Midtown Partners & Co., LLC
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Midtown
Partners & Co., LLC
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Phone: ▇▇▇.▇▇▇.▇▇▇▇ ♦
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June 8,
2009
CONFIDENTIAL
Generex
Biotechnology Corporation
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Attention:
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President
& Chief Executive
Officer
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Dear
Sirs:
This
letter (the “Agreement”) confirms Midtown Partners & Co., LLC (“Midtown”)
engagement as placement agent for Generex Biotechnology Corporation (the
“Company”), in connection with the proposed registered direct offering (the
“Offering”) of up to 17,500,000 share of the Company’s common stock and warrants
(the “Warrants”) to acquire up to 8,750,000 shares of the Company’s common stock
(collectively, the “Securities”). The Securities will be sold only to
“accredited investors” (the “Investors”), as such term is defined in Rule 501(a)
of Regulation D, promulgated under the United States Securities Act of 1933, as
amended.
Subject
to the terms and conditions of this Agreement, the Company hereby appoints
Midtown to act on a best efforts basis as its exclusive placement agent in
respect of the Offering. Midtown hereby accepts such
engagement. It is expressly understood that the exclusive nature of
this Agreement shall apply only to those prospective purchasers listed on
Exhibit B to this Agreement, which Exhibit B may be modified from time to time
with prior written consent by the Company and Midtown.
1. Services to be
Rendered. In
connection with the Offering, as requested, Midtown will assist the Company in
identifying, contacting and evaluating potential purchasers, preparing executive
summaries or business plans, facilitating potential purchasers’ due diligence
investigations, analyzing and advising on the financial implications of offers,
preparing and making presentations to the Company's Board of Directors,
formulating negotiation strategies and conducting negotiations, as appropriate,
and in such other matters as may be agreed upon from time to time by Midtown and
the Company (the “Services”). The Services provided to the Company
hereunder shall be deemed exclusive with respect to the investors set forth on
Exhibit B to this Agreement.
In
connection with this Agreement, the Company agrees to keep Midtown up to date
and apprised of all material business, market and current legal practices and
developments related to the Company and its operations and
management. Midtown shall devote such time and effort, as it deems
commercially reasonable under the circumstances in rendering the
Services. Midtown cannot guarantee results on behalf of the Company,
but shall pursue all avenues that it deems reasonable through its network of
contacts.
2. Compensation. For
Midtown’s services hereunder, the Company agrees to pay Midtown the fees
outlined below upon closing of a sale of any of the Securities (in each
instance, a “Closing”):
(a) a cash
placement fee equal to two percent (2%) of the gross purchase price paid for the
Securities (which will not include any monies received by the Company in respect
of the exercise of the Warrants), payable in full, in cash, at each Closing for
the sale of any of the Securities to any purchaser other than (a) the purchasers
identified on Exhibit B, and (b) any Former Note Holder (as that term is
hereinafter defined).
(b) a cash
placement fee equal to four percent (4%) of the gross purchase price paid for
the Securities (which will not include any monies received by the Company in
respect of the exercise of the Warrants), payable in full, in cash, at each
Closing for the sale of any of the Securities to purchasers identified on
Exhibit B.
(c) at each
Closing, the Company shall issue to Midtown, or its permitted assigns, warrants
(the “PA Warrants”) to purchase that number of shares of common stock of the
Company equal to five percent (5%) of the sum of (i) the number of shares of
common stock of the Company issued at each such Closing (but excluding the
number of shares of common stock of the Company issued to any Former Note
Holder) and (ii) the number of shares of common stock issuable by the Company
upon exercise or conversion of any and all convertible securities issued at each
such Closing (including, but not limited to, all convertible promissory notes,
convertible preferred stock and all series of warrants but excluding any such
securities issued to any Former Note Holder). The shares underlying the PA Warrants
shall be covered by the Registration Statement on Form S-3, as
amended by Pre-Effective Amendment No. 1 thereto (Registration File no.
333-139637) that the Company filed with the Securities and Exchange Commission
as part of a “shelf” registration process, as supplemented by the filing of the
Prospectus Supplement on Form 424(b)5, filed on May 15, 2009. The PA
Warrants shall be exercisable for five (5) years, shall provide for cashless
exercise in the event there is no registration statement covering the underlying
warrant shares, and shall not be callable or redeemable by the Company. The
exercise price of the PA Warrants shall be the same exercise price as in the
Warrants issued to the Investors. The Company agrees the
Midtown may direct to whom the PA Warrants are to be issued, subject to
compliance with Federal and State securities laws.
Midtown hereby acknowledges that
Smithfield Fiduciary LLC, Cranshire Capital, L.P., Iroquois Master Fund Ltd.,
Iroquois Capital Opportunity Fund, LP, Portside Growth and Opportunity Fund and
▇▇▇▇▇▇▇▇ Investment Master Fund Ltd. (each a “Former Note Holder”) have certain
participation rights in respect of the Offering pursuant to a Securities
Purchase Agreement dated as of March 31, 2008 between the Company and each of
the Former Note Holders pursuant to which the Former Note Holders are entitled
to purchase up to 100% of the Offering. For greater certainty, no
compensation shall be due and payable by the Company to Midtown hereunder in
respect of the participation by any Former Note Holder in the Offering
(provided, however, that Midtown shall nonetheless be entitled to reimbursement
of any expenses incurred by it in accordance with paragraph 3
hereof).
An escrow
account with a third party agent approved by the parties hereto will be used for
each closing of the Offering during the Term (as hereinafter
defined). All consideration due Midtown shall be paid to Midtown
directly from such escrow. Any fee charged by the escrow agent in the
performance of its duties as escrow agent shall be borne by the
Company.
3. Expenses. It
is acknowledged and agreed that the Company shall bear all costs incidental to
the advancement and completion of the Offering. No such expense shall
exceed $1,000 without the prior written consent of the Company. In
addition, subject to investor request, the Company shall pay to
Midtown $1,000 to conduct personal background checks on the Company’s Officers
and Directors using a background investigation agency.
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4. Information. The Company will
furnish Midtown such information with respect to the Company and access to such
Company personnel and representatives, including the Company’s auditors and
counsel, as Midtown may request in order to permit Midtown to advise the Company
and to assist the Company in preparing offering materials for use in connection
with the Offering (including, but not limited to: a business plan; executive
summary; three (3) year historical income statement, statement of cash flows,
and balance sheet; five (5) year projected financial statements; use of proceeds
statement; investor presentation; valuation analysis) (collectively, the
“Offering Materials”). The Company will be solely responsible for the
contents of the Offering Materials and other information provided to investors
in connection with the Offering. The Company represents and warrants
to Midtown that the Offering Materials will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company agrees to advise Midtown promptly upon
the Company becoming aware of the occurrence of any event or change in
circumstance that results or might reasonably be expected to result in the
Offering Materials containing any untrue statement of a material fact or
omitting to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The Company authorizes Midtown to provide the Offering
Materials to investors in connection with the Offering. The Company
and Midtown shall have the right to approve every form of letter, circular,
notice, memorandum or other written communication from the Company or any person
acting on its behalf in connection with the Offering.
5. Termination and
Survival. This Agreement
shall terminate on July 29, 2009 (the “Term”); provided, this Agreement may be
terminated prior to expiration of the Term, by Midtown for any reason at any
time upon thirty (30) days prior written notice. Notwithstanding the
foregoing, it is understood that the provisions of paragraphs 2 (to the extent
fees are payable prior to termination), Paragraph 2(c) (to the extent fees are
payable after termination), 3 (to the extent expenses have been incurred prior
to termination), 4 (the second, third and fourth sentences only), and sections 6
through 18 of this Agreement shall remain operative and in full force and effect
regardless of any termination or expiration of this Agreement.
In the
event of termination, Midtown shall be immediately paid in full on all items of
compensation and expenses payable to Midtown pursuant hereto, as of the date of
termination.
6. Tail
Period. Midtown shall be entitled to compensation as set forth
in Section 2 of this Agreement for any Qualified Financing (as defined below)
that occurs at any time during the twelve (12) month period following the
termination or expiration of this Agreement. “Qualified Financing”
shall mean any investment from a person or entity set forth on Exhibit
B. All compensation shall be paid to Midtown on the date that the
Company closes on the Qualified Financing.
7. Confidentiality
of Advice. Except as
otherwise provided in this paragraph, any written or other advice rendered by
Midtown pursuant to its engagement hereunder are solely for the use and benefit
of the Company’s executive management team and Board of Directors and
shall not be publicly disclosed in whole or in part, in any manner or
summarized, excerpted from or otherwise publicly referred to or made available
to third parties, other than representatives and agents of the Company’s
executive management team and Board of Directors who also shall not disclose
such information, in each case, without Midtown’s prior approval, unless in the
opinion of counsel and after consultation with Midtown, such disclosure is
required by law. In addition, Midtown may not be otherwise publicly
referred to without its prior written consent. The Company
acknowledges that Midtown and its affiliates are in the business of providing
financial services and consulting advice to others. Nothing herein
contained shall be construed to limit or restrict Midtown in conducting such
business with respect to others, or in rendering such advice to others, except
as such advice may relate to matters relating to the Company’s business and
properties and that might compromise confidential information delivered by the
Company to Midtown.
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8. Obligations
Limited. Midtown shall have no obligation to make any
independent appraisals of assets or liabilities or any independent verification
of the accuracy or completeness of any information provided it in the course of
this engagement and shall have no liability in regard thereto.
9. Third Party
Beneficiaries. This Agreement is made solely for the benefit
of the Board of Directors of the Company, Midtown and other Indemnified Persons
(as defined herein), and their respective successors, assigns, heirs and
personal representatives, and no other person shall acquire or have any right
under or by virtue of this Agreement.
10. Representations
and Warranties. The Company represents and warrants that this
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company.
11. Indemnification. In
connection with and as part of the engagement contemplated herein, the Company
agrees to indemnify, defend and hold Midtown harmless in accordance with the
indemnification rider attached hereto as Exhibit
A.
12. Exclusive. The
Company acknowledges and agrees that Midtown is being granted exclusive rights
with respect to the Services to be provided to the Company in connection with
the investors set forth on Exhibit B and the Company is not free to engage other
parties to provide services in respect of the Offering similar to those being
provided by Midtown hereunder during the Term, without the prior written consent
of Midtown. During the Term, the Company shall not work with,
negotiate with or enter into any financing whatsoever with any investor
identified on Exhibit B without Midtown’s prior written consent. If
the Company raises capital in any offering or sale of securities to any investor
identified on Exhibit B during the Term or within the Tail Period (as defined in
Section 6), the Company shall pay to Midtown all of its fees in Section 2 above,
even if Midtown has provided no assistance whatsoever in raising such
capital.
13. Non-Circumvention. The
Company agrees not to circumvent, avoid, bypass, or obviate, directly or
indirectly, the intent of this Agreement, including the Company shall not permit
its subsidiaries and its other affiliated entities to sell securities with the
effect of avoiding payment of fees under this Agreement. The Company agrees not
to accept any business opportunity during the Term from any investor identified
on Exhibit B without the consent of Midtwon, unless for each such business
opportunity accepted by the Company, the Company remits a term sheet providing
for compensation to Midtown in accordance herewith, or which otherwise provides
for a compensation structure agreeable to Midtown, in its sole
discretion.
14. 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, New York, for the adjudication
of any dispute hereunder or in connection herewith or with 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 TO A JURY TRIAL, 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.
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15. Legal Fees and
Costs. If a legal action is initiated by any party to this
Agreement against another, arising out of or relating to the alleged performance
or non performance of any right or obligation established hereunder, or any
dispute concerning the same, any and all fees, costs and expenses reasonably
incurred by each successful party or his, her or its legal counsel in
investigating, preparing for, prosecuting, defending against, or providing
evidence, producing documents or taking any other action in respect of such
action shall be the joint and several obligation of and shall be paid or
reimbursed by the unsuccessful party(ies).
16. Severability. If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be excluded from
this Agreement, (b) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.
17. Future
Advertisements. The Company agrees that Midtown has the right
to place advertisements describing its services to the Company under this
Agreement in its own marketing materials as well as financial and other
newspapers and journals at its own expense following the final closing of the
Offering.
18. Miscellaneous. (a)
This Agreement and the documents referred to herein constitute the entire
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly cancelled; (b) Only an instrument in writing executed by
the parties hereto may amend this Agreement; (c) The failure of any party to
insist upon strict performance of any of the provisions of this Agreement shall
not be construed as a waiver of any subsequent default of the same or similar
nature, or any other nature; (d) This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one (1) instrument; (e) This Agreement shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The rights and obligations of the
parties under this Agreement may not be assigned or delegated without the prior
written consent of both parties, and any purported assignment without such
written consent shall be null and void.
If the
foregoing correctly sets forth the understanding between Midtown and the
Company, please so indicate in the space provided below for that purpose within
ten (10) days of the date hereof or this Agreement shall be withdrawn and
become null and void. The undersigned parties hereto have caused this
Agreement to be duly executed by their authorized representatives, pursuant to
corporate board approval and intend to be legally bound.
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MIDTOWN
PARTNERS & CO., LLC
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Date:
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| ▇▇▇▇▇ ▇▇▇▇▇▇, President | ||||
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GENEREX
BIOTECHNOLOGY CORPORATION
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By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Date:
June 8, 2009
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| ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Executive Vice-President | ||||
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By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Date:
June 8, 2009
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| ▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer | ||||
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EXHIBIT
A
INDEMNIFICATION AND
CONTRIBUTION
For
purposes of this Exhibit A, unless the
context otherwise requires, “Midtown” shall include Midtown, any affiliated
entity, and each of their respective officers, directors, employees, partners
and controlling persons within the meaning of the federal securities laws and
the successors, assigns, heirs and personal representatives of the foregoing
persons (collectively, the “Indemnified Persons”).
The
Company shall indemnify, defend and hold Midtown harmless against any losses,
claims, damages, liabilities, costs and expenses (including, without limitation,
any legal or other expenses incurred in connection with investigating, preparing
to defend or defending against any action, claim, suit or proceeding, whether
commenced or threatened and whether or not Midtown is a party thereto, or in
appearing or preparing for appearance as a witness), based upon, relating to or
arising out of or in connection with advice or services rendered or to be
rendered pursuant to the Agreement, the transaction contemplated thereby or
Midtown’s actions or inactions in connection with any such advice, services or
transaction (including, but not limited to, any liability arising out of (i) any
misstatement or alleged misstatement of a material fact in any offering
materials and (ii) any omission or alleged omission from any offering materials,
including, without limitation of a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading), except to the extent that any such loss, claim, damage,
liability, cost or expense results solely from the gross negligence or bad faith
of Midtown in performing the services which are the subject of the
Agreement. If for any reason the foregoing indemnification is
unavailable to Midtown or insufficient to hold it harmless, then the Company
shall contribute to the amount paid or payable by Midtown as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
the relative benefits received by the Company and its stockholders on the one
hand and Midtown on the other hand, or, if such allocation is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Company and Midtown, as well as any relevant equitable considerations;
provided, however, that, to the extent permitted by applicable law, Midtown
shall not be responsible for amounts which in the aggregate are in excess of the
amount of all fees actually received from the Company in connection with the
engagement. No person guilty of fraudulent misrepresentation (as such
term has been interpreted under Section 11(f) of the Securities Act of 1933)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Relative benefits to Midtown, on the
one hand, and the Company and its stockholders, on the other hand, with respect
to the engagement shall be deemed to be in the same proportion as (i) the total
value paid or proposed to be paid or received or proposed to be received by the
Company or its stockholders, as the case may be, pursuant to the potential
transaction, whether or not consummated, contemplated by the engagement bears to
(ii) all fees paid to Midtown by the Company in connection with the
engagement. Midtown shall not have any liability to the Company in
connection with the engagement, except to the extent of its gross negligence or
willful misconduct.
The
Company also agrees to promptly upon demand reimburse Midtown for its legal and
other expenses reasonably incurred by it in connection with investigating,
preparing to defend, or defending any lawsuits, investigations, claims or other
proceedings in connection with any matter referred to in or otherwise
contemplated by the Agreement; provided, however, that in the event a final
judicial determination is made to the effect that Midtown is not entitled to
indemnification hereunder, Midtown will remit to the Company any amounts that
have been so reimbursed.
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The
Company shall not be liable for any settlement of any action, claim, suit or
proceeding (or for any related losses, damages, liabilities, costs or expenses)
if such settlement is effectuated without its written consent, which shall not
be unreasonably withheld. The Company further agrees that it will not
settle or compromise or consent to the entry of any judgment in any pending or
threatened action, claim, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not Midtown is a party
therein) unless the Company has obtained an unconditional release of Midtown,
from all liability arising therefrom. The reimbursement, indemnity
and contribution obligations of the Company set forth in this Agreement shall be
in addition to any liability which the Company may otherwise have to
Midtown.
Any
Indemnified Persons that are not signatories to this Agreement shall be deemed
to be third party beneficiaries of this Agreement.
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EXHIBIT
B
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