Exhibit 4.1
Portions of this Exhibit have been omitted pursuant to a Request for
Confidential Treatment
THE SYMBOL "[**]" IS USED TO INDICATE WHERE A PORTION OF THIS EXHIBIT HAS BEEN
OMITTED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS. A COMPLETE COPY OF THIS EXHIBIT, CONTAINING ALL OF THE OMITTED
PORTIONS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
TOGETHER WITH THE REQUEST FOR CONFIDENTIAL TREATMENT.
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
16, 2001, among Generex Biotechnology Corporation, a Delaware corporation (the
"Company"), Elan International Services, Ltd., a Bermuda exempted limited
liability company (and its affiliates, "EIS"), and a wholly owned subsidiary of
Elan Corporation, plc, an Irish public limited company ("Elan").
R E C I T A L S:
A. The Company desires to issue and sell to EIS, and EIS desires to
purchase from the Company, on the date hereof, (i) 1,000 shares of a
newly-created series of the Company's preferred stock, par value U.S.$.001 per
share, captioned "Series A Preferred Stock" (the "Series A Preferred Stock"),
(ii) 344,116 shares of the Company's common stock, par value U.S.$.001 per share
(the "Company Common Stock") and (iii) a warrant to purchase up to 75,000 shares
of Company Common Stock, as provided therein, in the form attached hereto as
Exhibit A (as amended at any time, the "Warrant"). The Series A Preferred Stock
and the Company Common Stock collectively are referred to herein as the
"Shares". The Shares and the Warrant collectively are referred to herein as the
"Securities". The rights, preferences and privileges of the Series A Preferred
Stock are as set forth in the Company's Certificate of Designations, Preferences
and Rights, the form of which is attached hereto as Exhibit B (the "Certificate
of Designations").
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B. The Company and EIS have formed Generex (Bermuda), Ltd., an exempted
limited liability company incorporated under the laws of Bermuda ("Newco"), and
pursuant to the terms of a Subscription, Joint Development and Operating
Agreement, dated as of the date hereof (as amended at any time, the "JDOA"),
simultaneously with the transactions contemplated by this Agreement, (i) the
Company shall acquire 100% voting common shares of Newco, par value U.S.$1.00
per share (the "Newco Common Shares"), representing 100% of the issued and
outstanding Newco Common Shares for $7.5 million, and 60.2% non-voting
convertible preference shares of Newco, par value of U.S.$1.00 per share (the
"Newco Preferred Shares"; together with the Newco Common Shares, the "Newco
Shares"), representing 30.1% of the outstanding Shares for $4.515 million and
(ii) EIS shall acquire 39.8% of the Preferred Shares, representing 19.9% of the
outstanding Shares, on an as converted basis, for $2.985 million. Additionally,
as of the date hereof, Newco has entered into license agreements with (i) Elan
(the "Elan License Agreement") and (ii) the Company (such agreement, as amended
at any time, the "Company License Agreement"; together with the Elan License
Agreement, the "License Agreements"). Further, Elan and Company shall enter into
a development agreement (the "Development Agreement").
C. The Company and EIS are executing and delivering on the date hereof
a Registration Rights Agreement in the form attached hereto as Exhibit C (as
amended at any time, the "Company Registration Rights Agreement") in respect of
(i) the Company Common Stock issued and purchased hereunder, the Company Common
Stock issued or issuable upon conversion of the Series A Preferred Stock or
exercise of all or any portion of the Warrant and (ii) any other Company Common
Stock owned by EIS or any of its affiliates or their respective permitted
transferees. The Company, EIS and Newco are also executing and delivering on the
date hereof a Registration Rights Agreement in the form attached hereto as
Exhibit D(as amended at any time, the "Newco Registration Rights Agreement").
This Agreement, the Certificate of Designations, the Warrant, the JDOA, the
Company Registration Rights Agreement, the Newco Registration Rights Agreement,
the License Agreements and each other document or instrument executed and
delivered in connection with the transactions contemplated hereby and by the
JDOA collectively are referred to herein as the "Transaction Documents".
A G R E E M E N T:
In consideration of the foregoing premises and the mutual covenants
contained herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
SECTION 1. Closing.
(a) Time and Place. The closing of the Initial Purchase (as defined
below) (the "Initial Closing") shall occur on the date hereof (the "Initial
Closing Date"). The funding of any purchase due under the Put Event (as defined
below) (each, a "Subsequent Closing") shall occur on such dates as set forth in
Section 1(d) (each, a "Subsequent Closing Date"). The Initial Closing and each
Subsequent Closing individually are referred to herein as a "Closing", and the
Initial Closing Date and each Subsequent Closing Date individually are referred
to herein as a "Closing Date". The Closing shall be held at the offices of
Xxxxxx, Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (by means of
facsimile or overnight mail).
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(b) Sale and Purchase. At the Initial Closing, subject to the terms and
conditions hereof, the Company shall issue and sell to EIS, and EIS shall
purchase from the Company, (i) 1,000 shares of Series A Preferred Stock, (ii)
344,116 shares of Company Common Stock and (iii) the Warrant (the "Initial
Purchase").
(c) Purchase Price. The aggregate purchase price for the Initial
Purchase shall be .S.$17.015 million (the "Initial Purchase Price").
(d) Initial Closing Delivery. (i) On the Closing Date, subject to the
terms and conditions hereof: (a) EIS shall pay the Initial Purchase Price by
wire transfer of U.S.$17.015 million to an account designated in writing by the
Company ; (b) the parties hereto shall execute and deliver to each other, as
applicable, (A) certificates representing 1,000 shares of Series A Preferred
Stock and 344,116 shares of Common Stock, (B) the Warrant, (C) the Company
Registration Rights Agreement, (D) the Newco Registration Rights Agreement, (E)
the JDOA, (F) the Certificate of Designations as filed with the Secretary of
State of the State of Delaware, (G) the License Agreements, (H) a customary
secretary's certificate from the secretary of the Company, including a
certificates as to the incumbency of the officers of the Company executing any
of the Transaction Documents, (I) certificates as to the incumbency of the
officers of EIS and EPIL executing any of the Transaction Documents and (J) any
other documents or instruments reasonably requested by a party hereto; and (c)
the Company shall cause to be delivered to EIS an opinion of counsel in the form
attached hereto as Exhibit E.
(ii) It is estimated that Newco will require additional funds to
commence development of Newco's products. Upon approval by the United States
Food and Drug Administration of an investigational new drug application (an
"IND") filed by Newco, and the dosing of the first human patient of such product
(the "Put Event"), the Company shall have the right, exercisable for 30 days, to
require EIS to purchase shares of Company Common Stock for an aggregate amount
of $1.0 million payable in cash at a price per share equal to a 30% premium over
the average closing price for the sixty day period immediately preceding the Put
Event, provided, that the closing of such purchase shall be subject to the
satisfaction of any applicable regulatory approvals. The Subsequent Closing
shall occur the third business day after the Company notifies Elan of its intent
to exercise this right, subject to the satisfaction of all regulatory approvals.
EIS shall receive the same anti-dilution protection that is provided with
respect to the shares of Generex Common Stock purchased on the Initial Closing
Date. Notwithstanding the foregoing, the preceding anti-dilution provisions
relating to any shares purchased pursuant to the Put Event shall terminate upon
the earlier of (i) 60 days following the registration of the shares of Company
Common Stock purchased by EIS pursuant to the Put Event and (ii) the fourteen
month anniversary of the Put Event.
-4-
(e) Development Funding. It is estimated that Newco will require
additional funds to commence research development of Newco's products. Within
the period commencing on the Initial Closing Date and ending on the three (3)
year anniversary of the Initial Closing Date, (the "Development Period"), EIS
and the Company may provide to Newco up to an aggregate maximum amount of
U.S.$6.0 million, such funding to be provided by EIS and the Company in
accordance with the parties then-current respective ownership on a fully-diluted
basis, in Newco (the "Development Funding"). The provisions with respect to the
Development Funding are subject to the more specific provisions contained in
Sections 6.3 and 6.4 of the JDOA.
(f) Exemption from Registration. The Securities and any underlying
shares of Company Common Stock will be issued under an exemption or exemptions
from registration under the U.S. Securities Act of 1933, as amended (the
"Securities Act"). Accordingly, the certificates evidencing the Series A
Preferred Stock, the Company Common Stock, the Warrant, and any shares of the
Company Common Stock or other securities issuable upon the exercise, conversion
or exchange of any of the Securities shall, upon issuance, contain a legend,
substantially in the form as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST
THEREIN MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR THE ISSUER OF THESE SECURITIES RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO
THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
ANY APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS ALSO SUBJECT TO THE RESTRICTIONS CONTAINED IN
THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF
JANUARY 16, 2001, BY AND AMONG GENEREX BIOTECHNOLOGY
CORPORATION AND ELAN INTERNATIONAL SERVICES, LTD.
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SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to EIS, as of the Closing Date, as follows:
(a) Organization and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority
to own and lease its properties, to carry on its business as presently
conducted and as proposed to be conducted and to consummate the
transactions contemplated hereby. The Company is duly qualified as a
foreign corporation and in good standing to do business in each
jurisdiction in which the nature of the business conducted or the
property owned by it requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a material adverse effect on the business, assets, liabilities
(contingent or otherwise), operations, condition (financial or
otherwise), or prospects of the Company (a "Company Material Adverse
Effect").
(b) Capitalization. (i) Immediately following the Initial
Closing, the capitalization of the Company will be as follows: (a)
50,000,000 shares of Common Stock, of which 19,178,186 shares have been
issued and are outstanding, (b) 1,000,000 shares of preferred stock, of
which (x) 1,512 have been designated shares of Series A Preferred
Stock, of which 1,000 shares have been issued and are outstanding, and
(y) 1,000 shares have been designated Special Voting Rights Preferred
Stock of which 1,000 are issued and outstanding.. All authorized and
issued shares of Common Stock are fully paid and non-assessable.
(ii) As of the Initial Closing Date, the Company has
reserved a sufficient number of shares of Company Common Stock
for issuance upon conversion of the Series A Preferred Stock,
exercise of the Warrant and a sufficient number of shares of
Series A Preferred Stock for issuance as dividends on the
Series A Preferred Stock.
(iii) There are no preemptive rights, voting
agreements, rights of first offer or refusal, options,
warrants or other conversion privileges or rights presently
outstanding to purchase, subscribe for or otherwise acquire,
or any securities convertible into or exercisable for or into,
any of the Company's capital stock (collectively, "Preemptive
Rights"), except as described on Schedule 2(b). There are no
agreements to register any of the Company's outstanding
securities under U.S. federal securities laws, other than the
Company Registration Rights Agreement and except as described
on Schedule 2(b).
(iv) All of the outstanding shares of capital stock
of the Company have been issued in accordance with applicable
state and federal laws and regulations (or exemptions
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therefrom) governing the sale and purchase of securities, all
of such shares have been duly and validly issued and are fully
paid and non-assessable. The Shares, when issued against
payment therefor in accordance with this Agreement or, in the
case of the Series A Preferred Stock, as dividends in respect
of previously issued shares of Series A Preferred Stock, will
be duly and validly issued, fully paid and non-assessable, and
the Warrant (including additional amounts issued as accrued
interest), when issued against payment therefor in accordance
with this Agreement, will be duly and validly issued, and in
each case will not be issued in violation of any Preemptive
Rights. The shares of Company Common Stock issuable upon
conversion or exercise of the Series A Preferred Stock and the
Warrant (the "Underlying Shares"), when issued upon conversion
or exercise in accordance with the terms thereof, will be duly
and validly issued, fully paid and non-assessable, and will
not be issued in violation of any Preemptive Rights.
(c) Authorization of Transaction Documents. The Company has
full corporate power and authority to execute and deliver this
Agreement and each of the other Transaction Documents to which it is a
party, and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by the Company of this Agreement
and each of the other Transaction Documents to which it is a party
(including the issuance and sale of the Securities and the Underlying
Shares) have been duly authorized by all requisite corporate action by
the Company and, when executed and delivered by the Company, this
Agreement and each of the other Transaction Documents to which it is a
party will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
(d) No Violations. The execution, delivery and performance by
the Company of this Agreement and each of the other Transaction
Documents to which it is a party (including the issuance and sale of
the Securities) and the compliance with the provisions hereof and
thereof by the Company do not violate, conflict with or constitute or
result in a breach of or default under (or an event which with notice
or passage of time or both would constitute a default) or give rise to
any right of termination, cancellation or acceleration under, or result
in the creation of any Encumbrance (as defined below) upon any
properties or assets of the Company under (i) the Certificate of
Incorporation or bylaws of the Company, (ii) applicable law, statute,
rule or regulation, or any ruling, writ, injunction, order, judgment or
decree of any court, arbitrator, administrative agency or other
governmental body applicable to the Company or any of its properties or
assets or (iii) to the Company's knowledge, any contract or agreement
affecting the Company, except, in each case, where such violation,
conflict, breach, default, termination, cancellation, acceleration or
Encumbrance would not, individually or in the aggregate, have a Company
Material Adverse Effect. As used herein, the term "Encumbrance" shall
mean any lien, charge, encumbrance, claim, option, proxy, pledge,
security interest, or other similar right of any nature other than
statutory liens securing payments not yet due and payable or due but
not yet delinquent.
-7-
(e) Approvals. Except as set forth on Schedule 2(e) and for
consent which may be required under the Mergers and Takeovers (Control)
Acts 1978-1996 (Ireland), the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, or any other similar law and regulation, no
permit, authorization, consent, approval, or order of or by, or any
notification of or filing with, any person or entity (governmental or
otherwise) is required in connection with the execution, delivery or
performance of this Agreement or the other Transaction Documents
(including the issuance and sale of the Securities) by the Company,
except for filings on Form D with the Securities and Exchange
Commission ("SEC") and except for such permits, authorizations,
consents, approvals, orders, notifications or filings which, if not
obtained or made, would not have a Company Material Adverse Effect.
(f) Financial Statements. The Company has provided access to
(i) the balance sheet of the Company in the Form 10-K for the fiscal
year ending July 31, 2000 and the related statements of operations,
stockholders' equity (deficit) and cash flows for the year then ended,
together with the reports thereon of Withom Xxxxx Xxxxx (the "Audited
Financial Statements") and (ii) the unaudited balance sheet of the
Company in the Form 10-Q for the period ended October 31, 2000 and the
related statements of operations and cash flows for the period then
ended (the "Unaudited Financial Statements"; collectively with the
Audited Financial Statements, the "Financial Statements"). The
Financial Statements fairly present, in all material respects, the
financial position of the Company and the results of its operations and
its cash flows at such dates and for the periods indicated and were
prepared in conformity in all material respects with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be otherwise indicated
therein), subject, in the case of the Unaudited Financial Statements,
to normal year-end audit adjustments (which shall not be material in
the aggregate) and the absence of footnote disclosures. As of the
Closing Date, the Company has not incurred and is not liable for any
material liabilities or obligations except as set forth on the face of
the balance sheet contained in the Unaudited Financial Statements or
the footnotes to the Audited Financial Statements or otherwise
disclosed in the Company's SEC filings.
(g) Taxes. The Company has filed in a timely manner any
federal, state, local and foreign tax returns, reports and filings
(collectively, "Returns"), including income, franchise, property and
other taxes, and has paid or accrued the appropriate amounts reflected
on such Returns heretofore required to be filed. Except as set forth on
Schedule 2(g), none of the Returns have been audited or challenged, nor
has the Company received any notice of challenge nor to the Company's
knowledge have any of the amounts or other data included in the Returns
been challenged or reviewed by any governmental authority.
-8-
(h) Absence of Certain Events. Since the most recent filing by
the Company with the SEC, there has been no material adverse change and
no material adverse development in the business, properties,
operations, financial condition, results of operations or prospects of
the Company. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
The Company owns or possesses adequate rights or
licenses to use all trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as
now conducted. None of the Company's trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate
within two years from the date of this Agreement. The Company does not
have any knowledge of any infringement by the Company of trademark,
trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations,
trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical
information by others and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
(i) No Liabilities. The Company does not have any material
obligation or liability, contingent or otherwise, except as disclosed
in its most recent 10-K and other filings with the SEC since the filing
of its most recent 10-K, or as incurred in the ordinary course of
business, consistent with past practices.
(j) Properties and Assets; Etc. (i) Except as disclosed in the
Company's filings with the SEC, the Company has good and marketable
title to its properties and assets shown in the Financial Statements to
be owned by the Company, and has valid leasehold interests to the
properties and assets shown in the Financial Statements to be leased by
the Company, in each case subject to no Encumbrances.
-9-
(ii) There are no material contracts ("Material
Contracts") of the Company other than as disclosed in the
Company's filings with the SEC. Each Material Contract is a
legal and valid agreement binding upon the Company and, to the
Company's knowledge, is in full force and effect. To the
Company's knowledge, there is no material breach or default by
any party thereunder.
(iii) The Company has and maintains adequate and
sufficient insurance, including liability, casualty and
products liability insurance, covering risks associated with
its business, properties and assets, including insurance that
is customary for companies similarly situated.
(iv) The Company, its business and properties and
assets are in compliance in all material respects with all
applicable laws and regulations, including without limitation,
those relating to (i) health, safety and employee relations,
(ii) environmental matters, including the discharge of any
hazardous or potentially hazardous materials into the
environment and (iii) the development, commercialization and
sale of pharmaceutical and biotechnology products, including
all applicable regulations of the U.S. Food and Drug
Administration and comparable applicable foreign regulatory
authorities.
(k) Legal Proceedings, etc. There is no legal, administrative,
arbitration or other action or proceeding or governmental or
investigation pending, or to the Company's knowledge, threatened
against the Company, or any director, officer or employee of the
Company in their capacities as such that (i) challenges the validity or
performance of this Agreement or the other Transaction Documents or
(ii) except as disclosed in the Company's filings with the SEC could
reasonably be expected to have a Company Material Adverse Effect. The
Company is not in violation of or default under, any material laws,
judgments, injunctions, orders or decrees known to it of any court,
governmental department, commission, agency, instrumentality or
arbitrator applicable to its business, which violation or default would
be required to be disclosed in the Company's filings with the SEC,
other than any violation or default which, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(l) Disclosure. The representations and warranties set forth
herein and in the other Transaction Documents, when viewed
collectively, do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
contained herein not misleading in light of the circumstances in which
they were made.
-10-
(m) Brokers or Finders. There have been no investment bankers,
brokers or finders used by the Company in connection with the
transactions contemplated by the Transaction Documents to whom EIS will
have any liability in respect thereof and there are no persons or
entities that are entitled to a fee or compensation in respect thereof
for which EIS will have any liability.
(n) SEC Filings. Since February 12, 1999, the Company has
timely filed with the Securities and Exchange Commission (the "SEC")
all forms, reports, schedules, statements, exhibits and other documents
(collectively, the "SEC Filings") required to be filed by the Company
on or before the date hereof. At the time filed, the SEC Filings,
including without limitation, any financial statements, exhibits and
schedules included therein or documents incorporated therein by
reference (i) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii)
complied in all material respects with the applicable requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as the case may be.
SECTION 3. Representation and Warranties of EIS. EIS hereby
represents and warrants to the Company, as of the date hereof, as follows:
(a) Organization. EIS is an exempted company duly organized,
validly existing and in good standing under the laws of Bermuda and has
all requisite corporate power and authority to own and lease its
properties, to carry on its business as presently conducted and as
proposed to be conducted and to consummate the transactions
contemplated hereby. EIS is duly qualified as a foreign corporation and
in good standing to do business in each jurisdiction in which the
nature of the business conducted or the property owned by it requires
such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a material adverse effect
on the business, assets, liabilities (contingent or otherwise),
operations, condition (financial or otherwise), or prospects of EIS (an
"EIS Material Adverse Effect").
(b) Authorization of Transaction Documents. EIS has full
corporate power and authority to execute and deliver this Agreement and
each of the other Transaction Documents to which it is a party, and to
perform its obligations hereunder and thereunder. The execution,
delivery, and performance by EIS of this Agreement and each other
Transaction Document to which it is a party (including the purchase and
acceptance of the Securities) have been duly authorized by all
requisite corporate action by EIS and, when executed and delivered by
EIS, this Agreement and each of the other Transaction Documents to
which it is a party will be the valid and binding obligations of EIS
enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
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(c) No Violation. The execution, delivery and performance by
EIS of this Agreement and each other Transaction Document to which it
is a party (including the purchase and acceptance of the Securities)
and compliance with provisions hereof and thereof by EIS will not
violate conflict with or constitute or result in a breach of or default
under (or an event which with notice or passage of time or both would
constitute a default) or give rise to any right of termination,
cancellation or acceleration under (i) the charter or bylaws of EIS,
(ii) applicable law, statute, rule or regulation, or any ruling, writ,
injunction, order, judgment or decree of any court, arbitrator,
administrative agency or other governmental body applicable to EIS or
any of its properties or assets or (iii) any material contract to which
EIS is a party, except, in each case, where such violation, breach,
default, termination, cancellation or acceleration would not,
individually or in the aggregate, have an EIS Material Adverse Effect.
(d) Approvals. Except for consents which may be required under
the Mergers and Takeovers (Control) Acts 1978-1996 (Ireland), the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
any other similar law and regulation, no material permit,
authorization, consent, approval or order of or by, or any notification
of or filing with, any person or entity (governmental or otherwise) is
required in connection with the execution, delivery or performance of
this Agreement by EIS or the other Transaction Documents to which it is
a party.
(e) Investment Representations.
(i) EIS is sophisticated in transactions of this
type and capable of evaluating the merits and risks of the
transactions described herein and in the other Transaction
Documents to which it is a party, and has the capacity to
protect its own interests. EIS has not been formed solely for
the purpose of entering into the transactions described herein
and therein and is acquiring the Securities (and the
Underlying Shares) for investment for its own account, not as
a nominee or agent, and not with the view to, or for resale,
distribution or fractionalization thereof, in whole or in
part, and no other person has a direct or indirect interest,
beneficial or otherwise in the Securities (or the Underlying
Shares); provided, however, that EIS shall be permitted to
convert or exchange such Securities in accordance with their
terms.
(ii) EIS has not and does not intend to enter into
any contract, undertaking, agreement or arrangement with any
person or entity to sell, transfer or pledge the Securities
(or the Underlying Shares).
-12-
(iii) EIS acknowledges its understanding that the
private placement and sale of the Securities (and the
Underlying Shares) is exempt from registration under the
Securities Act. In furtherance thereof, EIS represents and
warrants that it is an "accredited investor" as that term is
defined in the regulations under the Securities Act, has the
financial ability to bear the economic risk of its investment,
has adequate means for providing for its current needs and
personal contingencies and has no need for liquidity with
respect to its investment in the Company.
(iv) EIS agrees that it shall not sell or otherwise
transfer any of the Securities (or the Underlying Shares)
without registration under the Securities Act or pursuant to
an opinion of counsel reasonably satisfactory to the Company
that an exemption from registration is available, and fully
understands and agrees that it must bear the total economic
risk of its purchase for an indefinite period of time because,
among other reasons, none of the Securities (or the Underlying
Shares) have been registered under the Securities Act or under
the securities laws of any applicable state or other
jurisdiction and, therefore, cannot be resold, pledged,
assigned or otherwise disposed of unless subsequently
registered under the Securities Act and under the applicable
securities laws of such states or jurisdictions or an
exemption from such registration is available. EIS understands
that the Company is under no obligation to register the
Securities (or the Underlying Shares) on its behalf with the
exception of certain registration rights with respect to
certain of the Securities (and the Underlying Shares), as
provided in the Company Registration Rights Agreement. EIS
understands the lack of liquidity and restrictions on transfer
of the Securities (and the Underlying Shares) and that this
investment is suitable only for a person or entity of adequate
financial means that has no need for liquidity of this
investment and that can afford a total loss of its investment.
(f) Legal Proceedings, etc. There is no legal, administrative,
arbitration or other action or proceeding or governmental investigation
pending, or to the knowledge of EIS threatened, against EIS that
challenges the validity or performance of this Agreement or the other
Transaction Documents to which EIS is a party.
(g) Brokers or Finders. There have been no investment bankers,
brokers or finders used by EIS or its affiliates in connection with the
transactions contemplated by the Transaction Documents and no persons
or entities are entitled to a fee or compensation in respect thereof.
SECTION 4. Covenants of the Parties.
(a) Certain Covenants. From and after the Initial Closing Date
and until the earlier to occur of the exercise or expiration of the EIS Exchange
Right (as such term is defined in Section 5(c) hereof), the Company shall not
without the prior written consent of EIS, which consent shall not be
unreasonably withheld: (i) sell, transfer, encumber, pledge or otherwise affect,
in any respect, the shares of Newco Preferred Shares transferable to EIS upon
exercise by EIS of the EIS Exchange Right and (ii) affect, in any respect, the
Company's ability to permit EIS to exercise the EIS Exchange Right in full, as
provided herein.
-13-
(b) Fully-diluted Stock Ownership. Notwithstanding any other
provision of this Agreement, in the event that EIS shall have determined that at
any time they (together with their affiliates, if applicable) hold or have the
right to receive Company Common Stock (or securities or rights, options or
warrants exercisable, exchangeable or convertible for or into Company Common
Stock) representing in the aggregate in excess of 9.9% of the Company's
outstanding "Company" Common Stock on a fully diluted basis, EIS shall have the
right to elect to convert all or any part of the Securities into other
preferred, non-voting securities of the Company (to be specified by EIS, but
having terms no more favorable than the Securities being so converted by EIS)
such that EIS and its affiliates will not directly or indirectly own more than
9.9% of the Company Common Stock for a period of at least two years from the
date such election is made. In the event that EIS shall elect such conversion,
EIS and its affiliates shall retain the right to transfer all or a portion of
such securities (including the Company Common Stock issuable upon conversion
thereof) to their respective affiliates. Each of the Company and EIS shall use
commercially reasonable efforts to effect such transactions and any required
subsequent conversions or adjustments to the securities position of EIS, on a
quarterly basis, within 15 business days of the end of EIS's fiscal quarters.
Notwithstanding anything to the contrary herein, no transaction contemplated by
this Agreement or other Transaction Document shall require the Company to issue
any shares of Company Common Stock if such issuance would violate any rule or
regulation promulgated by the National Association of Securities Dealers, Inc.,
including, without limitation, issuing shares without any stockholder approval
as required under Rule 4460(i). In the incidence of such an event, the parties
will discuss in good faith a mutually satisfactory alternative.
(c) Use of Proceeds. The Company shall use the proceeds of the
issuance and sale of the Series A Preferred Stock solely to meet its initial
capitalization obligations to Newco as described in the JDOA and for no other
purpose.
(d) Confidentiality; Non-Disclosure.
(i) Subject to clause (ii) below, from and after the date
hereof, neither the Company nor EIS (nor its affiliates) shall disclose to any
person or entity this Agreement or the other Transaction Documents or the
contents thereof or the parties thereto, except that such parties may make such
disclosure (x) to their directors, officers, employees and advisors, and
potential bank creditors and investors, so long as they shall have advised such
persons of the obligation of confidentiality herein and for whose breach or
default the disclosing party shall be responsible or (y) as required by
applicable law, rule, regulation or judicial or administrative process, provided
that the disclosing party uses commercially reasonable efforts to obtain an
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order or ruling protecting the confidentiality of confidential information of
the other party contained herein or therein and notifies the other party prior
to such disclosure so that such other party may, if it chooses, seek such
relief. The parties shall be entitled to seek injunctive or other equitable
relief in respect of any breach or threatened breach of the foregoing covenant
without the requirement of posting a bond or other collateral.
(ii) Without limiting the foregoing, the parties shall agree
upon the text of the Company's press release in respect of the transactions,
which may be released by the Company subject to the prior consent of Elan, which
consent shall not be unreasonably withheld; the Company shall not make any
public disclosure of such transactions or the parties hereto other than
disclosure that is consistent with, and the substance of which is contained in,
such release without the prior consent of Elan, which consent shall not be
unreasonably withheld, and in any event, any press release that contains EIS's
name or any of its affiliates' names shall require EIS's specific written
consent, which consent shall not be unreasonably withheld and which consent may
be granted in Elan's discretion for repetitive boilerplate disclosures
periodically containing EIS's or one of its affiliates' names.
(iii) Notwithstanding any of the foregoing, after reasonable
consultation with EIS, the Company may disclose of any facts or any documents
that it considers reasonably necessary to comply with securities laws and
regulations or any other applicable laws and regulations.
(e) Further Assurances. From and after the date hereof, each
of the parties hereto agree to do or cause to be done such further acts and
things and deliver or cause to be delivered to each other such additional
assignments, agreements, powers and instruments, as each may reasonably require
or deem advisable to carry into effect the purposes of this Agreement and the
other Transaction Documents.
SECTION 5. Certain Rights of EIS.
(a) Preemptive Right. In order for EIS to maintain its pro
rata interest in the Company, during the period of six (6) months from the
Closing Date (which time period is consistent with or longer than preemptive
rights granted by the Company to Smallcap World Fund, Inc.), EIS shall have the
right to participate in any equity financing, or any financing involving
securities convertible or exchangeable for equity, consummated by the Company,
on the same terms and conditions (other than amount of shares to be purchased)
offered to the other proposed investors in such financing, in order for EIS and
its affiliates to maintain the pro rata interest in the Company which they had
immediately prior to such new financing, based on the number of shares of
Company Common Stock owned by EIS and its affiliates, assuming the conversion or
exercise of all Securities (other than the Series A Preferred Stock) and the
actual number of shares of Company Common Stock outstanding on the date such
financing is consummated; provided, however, that such right shall not apply to
(i) offerings under any employee benefit plan, as defined in Rule 405 of
Regulation C of the Securities Act of 1933; (ii) asset or company acquisitions
-15-
paid for in stock; (iii) any joint venture or partnering arrangements with a
Strategic Investor (as defined in the JDOA); (iv) a Prior Financing Commitment
(as defined in paragraph (d)); or (v) an underwritten or agented public
offering. Such right shall be exercised by EIS within 10 days of receipt of
notice of such financing from the Company, which notice shall be provided by the
Company at least 15 days prior to such financing.
Newco shall grant to each of EIS and Generex a pre-emptive
right that will terminate upon an initial public offering by Newco, to
participate in an equity, debt, warrant or convertible financing contemplated by
Newco so to maintain its pro rata interest in Newco.
(b) Company Board of Directors. For so long as EIS or its
affiliates, directly or indirectly, collectively own at least 1.0% of the issued
and outstanding shares of Company Common Stock (or securities convertible,
exchangeable or exercisable for or into the Company Common Stock which, with
such owned Company Common Stock represents at least 5.0% ownership, assuming the
exercise, conversion or exchange thereof by EIS and its affiliates but not of
any other Company Common Stock equivalents), EIS shall be entitled to nominate
one director (the "EIS Director") for election to the Company's board of
directors. The EIS Director shall not have more than 15.0% of the votes on the
Company's board of directors, irrespective of the actual number of directors
thereon. In connection with the foregoing, the Company will take all necessary
and/or appropriate steps to effect such appointment, such as including the
designated EIS Director as part of the management recommended slate of directors
presented at any regular or special meeting of the stockholders of the Company
at which directors of the Company are to be elected. Prior to such election, the
designated EIS Director shall be entitled to be an observer at the meetings of
the Company's board of directors. EIS shall inform the Company of its nominee
for director within ten (10) days after being notified of the record date for
any meeting of the Company's shareholders, or of the date for any meeting of the
board of directors of the Company at which the Company proposes to effect the
appointment of the EIS director.
(c) Conversion and Exchange Rights. The Company acknowledges
that the Certificate of Designations sets forth certain rights of the holders of
shares of Series A Preferred Stock to convert such shares of Series A Preferred
Stock into newly issued shares of Company Common Stock, or to exchange such
shares of Series A Preferred Stock (or shares of Company Common Stock into which
such shares of Series A Preferred Stock were converted under certain specified
circumstances) for certain shares of Newco Shares (the "EIS Exchange Right"),
and agrees that it will not take any action which would impair such rights other
than as otherwise permitted by the provisions thereof.
-16-
In the event that EIS shall exercise the EIS Exchange Right,
EIS shall cause to be paid to the Company, within 30 days of such exercise, an
amount equal to 30.1% of the aggregate amount of the Development Funding through
the date of such exercise provided to Newco (by or on behalf of the Company and
EIS and their respective affiliates and subsidiaries) from and after the Initial
Closing Date and prior to such exercise (plus interest on the amount so funded,
from the date of the pertinent funding, at the interest rate of 10% per annum
compounded semi-annually).
In the event of a Required Conversion (as defined in the
Certificate of Designations), the Common Stock delivered upon such conversion
shall have the benefit of the EIS Exchange Right identical to that with respect
to the Series A Preferred Stock so converted and shall be evidenced by a
security substantially in the form of Exhibit F.
(d) Antidilution. If the Company shall issue and sell any
shares of Company Common Stock (or securities exchangeable, exercisable or
convertible for or into Company Common Stock), at an effective price per share
of Company Common Stock less than the purchase price per share for Company
Common Stock paid at the Initial Closing (other than shares issued pursuant to
outstanding options, warrants, convertible securities or contractual commitments
or arrangements outstanding on the Closing Date and listed on Schedule 5(d)
("Prior Financing Commitments") and other than shares issued pursuant to an
employee benefit plan as defined in Rule 405 of Regulation C of the Securities
Act of 1933, as amended), then, in such event, within five business days after
such subsequent issuance and sale, the Company shall issue to EIS additional
shares of Company Common Stock so that EIS's weighted-average effective price
per share is adjusted in accordance with the methodology set forth on Annex I.
The preceding anti-dilution provisions shall terminate upon the earlier of (i)
60 days following the registration with the SEC of the shares of Company Common
Stock purchased by EIS hereunder and (ii) fourteen months after the Initial
Closing Date.
SECTION 6. Pledge of Newco Shares. In order to secure the
Company's obligations pursuant to the EIS Exchange Right, the Company hereby
pledges, assigns and sets over to EIS, all of the Company's right, title and
interest in and to all shares of Newco Shares deliverable by the Company upon
exercise of the EIS Exchange Right (including stock distributions and dividends
thereon) for such period of time as the EIS Exchange Right shall be exercisable.
The the Company shall cause to be delivered to EIS all of the certificates
together with duly executed stock power in favor of EIS evidencing such shares,
and take all other necessary, appropriate and customary actions in connection
therewith reasonably requested by EIS. Upon exercise of the EIS Exchange Right,
EIS shall be entitled to keep and retain such share certificates, which shall
then be owned by EIS in accordance with the terms thereof. Until EIS exercises
the EIS Exchange Right, the Company shall retain all rights in and to the
pledged Newco Shares (including without limitation all voting, dividend,
liquidation and other rights), subject only to this pledge and the JDOA.
-17-
SECTION 7. Survival and Indemnification. (a) Survival. For the
purposes of this Section, the representations and warranties of the Company, EIS
and Elan contained herein shall survive for a period of 24 months from and after
the date hereof.
(b) Indemnification. In addition to all rights and remedies
available to the parties hereto at law or in equity, the Company (in such
capacity, "Indemnifying Party") shall indemnify EIS, its stockholders, officers,
directors and assigns, its affiliates, and its affiliates' stockholders,
officers, directors, employees, agents, representatives, successors and assigns
(collectively, the "Indemnified Person"), and save and hold each Indemnified
Person harmless from and against and pay on behalf of or reimburse each such
Indemnified Person, as and when incurred, for any and all loss, liability,
demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty,
fine or expense, including interest, penalties, reasonable attorneys' fees and
expenses and all amounts paid in investigation, defense or settlement of any of
the foregoing (collectively, "Losses"), whether or not such Losses arise from
the claims of any third party or are directly incurred by the Indemnified
Person, that any such Indemnified Person may suffer, sustain incur or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of:
(i) any misrepresentation or breach of warranty on the part
of the Indemnifying Party in the case of the Company under Section 2 of
this Agreement or in the case of EIS under Section 3 of this Agreement
or any of the other Transaction Documents (as limited thereby) (it
being understood that the Company shall not be responsible for any such
misrepresentation or breach of warranty by Newco); or
(ii) any nonfulfillment, default or breach of any covenant or
agreement on the part of the Indemnifying Party under Section 4 of this
Agreement.
(c) Maximum Recovery. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Indemnifying Parties be liable
for indemnification under this Section 7 in an amount in excess of the aggregate
of the purchase price paid for the Shares and the Warrant. No Indemnified Person
shall assert any such claim unless Losses in respect thereof incurred by any
Indemnified Person, when aggregated with all previous Losses hereunder, equal or
exceed [ ** ] , but at such time that an Indemnified Person is entitled to
assert a claim, such claim shall include all Losses covered by this Section 7.
(d) Exception. Notwithstanding the foregoing, upon judicial
determination that is final and no longer appealable, that the act or omission
giving rise to the indemnification set forth above resulted primarily out of or
was based primarily upon the Indemnified Person's negligence (unless such
Indemnified Person's negligence was based upon the Indemnified Person's reliance
in good faith upon any of the representations, warranties, covenants or promises
made by the Indemnifying Party herein) the Indemnifying Party shall not be
responsible for any Losses sought to be indemnified in connection therewith, and
the Indemnifying Party shall be entitled to recover from the Indemnified Person
all amounts previously paid in full or partial satisfaction of such indemnity,
together with all costs and expenses (including reasonable attorneys fees) of
the Indemnifying Party reasonably incurred in connection with the Indemnified
-18-
Persons claim for indemnity, together with interest at the rate per annum
publicly announced by Xxxxxx Guaranty Trust Company as its prime rate from the
time of payment of such amounts to the Indemnified Person until repayment to the
Indemnifying Party.
(e) Investigation. All indemnification rights hereunder shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, irrespective of any investigation, inquiry or
examination made for or on behalf of, or any knowledge of the Indemnified Person
or the acceptance of any certificate or opinion, except where the Indemnified
Person has acknowledged in writing knowledge of any fact prior to Closing.
(f) Contribution. If the indemnity provided for in this
Section 7 shall be, in whole or in part, unavailable to any Indemnified Person,
due to Section 7(b) being declared unenforceable by a court of competent
jurisdiction based upon reasons of public policy, so that Section 7(b) shall be
insufficient to hold each such Indemnified Person harmless from Losses which
would otherwise be indemnified hereunder, then the Indemnifying Party and the
Indemnified Person shall each contribute to the amount paid or payable for such
Loss in such proportion as is appropriate to reflect not only the relative
benefits received by the Indemnifying Party on the one hand and the Indemnified
Person on the other, but also the relative fault of the Indemnifying Party and
be in addition to any liability that the Indemnifying Party may otherwise have.
The indemnity, contribution and expense reimbursement obligations that the
Indemnifying Party has under this Section 7 shall survive the expiration of the
Transaction Documents. The parties hereto further agree that the indemnification
and reimbursement commitments set forth in this Agreement shall apply whether or
not the Indemnified Person is a party to any lawsuit, claims or other
proceedings brought by a third party or any Loss is incurred directly by the
Indemnified Person.
(g) Limitation. This Section 7 is not intended to limit the
rights or remedies otherwise available to any party hereto with respect to this
Agreement or the Transaction Documents.
SECTION 8. Notices. All notices, demands and requests of any
kind to be delivered to any party in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if personally or hand
delivered or if sent by an internationally-recognized overnight delivery courier
or by registered or certified mail, return receipt requested and postage
prepaid, or by facsimile transmission addressed as follows:
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(i) if to the Company, to:
Generex Biotechnology Corporation
00 Xxxxxxx Xx.
Xxxxx 000
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attention: Chief Executive Officer
Facsimile:
with a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx LLC
0000 Xxxxxx Xxxxxx
0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxx
Facsimile: (000) 000-0000
(ii) If to EIS, to:
Elan International Services, Ltd.
000 Xx. Xxxxx Xxxxx
Xxxxxx, Xxxxxx Xxxxxx
Xxxxxxx XX 04
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 8. Any such notice or communication shall be deemed to have been
effectively given (i) in the case of personal or hand delivery, on the date of
such delivery, (ii) in the case of an internationally-recognized overnight
delivery courier, on the second business day after the date when sent, (iii) in
the case of mailing, on the fifth business day following that day on which the
piece of mail containing such communication is posted and (iv) in the case of
facsimile transmission, the date of telephone confirmation of receipt.
-20-
SECTION 9. Entire Agreement. This Agreement and the other
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties with respect thereto.
SECTION 10. Amendments and Waiver. This Agreement may not be
modified or amended, or any of the provisions hereof waived, except by written
agreement of the Company and EIS dated after the date hereof.
SECTION 11. Counterparts and Facsimile. The Transaction
Documents may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement. Each of the Transaction
Documents may be signed and delivered to the other party by facsimile
transmission; such transmission shall be deemed a valid signature.
SECTION 12. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of the Agreement.
SECTION 13. Governing Law; Disputes. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to principles of conflicts of laws. Any dispute
under the Transaction Documents that is not settled by mutual consent shall be
finally adjudicated by any federal or state court sitting in the City, County
and State of New York, and each party consents to the exclusive jurisdiction of
such courts (or any appellate court therefrom) over any such dispute.
SECTION 14. Expenses. Each of the parties shall be responsible
for its own costs and expenses incurred in connection with the transactions
contemplated hereby and by the other Transaction Documents.
SECTION 15. Exhibits and Schedules. The exhibits to and
schedules delivered by or on behalf of any party in connection with this
Agreement are an integral part of this Agreement, and any statements contained
in such schedules shall be deemed to be representations and warranties under
this Agreement.
-21-
SECTION 16. Assignments and Transfers. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. All or any
part of this Agreement, the Securities and the Underlying Shares may be assigned
or transferred by EIS and its permitted assigns and transferees to their
respective affiliates and subsidiaries, as well as any special purpose financing
or similar vehicle established by EIS. Other than as set forth above, no party
shall assign or transfer all or any part of this Agreement, the Securities and
the Underlying Shares, or any interest therein, without the prior written
consent of the other party.
SECTION 17. Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be in any way affected or
impaired thereby.
[Signature page follows]
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Agreement as of the date first written above.
GENEREX BIOTECHNOLOGY
CORPORATION
By: /s/ E. Xxxx Xxxxx
--------------------------------------------
Name: E. Xxxx Xxxxx
Title: Chairman
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Financial Officer
Annex I
Method of Calculating "Weighted Average" Anti-Dilution Provisions
-----------------------------------------------------------------
Upon issuance of shares of Generex Common Stock at a price below EIS' purchase
price, after giving effect to any prior adjustment hereunder, the "weighted
average" price per share of Generex Common Stock shall be determined as follows:
C' = CO + PN
-------
O+N
Where:
C'= The new effective price per share
C = The old effective price per share
O = The number of shares of Generex Common Stock outstanding prior to the new
issuance (including all shares issuable in connection with options,
warrants, and other convertible securities that are exercisable within 60
days of this calculation)
P = The price per share of Generex Common Stock sold in new issuance
N = The number of shares of Generex Common Stock sold in the new issuance
The number of additional shares to be issued to EIS following the determination
of the new effective price per share is as follows:
S'= A - S
-
C'
Where:
S'= The number of additional shares to be issued to EIS
S = The number of shares initially issued to EIS (as adjusted mechanically for
any stock splits or similar transactions subsequent to the issuance of the
shares to EIS)
A = The dollar amount of the initial investment by EIS
