this a class action?... 4 4. Why is there a settlement?... 5 WHO IS IN THE SETTLEMENT... 5 5. How do I know if I am part of the settlement?... 5 6. Are there exceptions to being included?... 5 7. What if I am still not sure if I am included?... 5 THE SETTLEMENT BENEFITS WHAT YOU GET... 5 8. What does the settlement provide?... 5 9. How much will my payment be?... 6 HOW YOU GET A PAYMENT SUBMITTING A PROOF OF CLAIM FORM... 6 10. How can I get a payment?... 6 11. When would I get my payment?... 6 12. What am I giving up to get a payment or stay in the Class?... 6 EXCLUDING YOURSELF FROM THE SETTLEMENT... 7 13. How do I get out of the proposed settlement?... 7 14. If I do not exclude myself, can I sue the Defendants and the other Released Parties for the same thing later?... 7 15. If I exclude myself, can I get money from the proposed settlement?... 7 THE LAWYERS REPRESENTING YOU... 7 16. Do I have a lawyer in this case?... 7 17. How will the lawyers fees and litigation expenses, and the expenses of the Settlement administration be paid?... 8 OBJECTING TO THE SETTLEMENT... 8 18. How do I tell the Court that I do not like the proposed settlement?... 8 19. What is the difference between objecting and excluding?... 8 THE COURT S SETTLEMENT FAIRNESS HEARING... 8 20. When and where will the Court decide whether to approve the proposed settlement?... 9 21. Do I have to come to the Hearing?... 9 22. May I speak at the Hearing?... 9 IF YOU DO NOTHING... 9 23. What happens if I do nothing at all?... 9 GETTING MORE INFORMATION... 9 24. Are there more details about the proposed settlement?... 9 25. How do I get more information?... 10 PLAN OF ALLOCATION OF NET SETTLEMENT FUND AND NET SETTLEMENT SHARES AMONG CLASS MEMBERS... 10 SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES... 16 3
BASIC INFORMATION 1. Why did I get this notice package? You or someone in your family may have purchased Genta common stock or call options on Genta common stock or may have sold (written) put options on Genta common stock during the period between December 14, 2000 and May 3, 2004, inclusive, and been damaged thereby. The Court directed that this Notice be sent to potential Class Members because they have a right to know about a proposed settlement of a class action lawsuit, and about all of their options, before the Court decides whether to approve the settlement. If the Court approves the settlement, and after objections and appeals are resolved, an administrator appointed by the Court will make the payments that the settlement allows. This package explains the lawsuit, the settlement, Class Members legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the United States District Court for the District of New Jersey, and the case is known as In re Genta, Inc. Securities Litigation, Civil Action No. 04 CV 2123 (JAG). This case was assigned to United States District Judge Joseph A. Greenaway, Jr.. The people who sued are called plaintiffs, and the company and the person they sued, Genta and Raymond P. Warrell, Jr. (the Chairman, President, and CEO of Genta during the Class Period), are called the Defendants. 2. What is this lawsuit about? Genta is a Delaware corporation in the pharmaceutical industry. It has been working at developing and commercializing new drugs for cancer and related diseases. The company s lead investigational drug during the Class Period was named Genasense, also known as oblimersen sodium. The Amended and Consolidated Class Action Complaint for Violation of the Federal Securities Laws dated October 4, 2004 (the Complaint ) filed in the Action generally alleges, among other things, that Defendants issued materially false and misleading statements related to the development of Genasense during the Class Period in a scheme to artificially inflate the market prices of Genta common stock and options on Genta common stock. The lawsuit seeks money damages against the Defendants for violations of the federal securities laws. The Defendants deny all allegations of misconduct contained in the Complaint and deny having engaged in any wrongdoing whatsoever. On December 6, 2004, Defendants moved to dismiss the Complaint. Plaintiffs Lead Counsel filed opposition papers to the motion to dismiss on January 18, 2005. Defendants filed their reply on February 18, 2005. By Order dated September 29, 2005, the Court denied in part and granted in part Defendants motion to dismiss the Complaint. On October 17, 2005, Defendants filed their answer to the Complaint. Pending the outcome of Defendants motion to dismiss, discovery was stayed under the mandatory discovery stay of the Private Securities Litigation Reform Act. Given the anticipated cost of discovery (including electronic discovery) and Defendants limited resources, the Court continued the discovery stay with the exception of documents necessary to engage in meaningful mediation efforts. The parties reached this proposed settlement as a result of discussions and arm s length negotiations with the assistance of the Honorable Daniel Weinstein acting as a mediator. Commencing on or about June 30, 2004, three purported shareholder derivative complaints on behalf of Genta Applestein v. Warrell, et al., Civil Action No. 04-3169-WJM; Colarusso v. Warrell, et al., Civil Action No. 04-3943-WJM; and Roost v. Warrell, et al., Civil Action No. 04-5294-WJM were filed in this Court. On December 1, 2004, those derivative actions were consolidated with the Action for all purposes. A proposed settlement in those derivative actions, separate from the proposed settlement in this Action, was reached by a Stipulation and Agreement of Compromise, Settlement and Release dated May 23, 2006. The proposed settlement in this Action does not include any derivative claims or those derivative actions. 3. Why is this a class action? In a class action, one or more people called Class Representatives (in this case Lead Plaintiffs Bal Harbor Financial LLC, William Nasser, Jr., David Smith, Brian R. Nickerson, and Ralph LeMar), sue on behalf of people who have similar claims. All these people are a Class or Class Members. Bringing a case, such as this one, as a class action allows adjudication 4
of many similar claims of persons and entities that might be economically too small to bring in individual actions. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. 4. Why is there a settlement? The Court did not finally decide in favor of Plaintiffs or Defendants. Instead, both sides agreed to a settlement. That way, they avoid the risks and cost of a trial, and the people affected will get compensation. The Class Representatives and their attorneys think the settlement is best for all Class Members. WHO IS IN THE SETTLEMENT To see if you will get money from this settlement, you first have to decide if you are a Class Member. 5. How do I know if I am part of the settlement? The Court directed, for the purposes of the proposed settlement, that everyone who fits this description is a Class Member: all persons who purchased Genta common stock or call options on Genta common stock or who sold (wrote) put options on Genta common stock during the period between December 14, 2000 and May 3, 2004, inclusive, and who were damaged thereby. 6. Are there exceptions to being included? Excluded from the Class are the Defendants, the officers and directors of Genta at all relevant times, members of their immediate families, Aventis Pharmaceuticals, Inc. and its officers and directors at all relevant times, and the legal representatives, heirs, successors or assigns of any of the foregoing, and any entity in which Defendants or Aventis have or had a controlling interest. If one of your mutual funds transacted in Genta common stock and options during the Class Period, that alone does not make you a Class Member. You are a Class Member only if you directly purchased shares of Genta common stock, purchased call options on Genta common stock, or wrote (sold) put options on Genta common stock during the Class Period and were damaged thereby. Check your investment records or contact your broker to see if you purchased shares of Genta common stock, purchased call options on Genta common stock, or wrote (sold) put options on Genta common stock during the Class Period. If your only transactions during the Class Period were that you sold Genta common stock, sold call options on Genta common stock, or purchased put options on Genta common stock, that alone does not make you a Class Member. You are potentially a Class Member only if you purchased Genta common stock, purchased call options on Genta common stock, or wrote (sold) put options on Genta common stock during the period between December 14, 2000 and May 3, 2004, inclusive. 7. What if I am still not sure if I am included? If you are still not sure whether you are included, you can ask for free help. You can call 1 (888) 295-0809 or visit www.gardencitygroup.com for more information. Or you can fill out and return the Proof of Claim form described on page 6, in question 10, to see if you qualify. 8. What does the settlement provide? THE SETTLEMENT BENEFITS WHAT YOU GET In exchange for the settlement and dismissal of the Action, Defendants have agreed to create a fund consisting of $18 million in cash and to provide 2 million shares 2 of Genta common stock. The cash and shares will be divided, after taxes and Court-approved fees and expenses, among all Class Members who send in valid Proof of Claim forms. 2 Pursuant to the Stipulation and Agreement of Settlement dated June 25, 2007 (the "Stipulation"), Genta originally agreed to issue "12 million" shares of Genta common stock as Settlement Shares. On July 12, 2007 Genta announced that its Board of Directors approved a one-for-six reverse stock split of Genta's common stock, effective with the open of trading on July 13, 2007. Under the terms of the Stipulation, the Settlement Shares are to be treated the same as any other Genta common stock that was previously issued and outstanding. Accordingly, as a result of this reverse stock split, 2 million "new" shares of Genta common stock are issuable under the Settlement, rather than the 12 million shares of "old" common stock stated in the Stipulation. 5
9. How much will my payment be? Your share of the fund will depend on the total Recognized Claims represented by the valid Proof of Claim forms that Class Members send in, how many shares of Genta common stock you bought, the number of call options on Genta common stock you bought, and the number of put options on Genta common stock you wrote (sold), and when you bought and sold them. You can calculate your Recognized Claim in accordance with the formula shown below in the Plan of Allocation. It is unlikely that you will get a payment for all of your Recognized Claim. After all Class Members have sent in their Proof of Claim forms, the payment you get will be a part of the net settlement proceeds based on your Recognized Claim relative to the total of everyone s Recognized Claims. See the Plan of Allocation beginning on page 10 for more information on your Recognized Claim. 10. How can I get a payment? HOW YOU GET A PAYMENT SUBMITTING A PROOF OF CLAIM FORM To qualify for a payment, you must send in a Proof of Claim form. A Proof of Claim form is being circulated with this Notice. You may also get a Proof of Claim form on the Internet at www.gardencitygroup.com. Read the instructions carefully, fill out the Proof of Claim form, include all the documents the form asks for, sign it, and mail it postmarked no later than February 2, 2008. 11. When would I get my payment? The Court will hold a hearing on March 3, 2008, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It is always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. It also takes time for all the Proofs of Claim to be processed. Please be patient. 12. What am I giving up to get a payment or stay in the Class? Unless you exclude yourself, you are staying in the Class, and that means that, upon the Effective Date, you will release all Settled Claims (as defined below) against the Released Parties (as defined below). Settled Claims means any and all claims, debts, demands, rights or causes of action or liabilities whatsoever (including, but not limited to, any claims for damages, interest, attorneys fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on federal, state, local, statutory or common law or any other law, rule or regulation, whether fixed or contingent, accrued or un-accrued, liquidated or un-liquidated, at law or in equity, matured or un-matured, whether class or individual in nature, including both known claims and Unknown Claims, (i) that have been asserted in this Action by the Class Members or any of them against any of the Released Parties, or (ii) that could have been asserted in any forum by the Class Members or any of them against any of the Released Parties which arise out of or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint and which relate to the purchase of shares of, or call options on, or the sale of put options on, the common stock of Genta during the Class Period. Settled Claims does not mean or include claims, if any, against the Released Parties arising under the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001, et seq. ( ERISA ) which are not common to all Class Members. Settled Claims does not mean or include any derivative claims or the derivative actions consolidated with this Action, which are the subject of a separate Stipulation and Agreement of Compromise, Settlement and Release dated May 23, 2006 in those actions. Released Parties means Defendants Genta and Warrell, their past or present subsidiaries, parents, successors and predecessors, the past or present officers, directors, agents, employees, attorneys, advisors, investment advisors, auditors, accountants and insurance carriers of any of them, and any person, firm, trust, corporation, officer, director or other individual or entity in which either Defendant has a controlling interest or which is related to or affiliated with either of the Defendants, and the legal representatives, heirs, successors in interest or assigns of either of the Defendants. The Effective Date of the settlement will occur when an Order entered by the Court approving the settlement becomes final and not subject to appeal. If you remain a Class Member, all of the Court s orders will apply to you and legally bind you. 6
EXCLUDING YOURSELF FROM THE SETTLEMENT If you do not want a payment from this settlement, but you want to keep any right you may have to sue or continue to sue the Defendants and the other Released Parties, on your own, about the Settled Claims, then you must take steps to get out. This is called excluding yourself or is sometimes referred to as opting out of the settlement class. Defendants may withdraw from and terminate the settlement if Class Members who purchased in excess of a certain percentage of Genta common stock exclude themselves from the Class. 13. How do I get out of the proposed settlement? To exclude yourself from the settlement Class, you must send a signed letter by mail stating that you request exclusion from the Class in In re Genta, Inc. Securities Litigation. Your letter should state the date(s), price(s), and number(s) of shares of all your purchases and sales of Genta common stock and of call and put options on Genta common stock during the Class Period. In addition, be sure to include your name, address, telephone number, and your signature. You must mail your exclusion request postmarked no later than January 28, 2008 to: In re Genta, Inc. Securities Litigation EXCLUSIONS c/o The Garden City Group, Inc. Claims Administrator P.O. Box 9220 Dublin, OH 43017-4620 You cannot exclude yourself by telephone or by e-mail. If you ask to be excluded, you will not get any settlement payment, and you cannot object to the settlement. You will not be legally bound by anything that happens in this lawsuit, and you may be able to sue (or continue to sue) the Defendants and the other Released Parties in the future. 14. If I do not exclude myself, can I sue the Defendants and the other Released Parties for the same thing later? No. Unless you exclude yourself, you give up any rights to sue the Defendants and the other Released Parties for any and all Settled Claims. If you have a pending lawsuit speak to your lawyer in that case immediately. You must exclude yourself from this Class to continue your own lawsuit. Remember, the exclusion deadline is January 28, 2008. 15. If I exclude myself, can I get money from the proposed settlement? No. If you exclude yourself, do not send in a Proof of Claim form to ask for any money. But, you may exercise any right you may have to sue, continue to sue, or be part of a different lawsuit against the Defendants and the other Released Parties. 16. Do I have a lawyer in this case? THE LAWYERS REPRESENTING YOU All Class Members are represented by the law firm of Shalov Stone Bonner & Rocco LLP of Morristown, New Jersey as Plaintiffs Liaison Counsel and the law firm of Milberg Weiss LLP (f/k/a Milberg Weiss Bershad & Schulman LLP) 3 in New York, NY as Plaintiffs Lead Counsel. You will not be separately charged for these lawyers. The Court will determine the amount of Plaintiffs Counsel s fees and expenses, which will be paid from the Gross Settlement Fund and Settlement Shares. If you want to be represented by your own lawyer, you may hire one at your own expense. 3 Milberg Weiss LLP was formerly known as Milberg Weiss Bershad & Schulman LLP. On May 18, 2006 in the United States District Court for the Central District of California (Los Angeles), Milberg Weiss Bershad & Schulman LLP and two of its partners, David J. Bershad and Steven G. Schulman, and others, were named as defendants in an indictment. The indictment alleged that, in certain cases identified in the indictment, portions of attorneys fees awarded to the firm were improperly shared with certain plaintiffs. Milberg Weiss LLP has pleaded not guilty. The two partners named in the indictment have left the firm and have agreed to plead guilty to conspiracy to obstruct justice. On September 20, 2007 a superseding indictment was filed which added Melvyn I. Weiss as a named defendant. Mr. Weiss has pleaded not guilty. The indictment does not refer to this action, and makes no allegations of any impropriety in the conduct of this action. 7
Prior to the appointment of Plaintiffs Lead Counsel, it was disclosed to the Court that certain attorneys at Plaintiffs Lead Counsel owned securities of Genta prior to and during part of the Class Period. Such holdings were considered insufficient to disqualify Plaintiffs Lead Counsel from representing the Class. 17. How will the lawyers fees and litigation expenses, and the expenses of the Settlement administration be paid? Plaintiffs Lead Counsel are moving the Court to award attorneys fees from the Gross Settlement Fund and Settlement Shares not to exceed twenty-five percent (25%) of the Gross Settlement Fund and Settlement Shares and for reimbursement from the Gross Settlement Fund of their expenses in the approximate amount of $450,000, plus interest on such expenses at the same rate as earned by the Gross Settlement Fund. One of the Lead Plaintiffs may also move the Court for reimbursement of an amount not to exceed $67,000 for reimbursement of that Lead Plaintiff's reasonable costs and expenses (including lost wages) directly relating to that Lead Plaintiff's representation of the Class. To the extent such reimbursement is ordered by the Court, Plaintiffs' Lead Counsel will reduce its fee by the amount reimbursed. The Claims Administrator s fees and expenses incurred in connection with giving notice, administering the settlement and distributing the settlement proceeds to the Class Members will be paid from the Gross Settlement Fund. OBJECTING TO THE SETTLEMENT You can tell the Court that you do not agree with the settlement or some part of it. 18. How do I tell the Court that I do not like the proposed settlement? If you are a Class Member you can object to the settlement or any of its terms, the proposed Plan of Allocation and/or the application by Plaintiffs Lead Counsel for an award of fees and expenses. You may write to the Court setting out your objection. You may give reasons why you think the Court should not approve any or all of the settlement terms or arrangements. The Court will consider your views if you file a proper objection within the deadline identified, and according to the following procedures. To object, you must send a signed letter stating that you object to the proposed settlement in the In re Genta, Inc. Securities Litigation. Be sure to include your name, address, telephone number, and your signature, identify the date(s), price(s), and number(s) of shares of all purchases and sales of the Genta common stock and of the call and put options on Genta common stock that you made during the Class Period, and state the reasons why you object to the settlement. Your objection must be filed with the Court and served on all the following counsel on or before January 28, 2008: COURT PLAINTIFFS LEAD COUNSEL DEFENDANTS COUNSEL Clerk of the Court United States District Court for the District of New Jersey Martin Luther King, Jr. Federal Building & U.S. Courthouse 50 Walnut Street Newark, NJ 07101 Neil Fraser, Esq. Milberg Weiss LLP One Pennsylvania Plaza New York, NY 10119-0165 19. What is the difference between objecting and excluding? 8 Amelia T.R. Starr, Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Objecting is simply telling the Court that you do not like something about the proposed settlement. You can object only if you stay in the Class. Excluding yourself is telling the Court that you do not want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. THE COURT S SETTLEMENT FAIRNESS HEARING The Court will hold a hearing to decide whether to approve the proposed settlement. You may attend and you may ask to speak, but you do not have to. You do not need to go to the Settlement Fairness Hearing (the Hearing ) to have your written objection considered by the Court. At the Hearing, any Class Member who has not previously submitted a request for exclusion from the Class and who has complied with the procedures set out in questions 18 and 22 for filing with the Court and providing to the counsel for Plaintiffs and Defendants a statement of an intention to appear at the Hearing may also appear and be heard, to the extent allowed by the Court, to state any objection to the settlement, the Plan of Allocation or Plaintiffs Lead Counsel s motion for an award of attorneys fees and reimbursement of expenses. Any such objector may appear in person or arrange, at that objector s expense, for a lawyer to represent the objector at the Hearing.
20. When and where will the Court decide whether to approve the proposed settlement? The Court will hold the Settlement Fairness Hearing at 9:30 a.m. on Monday, March 3, 2008, at the United States District Court for the District of New Jersey, Martin Luther King, Jr. Federal Building & U.S. Courthouse, 50 Walnut Street, Newark, New Jersey 07101. At this Hearing the Court will consider whether the settlement is fair, reasonable and adequate. At the Hearing, the Court also will consider the proposed Plan of Allocation for the proceeds of the settlement and the application of Plaintiffs Lead Counsel for attorneys fees and reimbursement of expenses. The Court may also decide how much to pay to Plaintiffs Counsel. The Court will take into consideration any written objections filed in accordance with the instructions at question 18. The Court also may listen to people who have properly indicated, within the deadline identified above, an intention to speak at the Hearing; but decisions regarding the conduct of the Hearing will be made by the Court. See question 22 for more information about speaking at the Hearing. After the Hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. You should be aware that the Court may change the date and time of the Hearing. Thus, if you want to come to the Hearing, you should check with Plaintiffs Lead Counsel before coming to be sure that the date and/or time has not changed. 21. Do I have to come to the Hearing? No. Plaintiffs Counsel will answer questions the Court may have. But, you are welcome to come at your own expense. If you send an objection, you do not have to come to Court to talk about it. As long as you filed your written objection on time, the Court will consider it. You may also pay your own lawyer to attend, but it is not necessary. Class Members do not need to appear at the Hearing or take any other action to indicate their approval. 22. May I speak at the Hearing? If you object to the settlement, you may ask the Court for permission to speak at the Hearing. To do so, you must include with your objection (see question 18 above) a statement, entitled Notice of Intention to Appear in In re Genta, Inc. Securities Litigation, Civil Action No. 04 CV 2123 (JAG), stating your intention to speak at the Hearing. Persons who intend to object to the settlement, the Plan of Allocation, and/or counsel s application for an award of attorneys fees and expenses and desire to present evidence at the Hearing must include in their written objections the identity of any witnesses they may call to testify and exhibits they intend to introduce into evidence at the Hearing. You cannot speak at the Hearing if you excluded yourself from the Class or if you have not provided written notice of your intention to speak at the Hearing by the deadline identified in question 18, and in accordance with the procedures described in question 18 and this paragraph. 23. What happens if I do nothing at all? IF YOU DO NOTHING If you do nothing, you will get no money from this settlement and you will be precluded from starting a lawsuit, continuing with a lawsuit, or being part of any other lawsuit against Defendants and the other Released Parties about the Settled Claims in this case, ever again. To share in the net settlement proceeds you must submit a Proof of Claim form (see question 10). To start, continue or be a part of any other lawsuit against the Defendants and the other Released Parties about the Settled Claims in this case you must exclude yourself from this Class (see question 13). GETTING MORE INFORMATION 24. Are there more details about the proposed settlement? This notice summarizes the proposed settlement. More details are in a Stipulation and Agreement of Settlement dated June 25, 2007 (the Stipulation ). You can get a copy of the Stipulation by writing to Neil Fraser, Esq., Milberg Weiss LLP, One Pennsylvania Plaza, New York, NY 10119-0165, or by visiting www.gardencitygroup.com. You also can call the Claims Administrator at 1-888-295-0809 toll free; write to In re Genta, Inc. Securities Litigation, c/o The Garden City Group, Inc., Claims Administrator, P.O. Box 9128, Dublin, OH 43017-4128; or visit the website at www.gardencitygroup.com, where you will find a Proof of Claim form, plus other information to help you determine whether you are a Class Member and whether you are eligible for a payment. 9
25. How do I get more information? For even more detailed information concerning the matters involved in this Action, reference is made to the pleadings, to the Stipulation, to the Orders entered by the Court and to the other papers filed in the Action, which may be inspected at the Office of the Clerk of the United States District Court for the District of New Jersey, the Martin Luther King, Jr. Federal Building & U.S. Courthouse, 50 Walnut Street, Newark, New Jersey 07101, during regular business hours. PLAN OF ALLOCATION OF NET SETTLEMENT FUND AND NET SETTLEMENT SHARES AMONG CLASS MEMBERS The $18 million Cash Settlement Amount and any income or interest earned thereon shall be the Gross Settlement Fund. The Gross Settlement Fund, less all taxes, approved costs, fees and expenses (the Net Settlement Fund ), and the Settlement Shares, less any amount approved as attorney s fees (the Net Settlement Shares ), shall be distributed to Class Members who submit acceptable Proofs of Claim ( Authorized Claimants ). The Claims Administrator shall determine each Authorized Claimant s pro rata share of the Net Settlement Fund and Net Settlement Shares based upon each Authorized Claimant s Recognized Claim. The Recognized Claim formula is not intended to be an estimate of the amount of what a Class Member might have been able to recover after a trial; nor is it an estimate of the amount that will be paid to Authorized Claimants pursuant to the settlement. The Recognized Claim formula is the basis upon which the Net Settlement Fund and Net Settlement Shares will be proportionately allocated to the Authorized Claimants. The Claims Administrator shall distribute at least five ($5) dollars in cash to each Authorized Claimant with a Recognized Claim. Authorized Claimants who would not be entitled to receive at least $5.00 based on the initial prorating of the Net Settlement Fund to Authorized Claimants will nonetheless be paid the minimum $5.00 cash distribution amount. The minimum number of Settlement Shares which shall be distributed to each Authorized Claimant shall be four (4) Settlement Shares. No shares shall be issued to any Authorized Claimant who would not be entitled to receive at least four (4) shares based on the initial prorating of shares to Authorized Claimants. To the extent that an Authorized Claimant s calculated distribution is fewer than four (4) Settlement Shares, that claimant will still receive at least $5.00 in cash. No fractional shares shall be issued. No adjustment will be made in the cash distributions for fractional shares nor for the minimum number of shares. The Claims Administrator shall determine each Authorized Claimant's pro rata share of the Net Settlement Fund based upon each Authorized Claimant's "Recognized Claim." The following proposed Plan of Allocation reflects Plaintiffs allegations that the price of Genta common stock was inflated artificially during the period from December 14, 2000 through May 3, 2004 due to alleged misrepresentations regarding the clinical investigation and tests used to evaluate Genta s Genasense product as an anti cancer treatment, including as an add on treatment to enhance the effectiveness of chemotherapy against malignant melanomas. Throughout the Class Period, the Defendants stated that Genta s multiple Phase 3 clinical trials, including the Phase 3 clinical trial for malignant melanoma, were of the highest quality, well-designed, thoughtful, carefully planned, and carefully executed. Defendants further disclosed that the studies were demonstrating statistically significant clinical success for Genta s Genasense product. On April 4, 2002 it was reported that additional patients were being added to the malignant melanoma study, which plaintiffs have alleged called into question the original adequacy and planning of the study, and coincided with a decline in the price of Genta stock from $15.81 on 4/3/2002 to $13.20 on 4/4/2002. On April 5, 2002 Genta held a conference call indicating the addition of patients and stating that the company had taken steps to simply and conservatively design the Phase 3 trials to assure FDA approval and to simply continue the enthusiastic pace of enrollment to a larger sample size, which is common, standard in the industry and represents a conservative strategy. Genta stock rebounded on April 5, 2002 to close at $14.00, down $1.81 from April 3, 2002 s close. On June 3, 2002, Defendant Warrell disclosed that Genta had obtained $72 million of additional financing, and that after discussion with the financier it had decided to further increase the number of patients enrolled in the study and that the increased enrollment would delay the final report and submission of the new drug application to the FDA. Genta s stock price dropped from $9.25 on 5/31/2002 to $7.18 on 6/3/2002, a $2.07 decrease. Defendants stated that the decision to change was made in an environment of high-profile product failures and was designed to increase the likelihood of getting a positive review. 10
On April 30, 2004, Genta disclosed in a press release that the United States Food and Drug Administration ( FDA ) briefing documents were critical of Genta s study and found the study s results inadequate. On May 3, 2004, the last day of the Class Period, the majority of an FDA committee reviewing Genta s application for approval of Genasense voted against approval. The following proposed Plan of Allocation is based on the premise that the decreases in the price of Genta common stock occurring upon the disclosures of changes to the study size and the FDA s finding that the clinical studies of Genasense were inadequate to show that it was safe and effective, may be used to measure the alleged artificial inflation in the price of Genta common stock prior to such disclosures. Genta common stock closed at $14.43 per share on April 29, 2004. Genta declined $5.83 per share to a closing price of $8.60 on Friday, April 30, 2004, and fell another $3.49 to close at $5.11 on Monday, May 3, 2004. Genta common stock did not rebound in the 90 day period following the May 3, 2004 end of the Class Period and therefore no adjustment is required under the PSLRA relating to post-class Period trading. For purposes of calculating claims, the following terms shall have the indicated meanings: PPP means the purchase price paid for a security, and it includes the purchase price and any brokerage commissions or other charges incurred on the purchase. SPR means the sales proceeds received and it is the net amount received for the security sold after deduction of brokerage commissions and other sales charges incurred on the sale. Recognized Claims will be calculated for purposes of the Settlement as follows: Common Stock Purchases: (a) For shares of Genta common stock purchased during the period December 14, 2000 through and including April 3, 2002, and (1) Sold on or before the close of trading on April 3, 2002, an Authorized Claimant shall have no ($0.00) "Recognized Claim"; (2) Sold at a loss during the period April 4, 2002 through and including Friday, May 31, 2002, an Authorized Claimant's "Recognized Claim" shall mean 50% 4 of the least of: (a) the out of pocket loss (i.e. the purchase price paid (including commissions, etc.) (the PPP ), minus the sales proceeds received (net of commissions, etc.) (the SPR )), (b) the PPP (but not more than $15.81 per share) minus the SPR (but not less than $14.00 per share); or (c) $1.81 per share ($15.81 - $14.00); (3) Sold at a loss during the period Monday, June 3, 2002 through and including Thursday, April 29, 2004 an Authorized Claimant's "Recognized Claim" shall mean 50% 5 of the least of: (a) the out of pocket loss (i.e. the PPP minus the SPR), (b) if the PPP was more than $14.00 per share, the PPP (but not more than $15.81 per share) minus $14.00 per share, plus $9.25 per share minus the SPR (but not more than $9.25 per share or less than $7.18 per share); (c) if the PPP was less than $14.00 per share, the PPP (but not more than $9.25 per share) minus $7.18 per share; or (d) $3.88 per share ($15.81 - $14.00 plus $9.25- $7.18); (4) Sold at a loss on Friday, April 30, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR), (b) the PPP (but not more than $15.81 per share) minus the SPR (but not less than $8.60 per share); (c) if the PPP was less than $14.00 per share, the PPP (but not more than $9.25 per share) minus $8.60 per share; or (d) $6.52 per share ((50% of $15.81 - $14.43) plus (100% of $14.43 - $8.60)); 4 This discount reflects the relatively higher risk that plaintiffs faced to show that the decline in Genta s common stock price on April 4, 2002 was caused by the correction of previously misrepresented facts. 5 This discount reflects the relatively higher risk that plaintiffs faced to show that the declines in Genta s common stock price on April 4, 2002 and June 3, 2002 were caused by the correction of previously misrepresented facts. 11
(5) Sold at a loss on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR), (b) the PPP (but not more than $15.81 per share) minus the SPR (but not less than $7.18 per share); or (c) $10.01 per share ((50% of $15.81 - $14.43) plus (100% of $14.43 - $5.11)); (6) Held at the close of trading on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the lesser of: (a) the out of pocket loss (i.e. the PPP less a $5.11 per share holding value), or (b) $10.01 per share ((50% of $15.81 - $14.43) plus (100% of $14.43 - $5.11)); (b) 31, 2002, and Claim"; For shares of Genta common stock purchased during the period April 4, 2002 through and including May (1) Sold on or before May 31, 2002, an Authorized Claimant shall have no ($0.00) "Recognized (2) Sold at a loss during the period Monday, June 3, 2002 through and including Thursday, April 29, 2004, an Authorized Claimant's "Recognized Claim" shall mean 50% 6 of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR); (b) the PPP (but not more than $9.25 per share) minus the SPR (but not less than $7.19 per share); or (c) $2.07 per share ($9.25 - $7.18); (3) Sold at a loss on Friday, April 30, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR), (b) the PPP (but no more than $14.43 per share) minus the SPR (but no less than $8.60 per share); or (c) $5.83 per share ($14.43 - $8.60); (4) Sold at a loss on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR), (b) the PPP (but no more than $14.43 per share) minus the SPR (but no less than $5.11 per share); or (c) $9.32 per share ($14.43 - $5.11); (5) Held at the close of trading on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the lesser of: (a) the out of pocket loss (i.e. the PPP less a $5.11 per share holding value), or (b) $9.32 per share. (c) 29, 2004, and For shares of Genta common stock purchased during the period June 3, 2002 through and including April (1) Sold on or before April 29, 2004, an Authorized Claimant shall have no ($0.00) "Recognized Claim"; (2) Sold at a loss on Friday, April 30, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR), (b) the PPP (but not more than $14.43 per share) minus the SPR (but not less than $8.60 per share); or (c) $5.83 per share ($14.43 - $8.60); (3) Sold at a loss on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR), (b) the PPP (but not more than $14.43 per share) minus the SPR (but not less than $5.11 per share); or (c) $9.32 per share ($14.43 - $5.11); (4) Held at the close of trading on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the lesser of: (a) the out of pocket loss (i.e. the PPP less a $5.11 per share holding value), or (b) $9.32 per share. (d) For shares of Genta common stock purchased on Friday, April 30, 2004 or Monday, May 3, 2004, and (1) Sold on April 30, 2004, an Authorized Claimant shall have no ($0.00) "Recognized Claim"; (2) Sold at a loss on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the least of: (a) the out of pocket loss (i.e. the PPP less the SPR), (b) the PPP (but no more than $8.60 per share) minus the SPR (but not less than $5.11 per share); or (c) $3.49 per share ($8.60- $5.11); 6 This discount reflects the relatively higher risk that plaintiffs faced to show that the decline in Genta s common stock price on June 3, 2002 was caused by the correction of previously misrepresented facts. 12
(3) Held at the close of trading on Monday, May 3, 2004, an Authorized Claimant's "Recognized Claim" shall mean 100% of the lesser of: (a) the out of pocket loss (i.e. the PPP less a $5.11 per share holding value), or (b) $3.49 per share. Call Option Purchases: (i) No claim will be recognized for any Genta call options purchased during the Class Period that were not owned as of the close of trading on April 4, 2002, June 3, 2002, April 30, 2004 and/or May 3, 2004. (ii) For Genta call options purchased during the Class Period and owned as of the close of trading on April 4, 2002 (and not owned as of the close of trading on June 3, 2002, April 30, 2004 and/or May 3, 2004), an Authorized Claimant s Recognized Claim shall be the lesser of: (a) 25% 7 of the difference, if a loss, between (x) PPP and (y) the sum for which said call options were subsequently sold at a loss (after brokerage commissions and transaction charges)(or $0.00 if the call option expired before the close of trading on May 3, 2004 and while still owned by the Authorized Claimant) (the SPR-Call ); or (b) $0.45 per share covered by such call option contracts (i.e. 25% of the $1.81 decline in Genta s common stock closing price from April 3 to April 5, 2002). (iii) For Genta call options purchased during the Class Period and owned as of the close of trading on both April 4, 2002 and June 3, 2002 (and not owned as of the close of trading on April 30, 2004 and/or May 3, 2004), an Authorized Claimant s Recognized Claim shall be the lesser of: (a) 25% of the difference, if a loss, between (x) the PPP and (y) the SPR-Call; or (b) $0.97 per share covered by such call option contracts (i.e. 25% of the $1.81 decline in Genta s common stock closing price from April 3 to April 5, 2002 and 25% of the $2.07 decline in Genta s common stock closing price from May 31, 2002 to June 3, 2002). (iv) For Genta call options purchased during the Class Period and owned as of the close of trading on June 3, 2002 (and not owned as of the close of trading April 4, 2002, April 30, 2004 and/or May 3, 2004), an Authorized Claimant s Recognized Claim shall be the lesser of: (a) 25% of the difference, if a loss, between (x) the PPP and (y) the SPR-Call; or (b) $0.52 per share covered by such call option contracts (i.e. 25% of the $2.07 decline in Genta s common stock closing price from May 31, 2002 to June 3, 2002). (v) For Genta call options purchased during the Class Period and owned as of the close of trading on April 30, 2004 (and not owned as of the close of trading on April 4, 2002, June 3, 2002, and/or May 3, 2004), an Authorized Claimant s Recognized Claim shall be the lesser of: (a) 50% 8 of the difference, if a loss, between (x) the PPP and (y) the SPR-Call; or (b) $2.91 per share covered by such call option contracts (i.e. 50% of the $5.83 decline in Genta s common stock closing price from April 29, 2004 to April 30, 2004). (vi) For Genta call options purchased during the Class Period and owned as of the close of trading on both April 30, 2004 and May 3, 2004 (and not owned as of the close of trading on April 4, 2002 and/or June 3, 2002), an Authorized Claimant s Recognized Claim shall be the lesser of: (a) 50% of the difference, if a loss, between (x) the PPP and (y) the SPR-Call; or (b) $4.66 per share covered by such call option contracts (i.e. 50% of the $9.32 decline in Genta s common stock closing price from April 29, 2004 to May 3, 2004). (vii) For Genta call options purchased during the Class Period and owned as of the close of trading on May 3, 2004 (and not owned as of the close of trading April 4, 2002, April 30, 2004 and/or June 3, 2002), an Authorized Claimant s Recognized Claim shall be the lesser of: (a) 50% of the difference, if a loss, between (x) the PPP and (y) the SPR-Call; or (b) $1.745 per share covered by such call option contracts (i.e. 50% of the $3.49 decline in Genta s common stock closing price from April 30, 2004 to May 3, 2004). (viii) For Genta call options purchased during the Class Period and owned as of the close of trading on April 4, 2002 and/or June 3, 2002 and still owned on April 30, 2004 (and not owned as of the close of trading on May 3, 2004), an Authorized Claimant s Recognized Claim shall be the lesser of: (a) 25% 9 of the difference, if a 7 This discount reflects both (i) the fact that a purchase of a call option includes the payment of a time premium and (ii) the relatively higher risk that plaintiffs faced to show that the decline in Genta s common stock price on April 4, 2002 was caused by the correction of previously misrepresented facts. 8 This discount reflects the fact that a purchase of a call option includes the payment of a time premium. 9 This discount reflects the fact that a purchase of a long-term call option includes the payment of a more substantial time premium. 13