UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 2018
GENEREX BIOTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 000-29169 | 98-0178636 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S Employer Identification No.) |
| 10102 USA Today Way, Miramar, Florida | 33025 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (416) 364-2551
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 3.02 Unregistered Sales of Equity Securities.
Item 3.03 Material Modification to Rights of Security Holders.
Stock Dividend
On November 30, 2018, Generex Biotechnology Corporation (the “Company”) paid its previously announced common stock dividend on its shares of common stock, par value $.001 per share, at a ratio of 20 for 1.
Stock Control Agreement
As of December 1, 2018, the Company, Lawrence Salvo, Stephen L. Berkman, Joseph Moscato and B-H Sanford, LLC entered into a Stock Control Agreement. Under the Stock Control Agreement, these stockholders agree to transfer to the Company any after tax profit on sale of 95% of the shares received by them due to the stock dividend, if the shares are sold during the term of the Agreement. Specifically, if any of these shares are sold, the stockholders will retain an amount equal to their cost basis plus an amount necessary to pay taxes on any gain on the sale, with any remaining proceeds to be contributed to the Company. Each of the named stockholders has agreed to make 95% of the shares received in the stock dividend subject to this arrangement, with the number of shares as follows:
|
Post-Dividend Agreement Shares |
|
| Joseph Moscato |
2,971,600 Common Shares, less any shares Mr. Moscato has or is required to pledge as collateral; for third party loans to the Company.
|
| Lawrence Salvo |
3,034,300 Common Shares
|
| BH-Sanford, LLC |
22,800,000 Common Shares
|
| Stephen L. Berkman |
4,370,000 Common Shares
|
To facilitate any sales the shares, each of the named stockholders had appointed Mr. Moscato as his or its attorney-in-fact to make agreements for sale and effect sales contemplated by the Stock Control Agreement. In addition, each of the named stockholders has agreed to name Mr. Moscato as proxy in connection with the voting of any of these shares during the term of the Stock Control Agreement. The term of the Stock Control Agreement will terminate on December 1, 2019.
Preferred Stock Conversions and Warrant Issuances .
Prior to payment of the dividend, on November 30, 2018, Joseph Moscato, the Company’s President and Chief Executive Officer, and Lawrence Salvo, a member of the Company’s Board of Directors, converted all shares of the Company’ Series I Convertible Preferred Stock owned by them. Mr. Moscato received 156.000 shares of the Company’s Common Stock upon conversion, which, after the completion of the dividend became 3,276,000 shares. Mr. Salvo received 159,745 shares of the Company’s Common Stock upon conversion, which, after the completion of the dividend became 3,354,645 shares.
On December 1, 2018, after payment of the dividend, B-H Sanford, LLC, converted all shares of the Company’ Series I Convertible Preferred Stock owned by it into 26,000,000 shares of common stock.
On December 1, 2018, the Company issued to Stephen L. Berkman a Warrant exercisable for 15,000,000 shares of common stock. The Warrant is exercisable until December 1. 2019 at an exercise price of $2.50 per shares. The Warrant contains a provision prohibiting the exercise of the Warrant to the extent that, after exercise, Mr. Berkman would own more than 9.99% of the Company’s Common Stock. The Warrant was issued pursuant to the January 18, 2017 Acquisition Agreement among the Company, Hema Diagnostic Systems, LLC (“HDS”), Stephen L. Berkman and the other equity owners of HDS.
Also on December 1, 2018, the Company and Mr. Berkman released $$624,403.64 owing to him by the Company and $13,431,705.66 owing to him by HDS, as of October 31, 2018, in exchange for shares of the Company’s common stock valued at the aggregate of such amount using the closing price for the common stock on November 30, 2018. The closing price was $18.99, resulting in 32,881 shares issuable to Mr. Berkman.
Item 5.01 Changes in Control of Registrant
The Stock Control Agreement discussed above will give Mr. Moscato voting and dispositive control of an aggregate 33,175,900 shares until December 1, 2019 or such shares are sold.
Forward-Looking Statements
Statements in this report may contain certain forward-looking statements. All statements included concerning activities, events or developments that the Generex expects, believes or anticipates will or may occur in the future are forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and involve known and unknown risks, uncertainties and other factors that may cause actual results and performance to be materially different from any future results or performance expressed or implied by forward-looking statements. Known risks and uncertainties also include those identified from time to time in the reports filed by Generex with the Securities and Exchange Commission, which should be considered together with any forward-looking statement. No forward-looking statement is a guarantee of future results or events, and one should avoid placing undue reliance on such statements. Generex undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Generex cannot be sure when or if it will be permitted by regulatory agencies to undertake additional clinical trials or to commence any particular phase of clinical trials. Because of this, statements regarding the expected timing of clinical trials or ultimate regulatory approval cannot be regarded as actual predictions of when Generex will obtain regulatory approval for any “phase” of clinical trials or when it will obtain ultimate regulatory approval by a particular regulatory agency. Generex claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act. Additional information on these and other risks, uncertainties and factors is included in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents filed with the SEC.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The
list of exhibits called included in this Current Report is incorporated by reference to the Exhibit Index filed with this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GENEREX BIOTECHNOLOGY CORPORATION. | ||
| Date: December 2, 2018 | /s/ Joseph Moscato | |
| Joseph Moscato | ||
| President and CEO | ||
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Exhibit Index
| Exhibit No. | Description | |
| 4.1 | Form of Common Stock Purchase Warrant issued to Stephen L. Berkman on December 1, 2018. | |
| 10.1 | Form of Stock Control Agreement among the Company, Lawrence Salvo, Stephen L. Berkman, Joseph Moscato and B-H Sanford, LLC. |
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Form of Warrant To Purchase Common Stock
EXCEPT AS PROVIDED IN THE REGISTRATION STATEMENT OF THE COMPANY ON FORM S-4, THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS AND THEN ONLY SUBJECT TO THE APPLICABLE RESTRICTIONS ON TRANSFER SET FORTH HEREIN.
WARRANT TO PURCHASE COMMON STOCK
OF
GENEREX BIOTECHNOLOGY CORPORATION
Warrant No. SB-1
Date of Issuance: December 1, 2018 (“Issuance Date”)
THIS WARRANT CERTIFIES THAT, for value received One Dollar ($1.00), Stephen Berkman (“Holder”) is entitled to purchase a maximum of Fifteen Million (15,000,000) fully-paid and non-assessable shares of the Common Stock, par value $0.001 per share (the “Shares” or “Common Stock”) of Generex Biotechnology Corporation (the “Company”) at a price of $2.50 per Share (the “Exercise Price”).
This Warrant is issued pursuant to that certain Acquisition Agreement, as amended, dated as of the Date of Issuance set forth above, between the Company and Hema Diagnostic Systems, LLC, a Florida Limited Liability Company and the initial Holder in satisfaction of the Company’s obligations under such agreement.
ARTICLE I
TERM AND EXERCISE
1.1 Term . This Warrant is exercisable, in whole or in part, at any time and from time to time on or before 5:00 p.m. Eastern Time on the date (“Expiration Date”) that is one year after the Date of Issuance set forth above. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrant, sufficient shares of Common Stock from time to time issuable on the exercise of the Warrant.
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1.2 Exercise of Warrant; One Million Shares and 9.99% Exercise Limitation:
(a) Exercise . The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise in substantially the form attached hereto as Appendix A to the principal office of the Company. and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Company); whereupon the Holder shall be entitled to receive from the Company a stock certificate in proper form representing the number of shares of Common Stock so purchased.
(b) One Million Shares and 9.99% Exercise Limitation . The Company shall not effect any exercise of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1.2(a) or otherwise, (i) to the extent that the Holder’s Notice of Exercise is less than One Million (1,000,000) Shares and/or (ii) to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the preceding sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (1) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and (2) exercise, conversion, or exchange of the unexercised, unconverted, or non-exchanged portion of any other securities of the Corporation (including, without limitation, any other warrants) subject to a limitation on conversion, exercise, or exchange analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 1.2(b), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the rules and regulations promulgated thereunder, and the determination of whether a person or entity is an “affiliate” of the Holder shall also be made in accordance with the Exchange Act, the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations under such acts. To the extent that the limitation contained in this Section 1.2(b) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.2(b), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Corporation’s most recent Form 10-Q report or Form 10-K report, as the case may be, (y) a more recent public announcement by the Corporation, or (z) any other notice by the Corporation or the Corporation’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Corporation shall within one trading day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1.2(b) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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1.3 Delivery of Certificate and New Warrant . Immediately after Holder exercises this Warrant, the Company shall deliver to Holder certificates, DWAC or book shares, depending upon how the Holder wants delivery, for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.
1.4 Lost or Destroyed Warrant . Upon receipt of an affidavit signed by the Holder and reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of the mutilated Warrant, the Company will execute and deliver, in lieu thereof, a new Warrant of like tenor.
1.5 Sale, Merger, or Consolidation of the Company .
(a) Acquisition . For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the Company is not the surviving corporation and the securities issued with respect to the Company’s securities outstanding immediately before the transaction represent less than 50% of the beneficial ownership of the new entity immediately after the transaction.
(b) Assumption of Warrant . Upon the closing of any Acquisition, the successor entity shall assume the obligations of this Warrant, then this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Company shall use reasonable efforts to cause the surviving corporation to assume the obligations of this Warrant.
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ARTICLE II
MISCELLAEOUS
2.1 Adjustment of Exercise Price and Number of Shares . If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding Common Shares into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Shares will be proportionately decreased. Any adjustment under Section 2.1 shall become effective at the close of business on the date such subdivision or combination becomes effective.
2.2 Legends . If applicable, this Warrant and the Shares shall be imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS AND THEN ONLY SUBJECT TO RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN THE CERTIFICATE OF INCORPORATION AS MAY BE AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH CERTIFICATE SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
2.3 Compliance with Securities Laws on Transfer . If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) and under applicable state securities or blue sky laws, the Company shall receive from the Holder or transferee of this Warrant, as the case may be, (i) a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws and (ii) an executed investment letter in form an substance acceptable to the Company (which investment letter shall be in form, substance and scope customary for such letters in comparable transactions). Within 24 hours of the receipt of (i) and (ii), the Company will instruct its transfer agent to remove the legend. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder.
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2.4 Transfer Procedure . Subject to the terms herein and subject to the Company’s written consent, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant by giving the Company notice of the Warrant being transferred setting forth the name, address, and taxpayer or identification number of the transferee and surrendering this Warrant to the Company for re-issuance to the transferee(s) (and Holder if applicable).
2.5 Warrant Holder Not Deemed a Shareholder . Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
2.6 Notices . Any notice required to be given under the terms of this Warrant shall be sent by certified or registered mail (return receipt requested) or delivered by hand or confirmed facsimile, and shall be effective five days after being placed in the mail, if mailed, or upon receipt or refusal of receipt if delivered by hand or confirmed facsimile, in each case addressed as follows:
If to the Company:
Generex Biotechnology Corporation
Joseph Moscato, President & Chief Executive Officer
10102 USA Today Way
Miramar, Florida, USA 33025
If to the Holder:
To the address of the Holder on the Company’s books and records.
2.7 Amendments . This Warrant may be amended only in writing, signed by the party against whom enforcement is sought.
2.8 Governing Law . This Warrant and all rights and obligations hereunder shall be governed by the laws of the State of Florida.
[signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first above written.
Company:
Generex Biotechnology Corporation
By: ___________________________
Name:
Title:
Holder:
Stephen Berkman
By: ___________________________
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APPENDIX A
NOTICE OF EXERCISE
Generex Biotechnology Corporation
10102 USA Today Way
Miramar, Florida, USA 33025
Attention: Joseph Moscato, President & Chief Executive Officer
To Mr. Moscato:
The undersigned hereby irrevocably exercises its right to purchase ___________ shares (the “Shares”) of the Common Stock of Generex Biotechnology Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such Shares in full.
Please issue a certificate or certificates, or DWAC or book shares representing said shares in the name of the undersigned or in such other name as is specified below:
The undersigned agrees not to sell, pledge or otherwise transfer any of the Shares obtained upon the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or applicable state securities laws.
Name: __________________
EIN or social security no.: _______________________
Signature: ____________________
Date: _____________________
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STOCK CONTROL AGREEMENT
This STOCK CONTROL AGREEMENT (this “ Agreement ”) is made and entered into as of December 1, 2018 (the “ Effective Date ”) among Joseph Moscato , Lawrence Salvo , Stephen L. Berkman , and BH-Sanford, LLC (each a “ Stockholder ” and collectively the “ Stockholders ”) and Generex Biotechnology Corporation (the “ Company ”).
BACKGROUND
A. The Stockholders are the registered and beneficial owners of the following securities in the capital of the Company as at the Effective Date:
| Stockholder | Securities |
| Joseph Moscato | 391 shares of Series I Convertible Preferred Stock |
| Lawrence Salvo | 399 shares of Series I Convertible Preferred Stock |
| Stephen L. Berkman | 230,000 shares of Common Stock |
| BH-Sanford, LLC | 3,000 shares of Series H Convertible Preferred Stock |
B. Based on a 20 for 1 common stock dividend, the shares of common stock issuable upon conversion of the convertible preferred stock have increased by a factor of 20, and the shares of common stock held by Stephen L. Berkman have increased by a factor of 20 (the “ Stock Dividend ”). The Stockholders have agreed with each other, for the benefit of the Company, to reserve ninety-five percent (95%) of the increase in shares held by or issuable to them due to the stock dividend (such shares are hereinafter collectively referred to as the “ Agreement Shares ”) and to contribute to the Company a portion of the proceeds from any sale of the Agreement Shares during the term of this Agreement. The specific number of Agreement Shares reserved by each Stockholder is set forth in Exhibit “A” annexed to this Agreement.
AGREEMENT
In consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby irrevocably acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. Incorporation of Background . The “Background” set forth above is incorporated into the terms of this Agreement.
| 2. | Reserve and Restrictions on Transfer. |
(a) During the Term (as defined below), each Stockholder agrees (i) to reserve the Agreement Shares, (ii) to permit the sale of the Agreement Shares in accordance with the terms of this Agreement, and (iii) to not sell, transfer, or assign any, or any interest in, or create or permit any encumbrance upon, any of such Stockholder’s Agreement Shares, except pursuant to this Agreement; provided that Joseph Moscato shall be entitled, in his sole discretion, to hypothecate any and all Agreement Shares of which he is the registered and beneficial owner solely as security for any personal guarantees he may grant of the repayment of any indebtedness of Company (any such Agreement Shares being hereinafter referred to as “ Hypothecated Agreement Shares ”).
(b) To the extent any Agreement Shares are not otherwise restricted on the books of the Company’s Transfer Agent, each Stockholder understands and agrees that the Company may cause the Agreement Shares to be restricted on the Transfer Agent’s books, or issue appropriate “stop transfer” instructions to its Transfer Agent, in order to administer compliance with the provisions of this Agreement. Each Stockholder authorizes the Company to place restive legends upon any physical certificate(s) evidencing ownership of the Agreement Shares, together with any other legends that may be required by the Company or by applicable state or federal securities laws; provided that the Company shall remove any and all such restrictions to the extent necessary to effectuate the hypothecation of Hypothecated Agreement Shares.
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(c) Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Agreement Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to treat as owner of such Agreement Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Agreement Shares have been so transferred.
(d) Restrictions Binding on Transferees . If, notwithstanding the terms of this Agreement, any Agreement Shares are transferred other than as contemplated by this Agreement, the transferees of such Agreement Shares shall receive and hold such Agreement Shares subject to all of the provisions of this Agreement, and there shall be no further transfer of such Agreement Shares except in accordance with the terms of this Agreement.
3. Term. The term of this Agreement (the “Term”) shall commence of the Effective Date and end on the first anniversary of the Effective Date (the “ Termination Date ”) .
| 4. | Proceeds of Sale . |
(a) The Stockholders agree that the net proceeds of any sale of the Agreement Shares shall be distributed as follows:
(i) An amount equal to the adjusted cost basis (the “ACB”) of the Agreement Shares sold shall be distributed to each Stockholder whose Agreement Shares have been sold. The ACB of the Agreement Shares for each Stockholder is set forth in Exhibit “A” annexed to this Agreement.
(ii) An amount intended to cover each Stockholder’s US Federal, state and local income or capital gains tax on the sale of the Agreement Shares shall be distributed to each Stockholder, taking into account, in the case of federal taxes, the effect on any deduction of state and local income taxes available on such Stockholder’s federal return, assuming no limitation of such deduction under §68 of the Code. The initial combined tax rate for each Stockholder is set forth on Exhibit “A,” or, if not set forth, will be determined by the Company in good faith. Any Stockholder may change its combined tax rate by providing the Company with notice showing the calculation of the new combined tax rate, as determined by a certified public accountant engaged by the Stockholder.
(iii) The remaining proceeds of the sale of the Agreement Shares shall be distributed to the Company as a contribution to capital by the Stockholders.
(b) Unless the Company and the Stockholder otherwise agree in writing, any determination required under this Section 4 shall be made in writing by the Company’s independent public accountants or any other certified public accounting firm agreed upon by the Company and at least three Stockholders (the “ Accountants ”), whose determination shall be conclusive and binding upon the Stockholders and the Company for all purposes. For purposes of making the calculations required by this Section 4 , the Accountants may make reasonable assumptions and approximations concerning applicable taxes. The Company and the Stockholders shall furnish to the Accountants such information and documents as the Accountants may reasonably request to make a determination under this Section 4 . The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 4 .
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| 5. | Sale Process . |
(a) Each Stockholder hereby constitutes the Chief Executive Officer of the Company (the “ Attorney ”) as his, her, or its agent and attorney in fact for all matters related to the sale and transfer of Agreement Shares pursuant to this Agreement. The power and authority of the Attorney hereunder shall include the power and authority to (i) cause the conversion of any of the Company’s preferred stock held by a Stockholder in order to yield Agreement Shares and (ii) to exercise any and all voting rights attached to the Agreement Shares. In furtherance of this authority, each Stockholder will execute the Transfer Power of Attorney annexed to this Agreement as Exhibit “B” and deliver such power of attorney to, or at the direction of, the Company’s General Counsel.
(b) The Attorney shall have the authority to offer and sell the Agreement Shares pursuant to the provisions of this Agreement on behalf of each Stockholder without the consent of any Stockholder in any particular instance provided that:
(i) All offers and sales of Agreement Shares shall be made without general solicitation and otherwise in a manner that would satisfy the requirements of Rule 506(b) of the Securities and Exchange Commission’s (the “ SEC ”) Regulation D as if the Company were conducting such offers and sales. In addition, all offers and sales of Agreement Shares shall be made in compliance with (i) all other applicable federal and state securities laws and (ii) all applicable listing requirements and rules and regulations of any exchange or quotation system on which the Company’s stock is listed for trading.
(ii) No Agreement Shares will be sold for a price less than 130% of a Stockholder’s ACB without the consent of such Stockholder.
(iii) Each sale of Agreement Shares will include a pro-rata amount of the Agreement Shares owned by each Stockholder (not including Hypothecated Agreement Shares) unless otherwise agreed by all Stockholders. Each Stockholder’s pro-rata portion at any time shall consist of the proportion such Stockholder’s unsold Agreement Shares bears to the aggregate unsold Agreement Shares held by all Stockholders.
(c) The Attorney shall be authorized to engage SEC registered broker-dealers to assist in the private sale of the Agreement Shares and to pay the fees of such brokers, and any other transaction fees, from the proceeds of sale of Agreement Shares to the extent the fees of the brokers and other transaction fees in the aggregate do not exceed 8% of the proceeds, before distributing amounts set forth in Section 4.
(d) The Attorney will not cause the sale of any Agreement Shares at any time (i) officers and directors are generally prohibited from transacting in the Company’s securities under general Company policies (i.e. “blackout periods”), or (ii) when the Attorney is in possession of material nonpublic information relating to the Company, unless the private purchaser is provided with all of the material nonpublic information after executing a confidentiality agreement acceptable to the Company’s General Counsel. The Attorney will not engage any Broker-Dealer that is an Affiliate of the Company, any of the Stockholders or any member of any Stockholder’s immediate family.
(e) The Attorney shall have no liability to the Stockholders for his or her actions in connection with the sale of the Agreement Shares except in the event and to the extent (i) he or she causes any of the Agreement Shares to be sold below 130% of a Stockholder’s ACB without such Stockholder’s consent, (ii) liability arises from statements made by him or her in connection with the sale of Agreement Shares which violate applicable securities laws, or (iii) he or she engages in self-dealing, fraud or willful misconduct in connection with the sale of Agreement Shares.
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(f) Subject to the terms hereof, and save and except for voting rights, each Stockholder will have all the rights of a stockholder with respect to the Agreement Shares while they are subject to this Agreement, including without limitation the right receive any further dividends declared thereon. If, from time to time during the Term there is (i) any stock dividend, stock split or other change in the Agreement Shares, or (ii) any merger or sale of all or substantially all of the Company’s assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Stockholder is entitled by reason of his, her, or its ownership of the Agreement Shares shall be subject to this Agreement.
| 6. | End of Term Adjustments. |
Any Agreement Shares remaining unsold pursuant to the terms of this Agreement on the Termination Date shall be converted into and exchanged for that number of shares of the Company’s common stock determined by the following formula: (the number of Agreement Shares upon payment of the Stock Dividend X 2.5) ¸ the highest VWAP (as that term is hereinafter defined) of the Company’s common stock during the period commencing on the six (6) month anniversary of the Effective Date and ending on the Termination Date. As used in this Agreement, “ VWAP ” means, for any date, the daily volume weighted average price for such date (or the nearest preceding date) of the Company’s common stock on the trading market where such securities are then listed or quoted as reported by Bloomberg L.P. (based on a trading day from 9 a.m. New York City time to 4:02 p.m. New York City time). For purposes of clarification, the transaction described above in this Section 6 is a stock-for-stock conversion requiring no cash or other consideration being delivered from, and no purchase by, any Stockholder in connection therewith.
7. SEC Compliance.
The Stockholders acknowledge that through the execution of this Agreement they may be deemed collectively to constitute a “group” with respect to the securities of the Company for purposes of federal securities regulations. For this and other reasons, the Stockholders will be required to file certain reports with the SEC to disclose (i) their beneficial ownership of the Company’s common stock, (ii) the execution and delivery of this Agreement, and (iii) subsequent transactions pursuant to this Agreement. Each Stockholder agrees to file such reports as the Company General Counsel advises are required from time to time. The Company and its General Counsel will assist in the preparation and filing of such reports on behalf of the Stockholders. Each of the Stockholders will execute and deliver to, or at the direction of the Company’s General Counsel, the SEC Power of Attorney annexed to this Agreement as Exhibit “C”, granting the Attorney authority to execute and file such reports. This power of attorney is for purposes of compliance with this Agreement and for administrative convenience, and no reports will be filed without the consent of the Stockholders whose signatures will appear on such filings. The Company will pay the reasonable legal fees and expenses of the Stockholders in connection with the filings contemplated by this Section 7, as well as the filing fees, if any.
8. Indemnification .
(a) The Company agrees to indemnify, defend and hold harmless each Stockholder and each Stockholder’s Affiliates (as that terms is defined in Rule 144 under the Securities Act of 1933), and their respective directors, officers, employees, stockholders, members successors and assigns (the “Indemnified Parties” and each an “Indemnified Party”) from and against all liabilities, expenses and/or judgments (including reasonable legal, accounting and other professional fees and expenses) (collectively, “Damages”) to the extent resulting from (i) any US federal, state or local taxes (including any interest or penalties with respect to such taxes) imposed upon a Stockholder due to the Stockholder’s taxable gain or income arising from the sale of the Agreement Shares pursuant to this Agreement, (ii) any claim that the sale of the Agreement Shares or the other transactions contemplated by this Agreement violates any US law or regulation, any contract by which the Company is bound or any rule of any exchange or quotation system on which the Company’s stock is listed for trading, to the extent (A) such Damages exceed the amounts distributed to the Stockholder pursuant to Subsection 4(a)(ii) and (B) such Damages do not arise from the illegal actions, gross negligence or willful misconduct of the Indemnified Party seeking indemnity or any of the Indemnified Parties associated with the same Stockholder as the Indemnified Party seeking indemnity. If any claim for indemnification under this Section 8 relates to a third party claim,, the Company may participate in the defense of such third-party claim and it may elect to assume the defense of such third-party claim with counsel reasonably satisfactory to the Indemnified Person. Neither the Company nor he Indemnified Party shall settle any claim without the consent of the other, which consent shall not be unreasonably withheld, delayed or conditioned.
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The Stockholders have been advised to review with their own tax advisors the U.S. federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement. .
9. General Provisions .
(a) Amendment . Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company and all of the Stockholders.
(b) Reliance on Counsel and Advisors . The Stockholders acknowledge that Eckert Seamans Cherin & Mellott, LLC and the Company’s General Counsel are representing only the Company in connection with this Agreement. The Stockholders severally acknowledge that they have had the opportunity to review this Agreement, including all Exhibits annexed hereto, and the transactions contemplated by this Agreement, with their own legal counsel, tax advisors and other advisors. Each Stockholder is relying solely on his, her, or its own legal counsel and advisors and not on any statements or representations of the Company or its agents for legal or other advice with respect to the transactions contemplated by this Agreement.
(c) Governing Law . This Agreement shall be governed in all respects by the internal laws of the State of New York as applied to agreements entered into among New York residents to be performed entirely within New York, without regard to principles of conflicts of law.
(d) Assignment . This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Stockholder without the prior written consent of the Company and each of the other Stockholders. Any attempt by a Stockholder without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
(e) Entire Agreement . This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof. No party shall be liable or bound to any other party in any manner with regard to the subject matter hereof by any warranties, representations or covenants except as specifically set forth herein.
(f) No Waiver . Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.
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(g) Severability . If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.
(h) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.
(i) Further Acts . Each party hereto agrees to execute and deliver, by the proper exercise of his, her, or its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.
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IN WITNESS WHEREOF, this Agreement is executed as of the Effective Date.
GENEREX BIOTECHNOLOGY CORPORATION
By: ________________________________________
Name: Mark A. Fletcher
Title: Executive Vice President & General Counsel
STOCKHOLDERS:
________________________________________
JOSEPH MOSCATO
________________________________________
LAWRENCE SALVO
________________________________________
STEPHEN L. BERKMAN
BH-SANFORD, LLC
By: ________________________________________
Name: Marissa Leighton
Title: Sole Member
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EXHIBIT “A”
AGREEMENT SHARES AND ACB
|
Post-Dividend Agreement Shares |
Post-Dividend Adjusted Cost Basis |
Combined Tax Rate | |
| Joseph Moscato |
2,971,600 Common Shares (95% x 3,128,000) upon conversion of Series I Convertible Preferred Stock |
$0.125 Per share |
|
| Lawrence Salvo |
3,034,300 Common Shares (95% x 3,194,900) upon conversion of Series I Convertible Preferred Stock |
$0.125 Per share |
|
| BH-Sanford, LLC |
22,800,000 Common Shares (95% x 24,000,000) upon conversion of Series H Convertible Preferred Stock |
$0.125 Per share |
Ordinary income: 45.82%
Capital gains: 23.8% |
| Stephen L. Berkman |
4,370,000 Common Shares [95% x 4,600,000) via 230,000 issued and outstanding Common Shares |
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EXHIBIT “B”
TRANSFER POWER OF ATTORNEY
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EXHIBIT “C”
SEC POWER OF ATTORNEY
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