FORBEARANCE AND AMENDMENT AGREEMENT
This
Forbearance and Amendment Agreement (the “Agreement”) is made this ___
day of February 2009 by and between Generex Biotechnology Corporation (the
“Company”) and the
holder listed on the signature page hereto (the “Holder”).
RECITALS
A.
Pursuant to that certain Securities Purchase Agreement, dated as of March 31,
2008, by and among the Company, the Holder and the other parties thereto (the
“Purchase Agreement”),
the Holder purchased the Company’s 8% Senior Secured Convertible Note in the
original principal amount of $______ (the “Note”). Capitalized terms used
in this Agreement that are not otherwise defined herein have the meanings set
forth in the Note.
B.
Pursuant to the Purchase
Agreement, the Holder also purchased (i) a Series A Warrant to acquire
additional shares of Common Stock (the “Series A Warrants”); (ii) a
Series A-1 Warrant to acquire additional shares of Common Stock (the “Series A-1 Warrants”); (iii) a
Series B Warrant to acquire additional shares of Common Stock (the “Series B Warrants”); and (iv)
a Series C Warrant to acquire additional shares of Common Stock (the “Series C Warrants”), in each
case, as set forth on Schedule of Buyers attached to the Purchase
Agreement. The Series A Warrants, the Series A-1 Warrants, the Series
B Warrants, and the Series C Warrants issued to the Holder are hereinafter
collectively referred to as the “Series
Warrants.” In addition to the Series Warrants, the Holder also
owns other warrants to purchase Common Stock (collectively, the “Other Warrants” and together
with the Series Warrants, the “Warrants”).
C.
Various Events of Default have occurred under the
Note.
D.
During and only during the period beginning on the date of this Agreement
and ending on the twenty-one (21) day anniversary of the date hereof (such
period is referred to herein as the “Standstill Period” and such
scheduled ending date is referred to herein as the “Scheduled Standstill Expiration
Date”), the
Holder is willing to temporarily forbear from exercising certain rights and
remedies on the terms, conditions and provisions contained in this
Agreement.
AGREEMENTS
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Holder hereby
agree as follows:
1. Acknowledgment of Events of
Default. The Company acknowledges and agrees that:
(i) an
Event of Default has occurred prior to the date hereof under Section 4(a)(xiv)
of the Note as a result of the failure of the Company to comply with its
obligations under Paragraph 15 of that certain Agreement, dated December 22,
2008, between the Company and the Holder;
(ii) an
Event of Default has occurred prior to the date hereof under Section 4(a)(xv) of
the Note as a result of the failure of the Company to satisfy the Net Cash
Balance Test under Section 13(f) of the Note;
(iii) an
Event of Default has occurred prior to the date hereof under Section 4(a)(xiv)
of the Note as a result of the failure of the Company to deliver Event of
Default Notices to the Holder with respect to the Events of Default listed in
each of clauses (i) and (ii) above;
(iv) an Event
of Default has occurred prior to the date hereof under Section 4(a)(xviii) of
the Note as a result of each of clauses (i) through (iii) above causing an Event
of Default to occur under the Other Notes; and
[(v) an
Event of Default has occurred prior to the date hereof under the Note and the
Purchase Agreement with regard to the timing of delivery by the Company to the
Holder and the holder of the Other Notes of cash in payment of the Installment
Amount due February 1, 2009 by reason of such delivery not being consistent
among the Holder and each other Holder.] – Iroquois version.
The
Events of Default listed in clauses (i) through (iv) above are collectively
referred to herein as the “Existing Events of Default.”
The Company represents and warrants to the Holder that no other (a) Event of
Default has occurred other than the Existing Events of Default and (b) breach by
the Company or any of its Subsidiaries of their respective obligations has
occurred under any of the Transaction Documents.
2. Forbearance; Standstill
Termination. Unless and until a Standstill Termination (as defined below)
occurs, during the Standstill Period, the Holder will not exercise any of its
rights or remedies under Section 4(b) of the Note or Section 16 of the Security
Agreement solely with respect to any of the Existing Events of Default. Upon the
occurrence of a Standstill Termination, the Standstill Period shall be
automatically terminated and the Holder shall then be permitted and entitled to
immediately exercise all of its rights and remedies under Section 4(b) of
the Note and Section 16 of the Security Agreement with respect to each of the
Existing Events of Default. “Standstill Termination” shall
mean the occurrence of the earliest of (i) the Scheduled Standstill Expiration
Date; (ii) any Event of Default occurring after the date hereof; and (iii) the
filing by or against the Company of any Insolvency Proceeding (as defined in the
Security Agreement).
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3. No Waiver; Reservation of
Rights. The Company acknowledges that the Holder is not waiving any of
the Existing Events of Default but is simply agreeing to forbear from exercising
its rights and remedies under Section 4(b) of the Note or Section 16 of the
Security Agreement with respect to the Existing Events of Default to the extent
expressly set forth in this Agreement. Without limiting the generality of the
foregoing, the Company acknowledges and agrees that immediately upon occurrence
of a Standstill Termination, the Holder shall have all of its rights and
remedies under Section 4(b) of the Note and Section 16 of the Security
Agreement with respect to the Existing Events of Default to the same extent, and
with the same force and effect, as if the forbearance had not occurred. The
Company will not assert and hereby forever waives any right to assert that the
Holder is obligated in any way to continue beyond the occurrence of a Standstill
Termination to forbear from enforcing its rights or remedies under
Section 4(b) of the Note or Section 16 of the Security Agreement with
respect to any of the Existing Events of Default or that the Holder is not
entitled to act on any of the Existing Events of Default after the occurrence of
a Standstill Termination as if the Standstill Period never existed. The Company
acknowledges that the Holder has made no representations as to what actions, if
any, the Holder will take upon the occurrence of a Standstill Termination or the
occurrence of any breach of this Agreement or any of the other Transaction
Documents after the date hereof, and the Holder does hereby specifically and
fully reserve any and all rights, remedies, and claims it has (after giving
effect hereto) with respect to the Existing Events of Default and each other
Event of Default or each other breach under this Agreement or any of the other
Transaction Documents that may occur. It is expressly understood and agreed that
nothing contained in this Agreement shall prohibit the Holder from exercising
any rights or remedies that may be available to the Holder under this Agreement,
the Note (including, without limitation, converting all or any portion thereof),
any other Transaction Document or applicable law, other than its rights and
remedies under Section 4(b) of the Note and Section 16 of the Security Agreement
solely with respect to the Existing Events of Default during the Standstill
Period as expressly contemplated hereby. The Company, on behalf of itself and
its Subsidiaries, hereby acknowledges receipt of
notices of intention to enforce security pursuant to section 244(1) of the
Bankruptcy and Insolvency Act (Canada) contemporaneously with execution of this
Agreement and hereby irrevocably waives the ten (10) day notice period
pursuant to the Bankruptcy and Insolvency Act (Canada) and hereby consents to,
and will not object to or oppose, any motion by the Holder to appoint a receiver
(either private or court-appointed) if any Event of Default occurs after the
date hereof.
4. Amendment of
Note. The Note is hereby amended as follows:
(a) The
term “Installment Amount” in the Note is hereby deleted in its entirety and
replaced with:
“Installment Amount” means,
with respect to any Installment Date occurring on or after March 1, 2009, the
lesser of (A) the product of (i) $1,927,333.32, multiplied
by (ii) Holder Pro Rata Amount and (B) the Principal amount under this Note as
of such Installment Date, as any such Installment Amount may be reduced pursuant
to the terms of this Note, whether upon conversion, redemption or otherwise,
together with, in each case, the sum of any accrued and unpaid Interest as of
such Installment Date under this Note (if such Installment Date is also an
Interest Date) and accrued and unpaid Late Charges, if any, under this Note as
of such Installment Date. In the event the Holder shall sell or otherwise
transfer any portion of this Note, the transferee shall be allocated a pro rata
portion of each unpaid Installment Amount hereunder.”
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(b) The
term “Installment Date” in the Note is hereby deleted in its entirety and
replaced with:
“Installment Date” means each
of the following dates: (i) August 1, 2008; (ii) September 1, 2008; (iii)
October 1, 2008; (iv) November 1, 2008; (v) December 1, 2008; (vi) January 1,
2009; (vii) February 1, 2009; (viii) March 1, 2009; (ix) April 1,
2009; (x) May 1, 2009; (xi) June 1, 2009; and (xii) the Maturity
Date.”
(c) The term “Fundamental Transaction” in the Note is hereby
deleted in its entirety and replaced with:
“Fundamental Transaction” means that (1) the Company shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person to make a purchase, tender or exchange offer that
is accepted by the holders of more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or party
to, such purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), or (v) reorganize, recapitalize or
reclassify its Common Stock, or (2) any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the ▇▇▇▇ ▇▇▇) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.”
(d) The
term “Maturity Date” in the Note is hereby deleted in its entirety and replaced
with:
“Maturity Date” shall mean July 1, 2009;
provided, however, that the
Maturity Date may be extended at the option of the Holder (i) in the event that,
and for so long as, an Event of Default shall have occurred and be continuing or
any event shall have occurred and be continuing that with the passage of time
and the failure to cure would result in an Event of Default or (ii) through the
date that is twenty (20) Business Days after the consummation of a Fundamental
Transaction in the event that a Fundamental Transaction is publicly announced or
a Fundamental Transaction Notice is delivered prior to the Maturity Date; provided, further, that if a
Holder elects to convert some or all of this Note pursuant to Section 3 hereof,
and the Conversion Amount would be limited pursuant to Section 3(d) hereunder,
the Maturity Date shall automatically be extended until such time as such
provision shall not limit the conversion of this Note.”
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(e) The
following is hereby added to the Note as Section 28(yy):
“(yy) “Forbearance and Amendment
Agreement” means that certain Forbearance and Amendment, dated February
___, 2009, by and between the Company and the Holder, as the same may be amended
from time to time.”
(f) Section
4(a)(iii) of the Note is hereby deleted in its entirety and replaced with the
following:
“(iii) the
suspension from trading or failure of the Common Stock to be listed on an
Eligible Market for a period of five (5) consecutive days or for more than an
aggregate of ten (10) days in any 365-day period, provided that the foregoing
shall not constitute an Event of Default if the Common Stock is quoted on the
OTC Bulletin Board on the fifth (5th)
Business Day immediately following such suspension from trading or such failure
to be so listed;”
(g) The
word “or” is hereby deleted at the end of Section 4(a)(xvii).
(h) Section
4(a)(xviii) of the Note is hereby deleted in its entirety and replaced with the
following:
“(xviii) the
Company and its Subsidiaries (taken together as a whole) expend cash in excess
of $900,000 in the aggregate in any of the following calendar months in 2009:
March, April or May; provided, however, solely for purposes of the foregoing
determination, all cash used to effect (i) (x) Company Redemptions under this
Note as permitted under the last sentence of Section 8(a) hereof and (y) Company
Redemptions (as defined in the Other Notes) under the Other Notes as permitted
under the last sentence of Section 8(a) thereof; (ii) the agreements and
instruments contemplated by Sections 5 and 6 of the Forbearance and Amendment
Agreement; and (iii) the expense reimbursement to the Holder contemplated by
Section 18 of the Forbearance and Amendment Agreement, in each case
shall not be deemed to be cash expended; ”
(i) The
following is hereby added to the Note as Section 4(a)(xix):
“(xix) any
breach by the Company of Section 8 of the Registration Rights Agreement
(including, without limitation, any failure by the Company to (x) file with the
SEC any required reports under Section 13 or 15(d) of the 1934 Act such that it
is not in compliance with Rule 144(c)(1), or (y) meet any of the requirements
under rule 144(i)(2)); or”
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(j) The
following is hereby added to the Note as Section 4(a)(xx):
“(xx) any
Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.”
(k) The
following is hereby added to the Note as the last sentence of Section
8(a):
“Notwithstanding
anything contained in this Section 8 to the contrary, the Company shall not be
permitted to elect, or effect, a Company Redemption from and after February ___,
2009; provided, however, the Company may elect, and effect, a Company Redemption
subject to, and in accordance with, the terms of this Note if such Company
Redemption is effected solely by using net proceeds received by the Company from
(i) any Subsequent Placements (as defined in the Securities Purchase Agreement)
consummated after February ___, 2009; (ii) revenues from sales of products by
the Company; or (iii) licensing fees received by the Company.”
(l) The
following is hereby added to the Note as Section 13(j):
“(j)
Certification.
Without limiting the Company’s obligations under any other provision of this
Note (including, without limitation, Sections 4 and 29), the Company shall
provide to the Holder on the first Business Day following the end of each of
March 2009, April 2009 and May 2009 a certification (executed on behalf of the
Company by the Chief Financial Officer of the Company) as to whether an Event of
Default occurred under Section 4(a)(xviii) hereof with respect to the calendar
month immediately preceding the date of such certification and shall immediately
publicly disclose (on a Current Report on Form 8-K or otherwise) any such Event
of Default on the date of such certification.”
It is
expressly understood and agreed that the Company’s payment of the Installment
Amount with respect to the Installment Date that is March 1, 2009 shall be paid
in accordance with the terms and conditions of that certain letter agreement,
dated February 13, 2009, by and between the Company and the Holder.
5. Control Agreement.
(a) The Company shall (i) promptly negotiate with the Holder and
JPMorgan Chase Bank, N.A. or another member of the New York Clearing House
Association, other financial institution of a reputation and size similar to
that of SmithBarney or regional commercial bank of a reputation and size similar
to that of State Street Corp., M&T Bank Corp, or Valley National Bancorp or
another financial institution reasonable acceptable to the Holder (any of the
foregoing being the “Depository”), and execute, a
Control Agreement (as defined in the Security Agreement) in form and substance
acceptable to the Holder in its sole discretion (that shall include, without
limitation, those terms set forth on Attachment
1 hereto), with respect to a blocked, non-operating Deposit Account (as
defined in the Security Agreement) of the Company, and (ii) deposit $3,000,000
in such Deposit Account immediately following the execution of such Control
Agreement (it being understood and agreed that such Control Agreement and such
Deposit Account will each be subject to the terms and conditions of the Security
Agreement and that the Company shall cause the
Security Agreement to promptly be amended (in form and substance acceptable to
the Holder in its sole discretion) to include any relevant terms on Attachment 1
hereto). If such Control Agreement has not been executed by the Company
and the Depository in such form and substance so acceptable to the Holder in its
sole discretion by the Scheduled Standstill Expiration Date or if such deposit
has not been so made by the Company immediately following the execution of such
Control Agreement, the Company hereby agrees and acknowledges that a breach of
the Company’s obligations under this Agreement shall have occurred, that such
breach shall be an Event of Default under Section 4(a)(xiv) of the Note and that
such breach shall be a breach which is not curable.
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(b) Without
limiting the foregoing provisions of paragraph (a) above, the Company, acting in
good faith, shall use commercially reasonable efforts to (i) cause to be issued
by the Depository prior to the Scheduled Standstill Expiration Date, a clean,
unconditional and irrevocable letter of credit that will remain “evergreen”
until the Note and each of the Other Notes are repaid in full (the “Letter of
Credit”) in the aggregate amount of $3 million for the ratable benefit of the
Holder and each holder of any of the Other Notes, that will be subject to the
following provisions of this Agreement, and (ii) if the Letter of Credit shall
be issued by the Depository, enter into with the Holder (and each holder of any
of the Other Notes) an agreement applicable to the Letter of Credit that
contains terms similar to those set forth on Attachment 1 hereto with regard to
drawdowns and otherwise shall be in form and substance acceptable to the Holder
in its sole discretion, as evidenced by the Holder’s written acceptance thereof
by the Scheduled Standstill Expiration Date. For purposes hereof, it
is understood and agreed that commercially reasonable efforts shall include,
without limitation, the Company paying customary issuance fees not to exceed
1.5% of the principal amount of the Letter of Credit, and establishing a blocked
cash collateral account to secure the Letter of Credit in an amount not to
exceed $3 million). If the Letter of Credit has been obtained by the
Company, and the Holder and each of the Other Holders entered into an agreement
with the Company applicable to the Letter of Credit in compliance with the
provisions of this paragraph (b) by the Scheduled Standstill Expiration Date,
then the Company shall have no further obligations solely under this Section 5
with respect to the Control Agreement, Deposit Account and deposit
expressly contemplated in paragraph (a) above. If, however, the Company fails to act in good faith or
use commercially reasonable efforts to cause the Letter of Credit to be issued,
or the agreement applicable to the Letter of Credit to be entered into by the
parties, as provided hereby, the Company hereby agrees and acknowledges that a
breach of the Company’s obligations under this Agreement shall have occurred,
that such breach shall be an Event of Default under Section 4(a)(xiv) of the
Note and that such breach shall be a breach which is not
curable.
6. Irrevocable Transfer Agent
Instructions. (a) The Company shall promptly issue and deliver
to the Company’s transfer agent (the “Transfer Agent”) irrevocable instructions
in form and substance acceptable to the Holder in its sole discretion which
shall instruct the Transfer Agent (without any further action, approval or
instruction required by the Company) to issue certificates or transmit shares of
the Company’s common stock to the Holder’s balance account at The Depository
Trust Company at the Holder’s written request in accordance with the terms of
the Note after the date hereof (including, without limitation, upon the
occurrence of an Event of Default) (the “Instructions”). If the
Instructions have not been issued and delivered to the Transfer Agent by the
Company by the Scheduled Standstill Expiration Date, the Company hereby agrees
and acknowledges that a breach of the Company’s obligations under this Agreement
shall have occurred, that such breach shall be an Event of Default under Section
4(a)(xiv) of the Note and that such breach shall be a breach which is not
curable.
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(b) Once
the Instructions have been delivered to the Transfer Agent, the Company no
longer shall be obligated or entitled to deliver share issuance instructions to
the Transfer Agent with regard to any Installment Notice Due Date or upon the
occurrence of an Event of Default. It is the Company’s intention to
continue to provide to the Holder, in advance of each Installment Notice Due
Date, a calculation of the number of Pre-Installment Conversion Shares the
Company believes, acting in good faith, should be issued on such Installment
Notice Due Date and in respect of which the Holder is expected to deliver to the
Transfer Agent delivery instructions. Though it is desirable that the
parties endeavor to resolve any disagreement there may be as to the number of
Pre-Installment Conversion Shares to be issued, no failure on the part of the
Company to provide to the Holder its calculation of the number of Conversion
Shares or any disagreement shall preclude the Holder from delivering to the
Transfer Agent delivery instructions for the number of Pre-Installment
Conversion Shares the Holder believes, in good faith, should be issued and
delivered to the Holder (which the Instructions shall expressly provide the
Holder is entitled and authorized to do). Any error in the
calculation of Pre-Installment Conversion Shares or Conversion Shares delivered
on any Installment Date shall be corrected by the parties reasonably promptly
after discovery.
(c) Following the issuance of the Instructions, the Company
agrees that if it, directly or indirectly, instructs or directs to the Transfer
that is inconsistent with the Instructions or takes any action, or permits any
action to be taken, which interferes with the Transfer Agent acting in
accordance with the Instructions, the Company hereby agrees and acknowledges
that a breach of the Company’s obligations under this Agreement shall have
occurred, that such breach shall be an Event of Default under Section 4(a)(xiv)
of the Note and that such breach shall be a breach which is not
curable.
(d)
The Company and the Holder hereby agree to the
following with respect to the Irrevocable Transfer Agent
Instructions:
(i) At
any time on or after the Instructions are effective, the Holder is entitled to
deliver to the Transfer Agent instructions for the delivery of the
Pre-Installment Conversion Shares required to be delivered to the Holder
pursuant to the provisions of paragraph 8(a) of Note (or this Agreement, with
regard to the April 1, 2009 Installment Date). A copy of such
instructions to the Transfer Agent shall be delivered by the Holder to the
Company.
(ii) At
any time on or after each Installment Date after the date hereof, the Holder is
entitled to deliver to the Transfer Agent instructions for the delivery of the
number of Conversion Shares required to be delivered to the Holder pursuant to
the provisions of paragraph 8(b) of the Note. A copy of such
instructions to the Transfer Agent shall be delivered by the Holder to the
Company.
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(iii) Upon
the occurrence of an Event of Default and the delivery after the date hereof of
an Event of Default Redemption Notice by the Holder in accordance with Section
4(b) of the Note, the Holder shall be entitled to deliver to the Transfer Agent
instructions for the delivery the number of shares of the Company’s common stock
as shall be required, valued in accordance with the applicable provisions of the
Note, to pay the Event of Default Redemption Price due to the Holder if the
Event of Default specified in such Event of Default Redemption Notice is not
cured by the Company within three (3) Business Days following the Company’s
receipt thereof (but such three (3) Business Day period shall not apply if such
Event of Default is not capable of being cured). A copy of such
instructions to the Transfer Agent shall be delivered by the Holder to the
Company.
7. April 1, 2009 Installment
Date. Notwithstanding the terms of the Note, (i) March 9, 2009
shall constitute the Installment Notice Due Date with respect to the Installment
Date that is April 1, 2009; (ii) the Pre-Installment Conversion Price with
respect to the Installment Amount due on such Installment Date will be equal to
the price which shall be computed as 90% of the arithmetic average of the VWAP
of the Common Stock on each of the fourteen (14) consecutive Trading Days
immediately preceding March 9, 2009 (to be appropriately adjusted for any stock
split, stock dividend, stock combination or other similar transaction during
such measuring period); and (iii) the Company Conversion Price with respect to
the Installment Amount due on such Installment Date will be equal to the price
which shall be computed as 90% of the arithmetic average of the VWAP of the
Common Stock on each of the seventeen (17) consecutive Trading Days immediately
preceding such Installment Date (to be appropriately adjusted for any stock
split, stock dividend, stock combination or other similar transaction during
such measuring period). In accordance with Section 8(a) of the Note, the Company
shall deliver the Pre-Installment Conversion Shares (which shall instead equal
the number of shares of Common Stock equal to the quotient of (x) the
Installment Amount due on such Installment Date divided by (y) the
Pre-Installment Conversion Price determined pursuant to this Section 7) to the
Holder no later than two (2) Trading Days after March 9, 2009. In accordance
with Section 8(b) of the Note, the Company shall deliver the number of shares of
Common Stock to be delivered pursuant to a Company Conversion on April 1, 2009
with respect to the Installment Amount due on such Installment Date, reduced by
the number of the Pre-Installment Conversion Shares delivered pursuant to this
Section 7.
8. Subsequent Placement.
If, but only if, the Company consummates a Subsequent Placement on or prior to
July 1, 2009, in which (i) only shares of Common Stock (and no other Equivalents
(as defined in the Purchase Agreement)) are issued by the Company; (ii) the
purchase price for each share of Common Stock so issued is greater than or equal
to $0.25 (as adjusted for stock splits, combinations and the like occurring from
and after the date hereof); (iii) the aggregate gross proceeds to the Company
(including, without limitation, all future gross proceeds receivable, directly
or indirectly, by the Company in connection therewith) are equal to or less than
$5,000,000; and (iv) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC acts as the sole placement agent,
then, and only then, the Holder hereby agrees that the number of shares of
Common Stock issuable upon exercise of the Warrants shall not be increased
solely as a result of the reduction of the exercise prices of the Warrants that
will occur pursuant to the anti-dilution provisions of the Warrants as a result
of such Subsequent Placement.
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9. Listing Maintenance Equity
Condition. As of the date hereof, clause (ii) of the
definition of Equity Conditions has not been satisfied as a result of the
Company’s receipt of notice from The NASDAQ Stock Market of the Company’s
failure to comply with the minimum bid price requirement of Marketplace Rule
4310(c)(4) (such clause (ii) is referred to herein as the “Listing Maintenance Equity
Condition”). The Holder hereby waives satisfaction of only the Listing
Maintenance Equity Condition solely with respect to the Installment Dates that
are March 1, 2009, April 1, 2009, May 1, 2009, June 1, 2009 and the Maturity
Date, thereby entitling the Company to pay the entire applicable Installment
Amount due on each of such Installment Dates pursuant to a Company Conversion
if, and only if, (i) (1) all other Equity Conditions and (2) all other
conditions relating to a Company Conversion, in each case, are satisfied in
accordance with the terms of the Note; and (ii) (x) the shares of Common Stock
continue to be listed or designated for quotation on, and trade on, an Eligible
Market; or (y) if clause (x) is not satisfied, the shares of Common Stock are
quoted on the OTC Bulletin Board.
10. Net Cash
Balance Test. The Holder
hereby waives compliance by the Company with the first sentence of Section 13(f)
of the Note for the period commencing on the date hereof and ending
on the date on which a Standstill Termination occurs.
11. Waiver. Effective
simultaneously with the Company’s compliance with, and satisfaction of, its
obligations under Sections 5 and 6 hereof on or prior to the Scheduled
Standstill Expiration Date, the Holder hereby waives (i) all Existing Events of
Default, (ii) compliance by the Company with the first sentence of Section 13(f)
of the Note and (iii) only Interest that accrued at the default Interest Rate
specified in Section 2 of the Note with respect to the Existing Events of
Default (but, for clarification purposes, not Interest that accrued at the
non-default Interest Rate). Without implication that the contrary would
otherwise be true, it is expressly understood and agreed that the waivers
contained in this Section 11 shall be null and void ab initio and be of no force
or effect if the Company does not comply with any of its obligations under this
Agreement (including, without limitation, compliance with, and satisfaction of,
its obligations under Sections 5 and 6 hereof on or prior to the Scheduled
Standstill Expiration Date) or any other Event of Default occurs after the date
hereof.
12. Existing Agreements; Entire
Agreement. Except as otherwise expressly provided herein, (i) the
Purchase Agreement, the Note and each other Transaction Document and each of the
obligations of the Company thereunder and each of the rights of and benefits to
the Holder thereunder is, and shall continue to be, in full force and effect and
each is hereby ratified and confirmed in all respects, except that on and after
the date hereof (A) all references in the Note to “this Note,” “hereto,”
“hereof,” “hereunder” or words of like import referring to the Note shall mean
the Note as amended by this Agreement and (B) all references in the other
Transaction Documents to the “Note,” “thereto,” “thereof,” “thereunder” or words
of like import referring to the Note shall mean the Note as amended by this
Agreement and (ii) the execution, delivery and effectiveness of this
Agreement shall not operate as an amendment of any right, power or remedy of the
Holder under any Transaction Document, nor constitute an amendment of any
provision of any Transaction Document and all of them shall continue in full
force and effect, as amended or modified by this Agreement. This Agreement
supersedes all other prior oral or written agreements between the Holder and the
Company solely with respect to the specific matters contained herein and in the
attachments hereto, and this Agreement and the attachments hereto contain the
entire understanding of the parties with respect to the specific matters covered
herein and therein. The Recitals set forth above are hereby incorporated into
this Agreement by reference. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party. This Agreement shall be deemed to be a Transaction Document
for purposes of the Purchase Agreement, the Note and all other Transaction
Documents. All dollar amounts referred to in this Agreement are in US Dollars
(as defined in the Purchase Agreement). Without limiting Sections 5 or 6 hereof,
the Company hereby agrees and acknowledges that any breach by the Company of any
representation, warranty or covenant of the Company contained in this Agreement
shall be an Event of Default under Section 4(a)(xiv) of the
Note.
10
13. Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original
thereof.
14. Headings;
Severability. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter, singular and plural
forms thereof. The terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
15. Miscellaneous. (a)
The provisions of this Agreement shall survive the termination of the Standstill
Period. This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, other than
those Persons expressly specified in Section 17 hereof who shall be intended
third party beneficiaries thereof. If requested by the Holder, the Company will
deliver to the Holder an amended Note to the address specified by the Holder
that reflect the amendments set forth herein within five (5) days after such
request, and such amended Note shall replace the Note and the Holder shall not
be obligated to return the original Note to the Company. For clarification
purposes, it is understood and agreed that the amendments set forth herein are
effective as of the date hereof regardless of whether such amended Note is so
requested or delivered.
(b) Except as expressly modified by this Agreement, (a) the
Company, on behalf of itself and each of its Subsidiaries, hereby acknowledges,
confirms and ratifies all of the terms and conditions set forth in, and all of
its and each of its Subsidiaries’ obligations under, the Purchase Agreement, the
Note, the Security Agreement, the Series Warrants, the Other Warrants and all
other Transaction Documents, which documents are valid, binding and in full
force and effect and (b) all of the terms and conditions set forth in the
foregoing Transaction Documents are legal, valid and binding obligations of the
Company and each of its Subsidiaries (as applicable).
11
(c) As a material inducement for the Holder to enter into
this Agreement and to forbear with respect to the Existing Events of Default in
the manner expressly provided in this Agreement, the Company, on behalf of
itself and each of its Subsidiaries represents and warrants to the Holder as
follows:
(i) Power and Authority. The Company has all
requisite corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby, and perform its obligations
hereunder.
(ii) Authorization of Agreements. The execution
and delivery of this Agreement and the other agreements and instruments
contemplated hereby by the Company and each of its Subsidiaries (as applicable)
and the performance by the Company and each of its Subsidiaries hereunder and
thereunder (as applicable) have been duly authorized by all necessary action,
and this Agreement has been duly executed and delivered by the Company and such
other agreements and instruments will be duly executed and delivered by the
company and each of its Subsidiaries (as applicable).
(iii) Enforceability. This Agreement constitutes
the legal, valid and binding obligation of the Company and its Subsidiaries
enforceable against each of them in accordance with its
terms.
(iv) No Violation or Conflict. The execution and
delivery by the Company or any of its Subsidiaries (as applicable) of this
Agreement or any of the other agreements or instruments contemplated hereby and
the performance by the Company and each of its Subsidiaries (as applicable)
hereunder and thereunder do not and will not (i) contravene, in any respect, any
provision of any law, regulation, decree, ruling, judgment or order that is
applicable to the Company or any of its Subsidiaries or any of their
respective properties or other assets, or (ii) result in a breach of
or constitute a default under the charter, bylaws or other organizational
documents of the Company or any of its Subsidiaries or any material agreement,
indenture, lease or instrument binding upon the Company or any of its
Subsidiaries or any of their respective properties or other
assets.
(v) Governmental Consents. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery and
performance by the Company or any of its Subsidiaries (as
applicable) of this Agreement or any of the other agreements or
instruments contemplated hereby.
(vi) Acknowledgement of Indebtedness. The Company
acknowledges and agrees that as of the date hereof, the aggregate indebtedness
due under the Note to the Holder is $________ (the “Indebtedness”). The Company represents, warrants
and agrees that the Indebtedness due to the Holder is secured by valid and
enforceable first priority liens and security interests against the Collateral
(as defined in the Security Agreement), and that neither the Company nor any of
its Subsidiaries has any offset, defense, counterclaim, dispute or disagreement
of any kind or nature whatsoever with respect to the liability or amount of the
Indebtedness or the liens and security interests securing the
Indebtedness.
12
16. Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, and the Company also submits to the
jurisdiction of federal and provincial courts in Ontario, Canada, with respect
to any matter involving the parties (including, without limitation, the
adjudication of any dispute hereunder or in connection herewith or any
transaction contemplated hereby or discussed herein), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
17. RELEASE. FOR VALUE
RECEIVED (INCLUDING, WITHOUT LIMITATION, THE AGREEMENTS OF THE HOLDER IN THIS
AGREEMENT), THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES, HEREBY
RELEASES THE HOLDER AND ALL THE OTHER INDEMNITEES (AS DEFINED IN THE PURCHASE
AGREEMENT) (COLLECTIVELY, THE “RELEASED PARTIES”) OF AND FROM
ANY AND ALL DEMANDS, ACTIONS, CAUSES OF ACTION, SUITS, CONTROVERSIES, ACTS AND
OMISSIONS, LIABILITIES, AND OTHER CLAIMS OF EVERY KIND OR NATURE WHATSOEVER,
BOTH IN LAW AND IN EQUITY, KNOWN OR UNKNOWN, WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES NOW HAS OR EVER HAD AGAINST ANY OF THE RELEASED PARTIES ARISING OUT
OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS (INCLUDING, WITHOUT
LIMITATION, ANY ARISING OUT OF OR RELATING TO THE NEGOTIATIONS IN CONNECTION
WITH THE EXISTING EVENTS OF DEFAULT), AND THE COMPANY FURTHER ACKNOWLEDGES THAT,
AS OF THE DATE HEREOF, NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS ANY
COUNTERCLAIM, SET-OFF, OR DEFENSE AGAINST ANY OF THE RELEASED PARTIES, EACH OF
WHICH THE COMPANY HEREBY EXPRESSLY WAIVES ON BEHALF OF ITSELF AND ITS
SUBSIDIARIES.
13
18. Expenses. The Company
shall reimburse the Holder or its designee(s) for all costs and expenses
incurred by it or its affiliates in connection with the transactions
contemplated by this Agreement (including, without limitation, the agreements
and instruments contemplated by Sections 5 and 6), the Existing
Events of Default and any other Events of Default that occurred prior to the
date hereof (including, without limitation, all legal fees and disbursements in
connection therewith and documentation and implementation of the transactions
contemplated by this Agreement), which amount shall be paid by the Company in
shares of Common Stock delivered within two (2) Trading Days after March 9,
2009, determined by dividing the amount of the Holder’s expenses to be
reimbursed by the price which shall be computed as 90% of the arithmetic average
of the VWAP of the Common Stock on each of the twenty (20) consecutive Trading
Days immediately preceding March 29, 2009 (to be appropriately adjusted for any
stock split, stock dividend, stock combination or other similar transaction
during such measuring period), and subject to a “true-up” as of the April 1,
2009 Installment Date in the same manner as for the Conversion Shares delivered
in respect of such Installment Date under paragraph 8(b) of the
Note. To the extent required hereunder to be paid in cash, such costs
and expenses shall be deemed not to be cash expended for purposes of paragraph
4(a)(xviii) of the Note.
19. Disclosure. The
Company shall, on or before 8:30 a.m., New York time, on the first (1st)
Business Day after the date of this Agreement file a Current Report on Form 8-K
describing all the material terms of the transactions contemplated by this
Agreement in the form required by the 1934 Act (as defined in the Purchase
Agreement) and attaching this Agreement (and all attachments to this Agreement)
as an exhibit thereto.
20. Terms. The
Company represents, warrants and covenants that the Company has not entered
into, and will not enter into, any agreement or instrument with, or for the
benefit of, any holder of Other Notes on terms or conditions which are more
favorable to any such holder than the terms and conditions provided to, or for
the benefit of, the Holder. To the extent the Company enters into
any agreement or instrument with, or for the benefit of, any holder of
Other Notes that contains any terms or conditions which are more favorable to
any such holder than the terms and conditions provided to, or for the benefit
of, the Holder, then the Holder, at its option, shall be entitled to the benefit
of such more favorable terms or conditions (as the case may be) and this
Agreement shall be automatically amended to reflect such more favorable terms or
conditions (as the case may be). Notwithstanding the foregoing, it is expressly
understood and agreed that to the extent the Company enters into a similar
agreement with any of the holders of the Other Notes with respect to the matters
contained herein and such agreement provides for expense reimbursement for such
holder, the expenses of such holder may be reimbursed by the Company in shares
of Common Stock so long as the number of shares of Common Stock issued as such
expense reimbursement is determined, as of March 9, 2009, by dividing the amount
of such holder’s expenses to be reimbursed by the price which shall be computed
as 90% of the arithmetic average of the VWAP of the Common Stock on each of the
twenty (20) consecutive Trading Days immediately preceding the date of such
agreement (to be appropriately adjusted for any stock split, stock dividend,
stock combination or other similar transaction during such measuring period),
and is subject to a “true-up” as of April 1, 2009 (as if the shares were
Conversion Shares being delivered in respect of the April 1, 2009 Installment
Date).
21. Series Warrants. The
term “Fundamental Transaction” in each of the Series Warrants is hereby deleted
in its entirety and replaced with:
14
““Fundamental Transaction” means
that (1) the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or
party to, such stock purchase agreement or other business combination), or (v)
reorganize, recapitalize or reclassify its Common Stock, or (2) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
▇▇▇▇ ▇▇▇) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Common Stock.”
22. Independent
Obligations. The obligations of the Holder hereunder are
several and not joint with the obligations of any other holder of Other Notes
and the Holder shall not be responsible in any way for the performance of the
obligations of any other holder of Other Notes under any other similar
agreement. Nothing contained herein, and no action taken by the Holder pursuant
hereto, shall be deemed to constitute the Holder and the holders of the Other
Notes as, and the Company acknowledges that the Holder and the holders of the
Other Notes do not so constitute, a partnership, an association, a joint venture
or any other kind of group or entity, or create a presumption that the Holder or
any holder of Other Notes are in any way acting in concert or as a group or
entity with respect to such obligations or the transactions contemplated by this
Agreement or any matters, and the Company acknowledges that the Holder and the
holders of the Other Notes are not acting in concert or as a group, and the
Company shall not assert any such claim, with respect to such obligations or the
transactions contemplated by this Agreement or any other similar agreement. The
decision of the Holder to enter into this Agreement has been made by the Holder
independently of any holder of Other Notes. The Company and the Holder confirm
that the Holder has independently participated with the Company in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel, [insert outsider law firm, if any]________ and advisors. The Holder
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other holder of
Other Notes to be joined as an additional party in any proceeding for such
purpose. To the extent that any holder of Other Notes enters into an agreement
with the same or similar terms and conditions or pursuant to the same or similar
documents, all such matters are solely in the control of the Company, not the
action or decision of the Holder, and would be solely for the convenience of the
Company and not because it was required or requested the
Holder.
[signature page
follows]
15
IN WITNESS WHEREOF, the Holder
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.
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GENEREX
BIOTECHNOLOGY
CORPORATION
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By:
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||
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Its:
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[HOLDER]
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By:
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Its:
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16
Attachment
1
The
Control Agreement shall include, without limitation, the following
concepts:
The
$3,000,000 deposited by the Company in the Deposit Account (such amount being
the “Blocked Account
Cash”) shall be blocked irrevocably and may not be accessed by the
Company or any of its Subsidiaries under any
circumstances (including in any Insolvency Proceeding) unless the conditions for
release of the funds expressly provided in the Control Agreement are
satisfied. However, the Blocked Account Cash may be
deposited with the Depository as cash collateral for the Letter of Credit as
long as the manner in which the Blocked Account Cash is transferred from the
Deposit Account and to the Depository to be held as cash collateral for the
Letter of Credit does not adversely affect any of the Holder’s rights under any
of the Transaction Documents.
Notwithstanding
anything to the contrary in the Security Agreement, upon the occurrence of an
Event of Default and the delivery of an Event of Default Redemption Notice by
the Holder in accordance with Section 4(b) of the Note, the Holder shall have
the unfettered right (regardless of whether the Holder is a Permitted Secured
Party (as defined in the Security Agreement)) to have a percentage
(which percentage shall be equal to the quotient of (i) the then remaining
amount of principal and interest due on the Holder’s Note divided by (ii) the
then remaining amount of principal and interest due on all Notes) of the Blocked
Account Cash released to the Holder as payment of a portion of the Event of
Default Redemption Price due to the Holder if the Event of Default specified in
such Event of Default Redemption Notice is not cured by the Company within three
(3) Business Days following the Company’s receipt thereof (but such three (3)
Business Day period shall not apply if such Event of Default is not capable of
being cured); [provided,
however, that the amount of the Event of Default Redemption Price to be paid
from the Blocked Account Cash shall be reduced by the value of the Conversion
Shares delivered to the Holder pursuant to the delivery of its instructions to
the Transfer Agent in connection with such Event of Default, it being agreed
that the Holder shall have the right, in connection with any Event of Default,
to cause all or a portion (in the Holder’s sole discretion) of the Event of
Default Redemption Price due to the Holder to be paid in cash with (its
percentage of) the Blocked Account Cash or with Conversion
Shares].
The
Blocked Account Cash shall only be released to the Company as
follows:
(i) If
no Event of Default has occurred on or prior to June 5, 2009, then an amount
equal to (a) $3,000,000 minus (b) 135% of all amounts due (principal, Interest
and Late Charges, if any) on all Notes on the Maturity Date will be released to
the Company by the Depository.
(ii) If
no Event of Default has occurred on or prior to the Maturity Date and all
amounts due under all Notes have been paid by the Company on the Maturity Date,
then the remaining Blocked Account Cash will be released to the Company by the
Depository.
17
(iii) If no
Event of Default has occurred on or prior to the Maturity Date, and all
amounts
due under all Notes have been paid by the Company on the Maturity Date, then the
Letter of Credit shall be delivered by the Holder to the Depository for
cancellation with an authorization for the Depository to release to the Company
the remaining cash collateral.
18