-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HolSGOJF2bePOddOF2woF74/5OF80saFJnl590IzSr4bYqOhqVzQyI1JlzL9344U c/cmi7KWYTUYY8u8irK7Nw== 0000950116-01-000077.txt : 20010124 0000950116-01-000077.hdr.sgml : 20010124 ACCESSION NUMBER: 0000950116-01-000077 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010116 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENEREX BIOTECHNOLOGY CORP CENTRAL INDEX KEY: 0001059784 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 820490211 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-25169 FILM NUMBER: 1512955 BUSINESS ADDRESS: STREET 1: 33 HARBOUR SQ STREET 2: STE 202 CITY: TORONTO ONTARIO CANA STATE: A1 BUSINESS PHONE: 4163642551 MAIL ADDRESS: STREET 1: 33 HARBOUR SQ STREET 2: STE 202 CITY: TORONTO ONTARIO M5J STATE: A1 8-K 1 0001.txt 8-K 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) January 16, 2001 ----------------- Generex Biotechnology Corporation - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-25169 82-049021 - ---------------------------- ------------- ------------------- (State or other jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 33 Harbor Square, Suite 202, Toronto, Ontario, Canada M5J 2G2 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 416/364-2551 -------------------------- - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. Other Events. A. Completion of Transaction with Elan On January 16, 2001 (the "Closing Date"), Generex Biotechnology Corporation (the "Company") established a joint venture with Elan International Services, Ltd. ("EIS"), a wholly owned subsidiary of Elan Corporation, plc ("Elan"). Through the joint venture, the parties will pursue the application of certain of the Company's and Elan's drug delivery technologies -- including the Company's platform technology for the buccal delivery (absorption through the inner cheek walls) of large molecule drugs -- to pharmaceutical products for the treatment of prostate cancer, endometriosis and/or the suppression of testosterone and estrogen. The parties will conduct the joint venture through Generex (Bermuda), Ltd., a Bermuda limited liability company ("Newco"). The parties are free to develop other products on their own outside of the field of the joint venture. In connection with the transaction, EIS purchased 344,116 shares of the Company's common stock for $5,000,000 (or $14.53 per share). The Company may use the proceeds for any corporate purpose without restriction. With respect to the shares of the Company's common stock purchased by EIS, EIS is entitled to the benefit of certain anti-dilution, preemptive and other rights that are commonly found in securities purchases of this nature. The Company also issued a six-year Warrant to EIS to acquire 75,000 shares of the Company's common stock at $25.15 per share. If certain conditions are met, the Company has the future right to require EIS to purchase an additional $1,000,000 of shares of the Company's common stock at a premium over the then-current fair market value of the Company's common stock. Provided that EIS attains certain levels of beneficial ownership with respect to the Company's outstanding and issued common stock, EIS is entitled to nominate one director for election to the Company's board of directors. An EIS-nominated director, if any, may not in any event have more than 15% of the total voting power of the directors as a whole. In connection with the transaction, EIS also purchased 1,000 shares of a new series of the Company's preferred stock, designated as Series A Preferred Stock. The Series A Preferred Stock; (i) is entitled to a 6% annual dividend payable in shares of Series A Preferred Stock, (ii) is exchangeable for 30.1% of the Company's equity ownership interest in Newco (the right of exchange described herein being the Exchange Right described below), (iii) is convertible (after the third anniversary of the date of issuance) into shares of the Company's common stock and (iv) has a liquidation preference over the Company's common stock. If the Series A Preferred Stock has not been exchanged or converted by the sixth anniversary of the date of issuance, the outstanding shares of Series A Preferred Stock are subject to redemption by the Company at that time for their liquidation value in either cash or shares of the Company's common stock. The Company applied the $12,015,000 that it received from EIS for the shares of the Company's Series A Preferred Stock to subscribe for an 80.1% equity ownership interest in Newco. At the same time, EIS paid in capital of $2,985,000 to subscribe for a 19.9% equity ownership interest in Newco. EIS has the option to exchange the Series A Preferred Stock for 30.1% of the Company's equity ownership interest in Newco (the "Exchange Right"). Upon exercise of the Exchange Right, the Company and EIS would each own 50% of Newco. The parties intend to select at least one pharmaceutical product for research and development under the joint venture within one year's time. The parties will establish a research and development plan and budget upon selection of the pharmaceutical product that will be the initial focus of the joint venture. Newco has been granted rights to use the Company's buccal delivery technologies and certain Elan drug delivery technologies for purposes of the joint venture. Using the funds from its initial capitalization, Newco paid a license fee to Elan in consideration for being granted rights to use the Elan drug delivery technologies. The Company and EIS will fund any Newco research and development activities in proportion to their respective ownership of Newco. If EIS should elect to exercise the Exchange Right, EIS will be required to pay that portion, if any, of the Newco research and development funds provided by the Company - through the date that EIS exercises the Exchange Right - that corresponds to the additional 30.1% of Newco that would thereby be obtained by EIS. It is anticipated that the Company will undertake a significant portion of the research and development conducted with respect to pharmaceutical products, if any, eventually identified for pursuit by the joint venture. The Company will receive negotiated arms-length fees from Newco for performing any such research and development work. B. Update to Legal Proceedings Reference is made to the description set forth in Item 3 (Legal Proceedings) of the Company's Report on Form 10-K for the fiscal year ended July 31, 2000 of the legal proceeding involving MQS, Inc. The Company recently entered into an agreement for the purpose of settling such legal proceeding. The terms and conditions of settlement are not expected to have a material adverse effect on the Company's business or financial condition. Item 7. Exhibits *4.1 Securities Purchase Agreement, dated as of January 16, 2001, between the Company, Elan International Services, Ltd. and Elan Corporation, plc. 4.2 Registration Rights Agreement, dated as of January 16, 2001, between the Company and Elan International Services, Ltd. 4.3 Form of Warrant issued to Elan International Services, Ltd. as of January 16, 2001. 4.4 Certificate of Designations, Preferences and Rights of Series A Preferred Stock of Generex Biotechnology Corporation filed with the Secretary of State of the State of Delaware on January 16, 2001. * Portions of this exhibit have been omitted pursuant to a request for confidential treatment. 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 hereunto duly authorized. GENEREX BIOTECHNOLOGY CORPORATION Dated: January 22, 2001 By: /s/ E. Mark Perri ----------------------------- -------------------------- E. Mark Perri Chief Financial Officer EX-4.1 2 0002.txt EXHIBIT 4.1 Exhibit 4.1 Portions of this Exhibit have been omitted pursuant to a Request for Confidential Treatment THE SYMBOL "[**]" IS USED TO INDICATE WHERE A PORTION OF THIS EXHIBIT HAS BEEN OMITTED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. A COMPLETE COPY OF THIS EXHIBIT, CONTAINING ALL OF THE OMITTED PORTIONS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION TOGETHER WITH THE REQUEST FOR CONFIDENTIAL TREATMENT. SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January 16, 2001, among Generex Biotechnology Corporation, a Delaware corporation (the "Company"), Elan International Services, Ltd., a Bermuda exempted limited liability company (and its affiliates, "EIS"), and a wholly owned subsidiary of Elan Corporation, plc, an Irish public limited company ("Elan"). R E C I T A L S: A. The Company desires to issue and sell to EIS, and EIS desires to purchase from the Company, on the date hereof, (i) 1,000 shares of a newly-created series of the Company's preferred stock, par value U.S.$.001 per share, captioned "Series A Preferred Stock" (the "Series A Preferred Stock"), (ii) 344,116 shares of the Company's common stock, par value U.S.$.001 per share (the "Company Common Stock") and (iii) a warrant to purchase up to 75,000 shares of Company Common Stock, as provided therein, in the form attached hereto as Exhibit A (as amended at any time, the "Warrant"). The Series A Preferred Stock and the Company Common Stock collectively are referred to herein as the "Shares". The Shares and the Warrant collectively are referred to herein as the "Securities". The rights, preferences and privileges of the Series A Preferred Stock are as set forth in the Company's Certificate of Designations, Preferences and Rights, the form of which is attached hereto as Exhibit B (the "Certificate of Designations"). B. The Company and EIS have formed Generex (Bermuda), Ltd., an exempted limited liability company incorporated under the laws of Bermuda ("Newco"), and pursuant to the terms of a Subscription, Joint Development and Operating Agreement, dated as of the date hereof (as amended at any time, the -2- "JDOA"), simultaneously with the transactions contemplated by this Agreement, (i) the Company shall acquire 100% voting common shares of Newco, par value U.S.$1.00 per share (the "Newco Common Shares"), representing 100% of the issued and outstanding Newco Common Shares for $7.5 million, and 60.2% non-voting convertible preference shares of Newco, par value of U.S.$1.00 per share (the "Newco Preferred Shares"; together with the Newco Common Shares, the "Newco Shares"), representing 30.1% of the outstanding Shares for $4.515 million and (ii) EIS shall acquire 39.8% of the Preferred Shares, representing 19.9% of the outstanding Shares, on an as converted basis, for $2.985 million. Additionally, as of the date hereof, Newco has entered into license agreements with (i) Elan (the "Elan License Agreement") and (ii) the Company (such agreement, as amended at any time, the "Company License Agreement"; together with the Elan License Agreement, the "License Agreements"). Further, Elan and Company shall enter into a development agreement (the "Development Agreement"). C. The Company and EIS are executing and delivering on the date hereof a Registration Rights Agreement in the form attached hereto as Exhibit C (as amended at any time, the "Company Registration Rights Agreement") in respect of (i) the Company Common Stock issued and purchased hereunder, the Company Common Stock issued or issuable upon conversion of the Series A Preferred Stock or exercise of all or any portion of the Warrant and (ii) any other Company Common Stock owned by EIS or any of its affiliates or their respective permitted transferees. The Company, EIS and Newco are also executing and delivering on the date hereof a Registration Rights Agreement in the form attached hereto as Exhibit D(as amended at any time, the "Newco Registration Rights Agreement"). This Agreement, the Certificate of Designations, the Warrant, the JDOA, the Company Registration Rights Agreement, the Newco Registration Rights Agreement, the License Agreements and each other document or instrument executed and delivered in connection with the transactions contemplated hereby and by the JDOA collectively are referred to herein as the "Transaction Documents". A G R E E M E N T: In consideration of the foregoing premises and the mutual covenants contained herein, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. Closing. (a) Time and Place. The closing of the Initial Purchase (as defined below) (the "Initial Closing") shall occur on the date hereof (the "Initial Closing Date"). The funding of any purchase due under the Put Event (as defined below) (each, a "Subsequent Closing") shall occur on such dates as set forth in Section 1(d) (each, a "Subsequent Closing Date"). The Initial Closing and each Subsequent Closing individually are referred to herein as a "Closing", -3- and the Initial Closing Date and each Subsequent Closing Date individually are referred to herein as a "Closing Date". The Closing shall be held at the offices of Cahill, Gordon & Reindel, 80 Pine Street, New York, New York 10005 (by means of facsimile or overnight mail). (b) Sale and Purchase. At the Initial Closing, subject to the terms and conditions hereof, the Company shall issue and sell to EIS, and EIS shall purchase from the Company, (i) 1,000 shares of Series A Preferred Stock, (ii) 344,116 shares of Company Common Stock and (iii) the Warrant (the "Initial Purchase"). (c) Purchase Price. The aggregate purchase price for the Initial Purchase shall be U.S.$17.015 million (the "Initial Purchase Price"). (d) Initial Closing Delivery. (i) On the Closing Date, subject to the terms and conditions hereof: (a) EIS shall pay the Initial Purchase Price by wire transfer of U.S.$17.015 million to an account designated in writing by the Company ; (b) the parties hereto shall execute and deliver to each other, as applicable, (A) certificates representing 1,000 shares of Series A Preferred Stock and 344,116 shares of Common Stock, (B) the Warrant, (C) the Company Registration Rights Agreement, (D) the Newco Registration Rights Agreement, (E) the JDOA, (F) the Certificate of Designations as filed with the Secretary of State of the State of Delaware, (G) the License Agreements, (H) a customary secretary's certificate from the secretary of the Company, including a certificates as to the incumbency of the officers of the Company executing any of the Transaction Documents, (I) certificates as to the incumbency of the officers of EIS and EPIL executing any of the Transaction Documents and (J) any other documents or instruments reasonably requested by a party hereto; and (c) the Company shall cause to be delivered to EIS an opinion of counsel in the form attached hereto as Exhibit E. (ii) It is estimated that Newco will require additional funds to commence development of Newco's products. Upon approval by the United States Food and Drug Administration of an investigational new drug application (an "IND") filed by Newco, and the dosing of the first human patient of such product (the "Put Event"), the Company shall have the right, exercisable for 30 days, to require EIS to purchase shares of Company Common Stock for an aggregate amount of $1.0 million payable in cash at a price per share equal to a 30% premium over the average closing price for the sixty day period immediately preceding the Put Event, provided, that the closing of such purchase shall be subject to the satisfaction of any applicable regulatory approvals. The Subsequent Closing shall occur the third business day after the Company notifies Elan of its intent to exercise this right, subject to the satisfaction of all regulatory approvals. EIS shall receive the same anti-dilution protection that is provided with respect to the shares of Generex Common Stock purchased on the Initial Closing Date. Notwithstanding the foregoing, the preceding anti-dilution provisions relating to any shares purchased pursuant to the Put Event shall terminate upon the earlier of (i) 60 days following the registration of the shares of Company -4- Common Stock purchased by EIS pursuant to the Put Event and (ii) the fourteen month anniversary of the Put Event. (e) Development Funding. It is estimated that Newco will require additional funds to commence research development of Newco's products. Within the period commencing on the Initial Closing Date and ending on the three (3) year anniversary of the Initial Closing Date, (the "Development Period"), EIS and the Company may provide to Newco up to an aggregate maximum amount of U.S.$6.0 million, such funding to be provided by EIS and the Company in accordance with the parties then-current respective ownership on a fully-diluted basis, in Newco (the "Development Funding"). The provisions with respect to the Development Funding are subject to the more specific provisions contained in Sections 6.3 and 6.4 of the JDOA. (f) Exemption from Registration. The Securities and any underlying shares of Company Common Stock will be issued under an exemption or exemptions from registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Accordingly, the certificates evidencing the Series A Preferred Stock, the Company Common Stock, the Warrant, and any shares of the Company Common Stock or other securities issuable upon the exercise, conversion or exchange of any of the Securities shall, upon issuance, contain a legend, substantially in the form as follows: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST THEREIN MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE ISSUER OF THESE SECURITIES RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS ALSO SUBJECT TO THE RESTRICTIONS CONTAINED IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF JANUARY 16, 2001, BY AND AMONG GENEREX BIOTECHNOLOGY CORPORATION AND ELAN INTERNATIONAL SERVICES, LTD. -5- SECTION 2. Representations and Warranties of the Company. The Company hereby represents and warrants to EIS, as of the Closing Date, as follows: (a) Organization and Qualification. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and lease its properties, to carry on its business as presently conducted and as proposed to be conducted and to consummate the transactions contemplated hereby. The Company is duly qualified as a foreign corporation and in good standing to do business in each jurisdiction in which the nature of the business conducted or the property owned by it requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, assets, liabilities (contingent or otherwise), operations, condition (financial or otherwise), or prospects of the Company (a "Company Material Adverse Effect"). (b) Capitalization. (i) Immediately following the Initial Closing, the capitalization of the Company will be as follows: (a) 50,000,000 shares of Common Stock, of which 19,178,186 shares have been issued and are outstanding, (b) 1,000,000 shares of preferred stock, of which (x) 1,512 have been designated shares of Series A Preferred Stock, of which 1,000 shares have been issued and are outstanding, and (y) 1,000 shares have been designated Special Voting Rights Preferred Stock of which 1,000 are issued and outstanding.. All authorized and issued shares of Common Stock are fully paid and non-assessable. (ii) As of the Initial Closing Date, the Company has reserved a sufficient number of shares of Company Common Stock for issuance upon conversion of the Series A Preferred Stock, exercise of the Warrant and a sufficient number of shares of Series A Preferred Stock for issuance as dividends on the Series A Preferred Stock. (iii) There are no preemptive rights, voting agreements, rights of first offer or refusal, options, warrants or other conversion privileges or rights presently outstanding to purchase, subscribe for or otherwise acquire, or any securities convertible into or exercisable for or into, any of the Company's capital stock (collectively, "Preemptive Rights"), except as described on Schedule 2(b). There are no agreements to register any of the Company's outstanding securities under U.S. federal securities laws, other than the Company Registration Rights Agreement and except as described on Schedule 2(b). (iv) All of the outstanding shares of capital stock of the Company have been issued in accordance with applicable state and federal laws and regulations (or exemptions therefrom) governing the sale and purchase of securities, all -6- of such shares have been duly and validly issued and are fully paid and non-assessable. The Shares, when issued against payment therefor in accordance with this Agreement or, in the case of the Series A Preferred Stock, as dividends in respect of previously issued shares of Series A Preferred Stock, will be duly and validly issued, fully paid and non-assessable, and the Warrant (including additional amounts issued as accrued interest), when issued against payment therefor in accordance with this Agreement, will be duly and validly issued, and in each case will not be issued in violation of any Preemptive Rights. The shares of Company Common Stock issuable upon conversion or exercise of the Series A Preferred Stock and the Warrant (the "Underlying Shares"), when issued upon conversion or exercise in accordance with the terms thereof, will be duly and validly issued, fully paid and non-assessable, and will not be issued in violation of any Preemptive Rights. (c) Authorization of Transaction Documents. The Company has full corporate power and authority to execute and deliver this Agreement and each of the other Transaction Documents to which it is a party, and to perform its obligations hereunder and thereunder. The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents to which it is a party (including the issuance and sale of the Securities and the Underlying Shares) have been duly authorized by all requisite corporate action by the Company and, when executed and delivered by the Company, this Agreement and each of the other Transaction Documents to which it is a party will be the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. (d) No Violations. The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents to which it is a party (including the issuance and sale of the Securities) and the compliance with the provisions hereof and thereof by the Company do not violate, conflict with or constitute or result in a breach of or default under (or an event which with notice or passage of time or both would constitute a default) or give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Encumbrance (as defined below) upon any properties or assets of the Company under (i) the Certificate of Incorporation or bylaws of the Company, (ii) applicable law, statute, rule or regulation, or any ruling, writ, injunction, order, judgment or decree of any court, arbitrator, administrative agency or other governmental body applicable to the Company or any of its properties or assets or (iii) to the Company's knowledge, any contract or agreement affecting the Company, except, in each case, where such violation, conflict, breach, default, termination, cancellation, acceleration or Encumbrance would not, individually or in the aggregate, have a Company -7- Material Adverse Effect. As used herein, the term "Encumbrance" shall mean any lien, charge, encumbrance, claim, option, proxy, pledge, security interest, or other similar right of any nature other than statutory liens securing payments not yet due and payable or due but not yet delinquent. (e) Approvals. Except as set forth on Schedule 2(e) and for consent which may be required under the Mergers and Takeovers (Control) Acts 1978-1996 (Ireland), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or any other similar law and regulation, no permit, authorization, consent, approval, or order of or by, or any notification of or filing with, any person or entity (governmental or otherwise) is required in connection with the execution, delivery or performance of this Agreement or the other Transaction Documents (including the issuance and sale of the Securities) by the Company, except for filings on Form D with the Securities and Exchange Commission ("SEC") and except for such permits, authorizations, consents, approvals, orders, notifications or filings which, if not obtained or made, would not have a Company Material Adverse Effect. (f) Financial Statements. The Company has provided access to (i) the balance sheet of the Company in the Form 10-K for the fiscal year ending July 31, 2000 and the related statements of operations, stockholders' equity (deficit) and cash flows for the year then ended, together with the reports thereon of Withom Smith Brown (the "Audited Financial Statements") and (ii) the unaudited balance sheet of the Company in the Form 10-Q for the period ended October 31, 2000 and the related statements of operations and cash flows for the period then ended (the "Unaudited Financial Statements"; collectively with the Audited Financial Statements, the "Financial Statements"). The Financial Statements fairly present, in all material respects, the financial position of the Company and the results of its operations and its cash flows at such dates and for the periods indicated and were prepared in conformity in all material respects with United States generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as may be otherwise indicated therein), subject, in the case of the Unaudited Financial Statements, to normal year-end audit adjustments (which shall not be material in the aggregate) and the absence of footnote disclosures. As of the Closing Date, the Company has not incurred and is not liable for any material liabilities or obligations except as set forth on the face of the balance sheet contained in the Unaudited Financial Statements or the footnotes to the Audited Financial Statements or otherwise disclosed in the Company's SEC filings. (g) Taxes. The Company has filed in a timely manner any federal, state, local and foreign tax returns, reports and filings (collectively, "Returns"), including income, franchise, property and other taxes, and has paid or accrued the appropriate amounts reflected on such Returns heretofore required to be filed. Except as set forth on -8- Schedule 2(g), none of the Returns have been audited or challenged, nor has the Company received any notice of challenge nor to the Company's knowledge have any of the amounts or other data included in the Returns been challenged or reviewed by any governmental authority. (h) Absence of Certain Events. Since the most recent filing by the Company with the SEC, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, results of operations or prospects of the Company. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. The Company owns or possesses adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. None of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or are expected to expire or terminate within two years from the date of this Agreement. The Company does not have any knowledge of any infringement by the Company of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. (i) No Liabilities. The Company does not have any material obligation or liability, contingent or otherwise, except as disclosed in its most recent 10-K and other filings with the SEC since the filing of its most recent 10-K, or as incurred in the ordinary course of business, consistent with past practices. (j) Properties and Assets; Etc. (i) Except as disclosed in the Company's filings with the SEC, the Company has good and marketable title to its properties and assets shown in the Financial Statements to be owned by the Company, and has valid leasehold interests to the properties and assets shown in the Financial Statements to be leased by the Company, in each case subject to no Encumbrances. -9- (ii) There are no material contracts ("Material Contracts") of the Company other than as disclosed in the Company's filings with the SEC. Each Material Contract is a legal and valid agreement binding upon the Company and, to the Company's knowledge, is in full force and effect. To the Company's knowledge, there is no material breach or default by any party thereunder. (iii) The Company has and maintains adequate and sufficient insurance, including liability, casualty and products liability insurance, covering risks associated with its business, properties and assets, including insurance that is customary for companies similarly situated. (iv) The Company, its business and properties and assets are in compliance in all material respects with all applicable laws and regulations, including without limitation, those relating to (i) health, safety and employee relations, (ii) environmental matters, including the discharge of any hazardous or potentially hazardous materials into the environment and (iii) the development, commercialization and sale of pharmaceutical and biotechnology products, including all applicable regulations of the U.S. Food and Drug Administration and comparable applicable foreign regulatory authorities. (k) Legal Proceedings, etc. There is no legal, administrative, arbitration or other action or proceeding or governmental or investigation pending, or to the Company's knowledge, threatened against the Company, or any director, officer or employee of the Company in their capacities as such that (i) challenges the validity or performance of this Agreement or the other Transaction Documents or (ii) except as disclosed in the Company's filings with the SEC could reasonably be expected to have a Company Material Adverse Effect. The Company is not in violation of or default under, any material laws, judgments, injunctions, orders or decrees known to it of any court, governmental department, commission, agency, instrumentality or arbitrator applicable to its business, which violation or default would be required to be disclosed in the Company's filings with the SEC, other than any violation or default which, individually or in the aggregate, would not have a Company Material Adverse Effect. (l) Disclosure. The representations and warranties set forth herein and in the other Transaction Documents, when viewed collectively, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained herein not misleading in light of the circumstances in which they were made. (m) Brokers or Finders. There have been no investment bankers, brokers or finders used by the Company in connection with the -10- transactions contemplated by the Transaction Documents to whom EIS will have any liability in respect thereof and there are no persons or entities that are entitled to a fee or compensation in respect thereof for which EIS will have any liability. (n) SEC Filings. Since February 12, 1999, the Company has timely filed with the Securities and Exchange Commission (the "SEC") all forms, reports, schedules, statements, exhibits and other documents (collectively, the "SEC Filings") required to be filed by the Company on or before the date hereof. At the time filed, the SEC Filings, including without limitation, any financial statements, exhibits and schedules included therein or documents incorporated therein by reference (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) complied in all material respects with the applicable requirements of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be. SECTION 3. Representation and Warranties of EIS. EIS hereby represents and warrants to the Company, as of the date hereof, as follows: (a) Organization. EIS is an exempted company duly organized, validly existing and in good standing under the laws of Bermuda and has all requisite corporate power and authority to own and lease its properties, to carry on its business as presently conducted and as proposed to be conducted and to consummate the transactions contemplated hereby. EIS is duly qualified as a foreign corporation and in good standing to do business in each jurisdiction in which the nature of the business conducted or the property owned by it requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, assets, liabilities (contingent or otherwise), operations, condition (financial or otherwise), or prospects of EIS (an "EIS Material Adverse Effect"). (b) Authorization of Transaction Documents. EIS has full corporate power and authority to execute and deliver this Agreement and each of the other Transaction Documents to which it is a party, and to perform its obligations hereunder and thereunder. The execution, delivery, and performance by EIS of this Agreement and each other Transaction Document to which it is a party (including the purchase and acceptance of the Securities) have been duly authorized by all requisite corporate action by EIS and, when executed and delivered by EIS, this Agreement and each of the other Transaction Documents to which it is a party will be the valid and binding obligations of EIS enforceable against it in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. -11- (c) No Violation. The execution, delivery and performance by EIS of this Agreement and each other Transaction Document to which it is a party (including the purchase and acceptance of the Securities) and compliance with provisions hereof and thereof by EIS will not violate conflict with or constitute or result in a breach of or default under (or an event which with notice or passage of time or both would constitute a default) or give rise to any right of termination, cancellation or acceleration under (i) the charter or bylaws of EIS, (ii) applicable law, statute, rule or regulation, or any ruling, writ, injunction, order, judgment or decree of any court, arbitrator, administrative agency or other governmental body applicable to EIS or any of its properties or assets or (iii) any material contract to which EIS is a party, except, in each case, where such violation, breach, default, termination, cancellation or acceleration would not, individually or in the aggregate, have an EIS Material Adverse Effect. (d) Approvals. Except for consents which may be required under the Mergers and Takeovers (Control) Acts 1978-1996 (Ireland), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and any other similar law and regulation, no material permit, authorization, consent, approval or order of or by, or any notification of or filing with, any person or entity (governmental or otherwise) is required in connection with the execution, delivery or performance of this Agreement by EIS or the other Transaction Documents to which it is a party. (e) Investment Representations. (i) EIS is sophisticated in transactions of this type and capable of evaluating the merits and risks of the transactions described herein and in the other Transaction Documents to which it is a party, and has the capacity to protect its own interests. EIS has not been formed solely for the purpose of entering into the transactions described herein and therein and is acquiring the Securities (and the Underlying Shares) for investment for its own account, not as a nominee or agent, and not with the view to, or for resale, distribution or fractionalization thereof, in whole or in part, and no other person has a direct or indirect interest, beneficial or otherwise in the Securities (or the Underlying Shares); provided, however, that EIS shall be permitted to convert or exchange such Securities in accordance with their terms. (ii) EIS has not and does not intend to enter into any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or pledge the Securities (or the Underlying Shares). (iii) EIS acknowledges its understanding that the private placement and sale of the Securities (and the Underlying Shares) is exempt from registration under the -12- Securities Act. In furtherance thereof, EIS represents and warrants that it is an "accredited investor" as that term is defined in the regulations under the Securities Act, has the financial ability to bear the economic risk of its investment, has adequate means for providing for its current needs and personal contingencies and has no need for liquidity with respect to its investment in the Company. (iv) EIS agrees that it shall not sell or otherwise transfer any of the Securities (or the Underlying Shares) without registration under the Securities Act or pursuant to an opinion of counsel reasonably satisfactory to the Company that an exemption from registration is available, and fully understands and agrees that it must bear the total economic risk of its purchase for an indefinite period of time because, among other reasons, none of the Securities (or the Underlying Shares) have been registered under the Securities Act or under the securities laws of any applicable state or other jurisdiction and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless subsequently registered under the Securities Act and under the applicable securities laws of such states or jurisdictions or an exemption from such registration is available. EIS understands that the Company is under no obligation to register the Securities (or the Underlying Shares) on its behalf with the exception of certain registration rights with respect to certain of the Securities (and the Underlying Shares), as provided in the Company Registration Rights Agreement. EIS understands the lack of liquidity and restrictions on transfer of the Securities (and the Underlying Shares) and that this investment is suitable only for a person or entity of adequate financial means that has no need for liquidity of this investment and that can afford a total loss of its investment. (f) Legal Proceedings, etc. There is no legal, administrative, arbitration or other action or proceeding or governmental investigation pending, or to the knowledge of EIS threatened, against EIS that challenges the validity or performance of this Agreement or the other Transaction Documents to which EIS is a party. (g) Brokers or Finders. There have been no investment bankers, brokers or finders used by EIS or its affiliates in connection with the transactions contemplated by the Transaction Documents and no persons or entities are entitled to a fee or compensation in respect thereof. SECTION 4. Covenants of the Parties. (a) Certain Covenants. From and after the Initial Closing Date and until the earlier to occur of the exercise or expiration of the EIS Exchange Right (as such term is defined in Section 5(c) hereof), the Company shall not without the prior written consent of EIS, which consent shall not be -13- unreasonably withheld: (i) sell, transfer, encumber, pledge or otherwise affect, in any respect, the shares of Newco Preferred Shares transferable to EIS upon exercise by EIS of the EIS Exchange Right and (ii) affect, in any respect, the Company's ability to permit EIS to exercise the EIS Exchange Right in full, as provided herein. (b) Fully-diluted Stock Ownership. Notwithstanding any other provision of this Agreement, in the event that EIS shall have determined that at any time they (together with their affiliates, if applicable) hold or have the right to receive Company Common Stock (or securities or rights, options or warrants exercisable, exchangeable or convertible for or into Company Common Stock) representing in the aggregate in excess of [**] of the Company's outstanding "Company" Common Stock on a fully diluted basis, EIS shall have the right to elect to convert all or any part of the Securities into other preferred, non-voting securities of the Company (to be specified by EIS, but having terms no more favorable than the Securities being so converted by EIS) such that EIS and its affiliates will not directly or indirectly own more than [**] of the Company Common Stock for a period of at least two years from the date such election is made. In the event that EIS shall elect such conversion, EIS and its affiliates shall retain the right to transfer all or a portion of such securities (including the Company Common Stock issuable upon conversion thereof) to their respective affiliates. Each of the Company and EIS shall use commercially reasonable efforts to effect such transactions and any required subsequent conversions or adjustments to the securities position of EIS, on a quarterly basis, within 15 business days of the end of EIS's fiscal quarters. Notwithstanding anything to the contrary herein, no transaction contemplated by this Agreement or other Transaction Document shall require the Company to issue any shares of Company Common Stock if such issuance would violate any rule or regulation promulgated by the National Association of Securities Dealers, Inc., including, without limitation, issuing shares without any stockholder approval as required under Rule 4460(i). In the incidence of such an event, the parties will discuss in good faith a mutually satisfactory alternative. (c) Use of Proceeds. The Company shall use the proceeds of the issuance and sale of the Series A Preferred Stock solely to meet its initial capitalization obligations to Newco as described in the JDOA and for no other purpose. (d) Confidentiality; Non-Disclosure. (i) Subject to clause (ii) below, from and after the date hereof, neither the Company nor EIS (nor its affiliates) shall disclose to any person or entity this Agreement or the other Transaction Documents or the contents thereof or the parties thereto, except that such parties may make such disclosure (x) to their directors, officers, employees and advisors, and potential bank creditors and investors, so long as they shall have advised such persons of the obligation of confidentiality herein and for whose breach or default the disclosing party shall be responsible or (y) as required by applicable law, rule, regulation or judicial or administrative process, provided -14- that the disclosing party uses commercially reasonable efforts to obtain an order or ruling protecting the confidentiality of confidential information of the other party contained herein or therein and notifies the other party prior to such disclosure so that such other party may, if it chooses, seek such relief. The parties shall be entitled to seek injunctive or other equitable relief in respect of any breach or threatened breach of the foregoing covenant without the requirement of posting a bond or other collateral. (ii) Without limiting the foregoing, the parties shall agree upon the text of the Company's press release in respect of the transactions, which may be released by the Company subject to the prior consent of Elan, which consent shall not be unreasonably withheld; the Company shall not make any public disclosure of such transactions or the parties hereto other than disclosure that is consistent with, and the substance of which is contained in, such release without the prior consent of Elan, which consent shall not be unreasonably withheld, and in any event, any press release that contains EIS's name or any of its affiliates' names shall require EIS's specific written consent, which consent shall not be unreasonably withheld and which consent may be granted in Elan's discretion for repetitive boilerplate disclosures periodically containing EIS's or one of its affiliates' names. (iii) Notwithstanding any of the foregoing, after reasonable consultation with EIS, the Company may disclose of any facts or any documents that it considers reasonably necessary to comply with securities laws and regulations or any other applicable laws and regulations. (e) Further Assurances. From and after the date hereof, each of the parties hereto agree to do or cause to be done such further acts and things and deliver or cause to be delivered to each other such additional assignments, agreements, powers and instruments, as each may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Transaction Documents. SECTION 5. Certain Rights of EIS. (a) Preemptive Right. In order for EIS to maintain its pro rata interest in the Company, during the period of [**] , EIS shall have the right to participate in any equity financing, or any financing involving securities convertible or exchangeable for equity, consummated by the Company, on the same terms and conditions (other than amount of shares to be purchased) offered to the other proposed investors in such financing, in order for EIS and its affiliates to maintain the pro rata interest in the Company which they had immediately prior to such new financing, based on the number of shares of Company Common Stock owned by EIS and its affiliates, assuming the conversion or exercise of all Securities (other than the Series A Preferred Stock) and the actual number of shares of Company Common Stock outstanding on the date such financing is consummated; provided, however, that such right shall not apply to -15- (i) offerings under any employee benefit plan, as defined in Rule 405 of Regulation C of the Securities Act of 1933; (ii) asset or company acquisitions paid for in stock; (iii) any joint venture or partnering arrangements with a Strategic Investor (as defined in the JDOA); (iv) a Prior Financing Commitment (as defined in paragraph (d)); or (v) an underwritten or agented public offering. Such right shall be exercised by EIS within 10 days of receipt of notice of such financing from the Company, which notice shall be provided by the Company at least 15 days prior to such financing. Newco shall grant to each of EIS and Generex a pre-emptive right that will terminate upon an initial public offering by Newco, to participate in an equity, debt, warrant or convertible financing contemplated by Newco so to maintain its pro rata interest in Newco. (b) Company Board of Directors. For so long as EIS or its affiliates, directly or indirectly, collectively own at least 1.0% of the issued and outstanding shares of Company Common Stock (or securities convertible, exchangeable or exercisable for or into the Company Common Stock which, with such owned Company Common Stock represents at least 5.0% ownership, assuming the exercise, conversion or exchange thereof by EIS and its affiliates but not of any other Company Common Stock equivalents), EIS shall be entitled to nominate one director (the "EIS Director") for election to the Company's board of directors. The EIS Director shall not have more than 15.0% of the votes on the Company's board of directors, irrespective of the actual number of directors thereon. In connection with the foregoing, the Company will take all necessary and/or appropriate steps to effect such appointment, such as including the designated EIS Director as part of the management recommended slate of directors presented at any regular or special meeting of the stockholders of the Company at which directors of the Company are to be elected. Prior to such election, the designated EIS Director shall be entitled to be an observer at the meetings of the Company's board of directors. EIS shall inform the Company of its nominee for director within ten (10) days after being notified of the record date for any meeting of the Company's shareholders, or of the date for any meeting of the board of directors of the Company at which the Company proposes to effect the appointment of the EIS director. (c) Conversion and Exchange Rights. The Company acknowledges that the Certificate of Designations sets forth certain rights of the holders of shares of Series A Preferred Stock to convert such shares of Series A Preferred Stock into newly issued shares of Company Common Stock, or to exchange such shares of Series A Preferred Stock (or shares of Company Common Stock into which such shares of Series A Preferred Stock were converted under certain specified circumstances) for certain shares of Newco Shares (the "EIS Exchange Right"), and agrees that it will not take any action which would impair such rights other than as otherwise permitted by the provisions thereof. In the event that EIS shall exercise the EIS Exchange Right, EIS shall cause to be paid to the Company, within 30 days of such exercise, an amount equal to 30.1% of the aggregate amount of the Development Funding through -16- the date of such exercise provided to Newco (by or on behalf of the Company and EIS and their respective affiliates and subsidiaries) from and after the Initial Closing Date and prior to such exercise (plus interest on the amount so funded, from the date of the pertinent funding, at the interest rate of 10% per annum compounded semi-annually). In the event of a Required Conversion (as defined in the Certificate of Designations), the Common Stock delivered upon such conversion shall have the benefit of the EIS Exchange Right identical to that with respect to the Series A Preferred Stock so converted and shall be evidenced by a security substantially in the form of Exhibit F. (d) Antidilution. If the Company shall issue and sell any shares of Company Common Stock (or securities exchangeable, exercisable or convertible for or into Company Common Stock), at an effective price per share of Company Common Stock less than the purchase price per share for Company Common Stock paid at the Initial Closing (other than shares issued pursuant to outstanding options, warrants, convertible securities or contractual commitments or arrangements outstanding on the Closing Date and listed on Schedule 5(d) ("Prior Financing Commitments") and other than shares issued pursuant to an employee benefit plan as defined in Rule 405 of Regulation C of the Securities Act of 1933, as amended), then, in such event, within five business days after such subsequent issuance and sale, the Company shall issue to EIS additional shares of Company Common Stock so that EIS's weighted-average effective price per share is adjusted in accordance with the methodology set forth on Annex I. The preceding anti-dilution provisions shall terminate upon the earlier of (i) 60 days following the registration with the SEC of the shares of Company Common Stock purchased by EIS hereunder and (ii) fourteen months after the Initial Closing Date. SECTION 6. Pledge of Newco Shares. In order to secure the Company's obligations pursuant to the EIS Exchange Right, the Company hereby pledges, assigns and sets over to EIS, all of the Company's right, title and interest in and to all shares of Newco Shares deliverable by the Company upon exercise of the EIS Exchange Right (including stock distributions and dividends thereon) for such period of time as the EIS Exchange Right shall be exercisable. The the Company shall cause to be delivered to EIS all of the certificates together with duly executed stock power in favor of EIS evidencing such shares, and take all other necessary, appropriate and customary actions in connection therewith reasonably requested by EIS. Upon exercise of the EIS Exchange Right, EIS shall be entitled to keep and retain such share certificates, which shall then be owned by EIS in accordance with the terms thereof. Until EIS exercises the EIS Exchange Right, the Company shall retain all rights in and to the pledged Newco Shares (including without limitation all voting, dividend, liquidation and other rights), subject only to this pledge and the JDOA. -17- SECTION 7. Survival and Indemnification. (a) Survival. For the purposes of this Section, the representations and warranties of the Company, EIS and Elan contained herein shall survive for a period of 24 months from and after the date hereof. (b) Indemnification. In addition to all rights and remedies available to the parties hereto at law or in equity, the Company (in such capacity, "Indemnifying Party") shall indemnify EIS, its stockholders, officers, directors and assigns, its affiliates, and its affiliates' stockholders, officers, directors, employees, agents, representatives, successors and assigns (collectively, the "Indemnified Person"), and save and hold each Indemnified Person harmless from and against and pay on behalf of or reimburse each such Indemnified Person, as and when incurred, for any and all loss, liability, demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty, fine or expense, including interest, penalties, reasonable attorneys' fees and expenses and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "Losses"), whether or not such Losses arise from the claims of any third party or are directly incurred by the Indemnified Person, that any such Indemnified Person may suffer, sustain incur or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any misrepresentation or breach of warranty on the part of the Indemnifying Party in the case of the Company under Section 2 of this Agreement or in the case of EIS under Section 3 of this Agreement or any of the other Transaction Documents (as limited thereby) (it being understood that the Company shall not be responsible for any such misrepresentation or breach of warranty by Newco); or (ii) any nonfulfillment, default or breach of any covenant or agreement on the part of the Indemnifying Party under Section 4 of this Agreement. (c) Maximum Recovery. Notwithstanding anything in this Agreement to the contrary, in no event shall the Indemnifying Parties be liable for indemnification under this Section 7 in an amount in excess of [**] . No Indemnified Person shall assert any such claim unless Losses in respect thereof incurred by any Indemnified Person, when aggregated with all previous Losses hereunder, equal or exceed [**] , but at such time that an Indemnified Person is entitled to assert a claim, such claim shall include all Losses covered by this Section 7. (d) Exception. Notwithstanding the foregoing, upon judicial determination that is final and no longer appealable, that the act or omission giving rise to the indemnification set forth above resulted primarily out of or was based primarily upon the Indemnified Person's negligence (unless such Indemnified Person's negligence was based upon the Indemnified Person's reliance in good faith upon any of the representations, warranties, covenants or promises made by the Indemnifying Party herein) the Indemnifying Party shall not be responsible for any Losses sought to be indemnified in connection therewith, and -18- the Indemnifying Party shall be entitled to recover from the Indemnified Person all amounts previously paid in full or partial satisfaction of such indemnity, together with all costs and expenses (including reasonable attorneys fees) of the Indemnifying Party reasonably incurred in connection with the Indemnified Persons claim for indemnity, together with interest at the rate per annum publicly announced by Morgan Guaranty Trust Company as its prime rate from the time of payment of such amounts to the Indemnified Person until repayment to the Indemnifying Party. (e) Investigation. All indemnification rights hereunder shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, irrespective of any investigation, inquiry or examination made for or on behalf of, or any knowledge of the Indemnified Person or the acceptance of any certificate or opinion, except where the Indemnified Person has acknowledged in writing knowledge of any fact prior to Closing. (f) Contribution. If the indemnity provided for in this Section 7 shall be, in whole or in part, unavailable to any Indemnified Person, due to Section 7(b) being declared unenforceable by a court of competent jurisdiction based upon reasons of public policy, so that Section 7(b) shall be insufficient to hold each such Indemnified Person harmless from Losses which would otherwise be indemnified hereunder, then the Indemnifying Party and the Indemnified Person shall each contribute to the amount paid or payable for such Loss in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Person on the other, but also the relative fault of the Indemnifying Party and be in addition to any liability that the Indemnifying Party may otherwise have. The indemnity, contribution and expense reimbursement obligations that the Indemnifying Party has under this Section 7 shall survive the expiration of the Transaction Documents. The parties hereto further agree that the indemnification and reimbursement commitments set forth in this Agreement shall apply whether or not the Indemnified Person is a party to any lawsuit, claims or other proceedings brought by a third party or any Loss is incurred directly by the Indemnified Person. (g) Limitation. This Section 7 is not intended to limit the rights or remedies otherwise available to any party hereto with respect to this Agreement or the Transaction Documents. SECTION 8. Notices. All notices, demands and requests of any kind to be delivered to any party in connection with this Agreement shall be in writing and shall be deemed to have been duly given if personally or hand delivered or if sent by an internationally-recognized overnight delivery courier or by registered or certified mail, return receipt requested and postage prepaid, or by facsimile transmission addressed as follows: -19- (i) if to the Company, to: Generex Biotechnology Corporation 33 Harbour Sq. Suite 202 Toronto, Ontario, Canada M5J 2G2 Attention: Chief Executive Officer Facsimile: with a copy to: Eckert Seamans Cherin & Mellott LLC 1515 Market Street 9th Floor Philadelphia, PA 19102 Attention: John G. Chou Facsimile: (215) 851-8383 (ii) If to EIS, to: Elan International Services, Ltd. 102 St. James Court Flatts, Smiths Parish Bermuda FL 04 Attention: Chief Executive Officer Facsimile: (441) 292-2224 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: William M. Hartnett Facsimile: (212) 269-5420 or to such other address as the party to whom notice is to be given may have furnished to the other party hereto in writing in accordance with provisions of this Section 8. Any such notice or communication shall be deemed to have been effectively given (i) in the case of personal or hand delivery, on the date of such delivery, (ii) in the case of an internationally-recognized overnight delivery courier, on the second business day after the date when sent, (iii) in the case of mailing, on the fifth business day following that day on which the -20- piece of mail containing such communication is posted and (iv) in the case of facsimile transmission, the date of telephone confirmation of receipt. SECTION 9. Entire Agreement. This Agreement and the other Transaction Documents contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings among the parties with respect thereto. SECTION 10. Amendments and Waiver. This Agreement may not be modified or amended, or any of the provisions hereof waived, except by written agreement of the Company and EIS dated after the date hereof. SECTION 11. Counterparts and Facsimile. The Transaction Documents may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. Each of the Transaction Documents may be signed and delivered to the other party by facsimile transmission; such transmission shall be deemed a valid signature. SECTION 12. Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of the Agreement. SECTION 13. Governing Law; Disputes. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of laws. Any dispute under the Transaction Documents that is not settled by mutual consent shall be finally adjudicated by any federal or state court sitting in the City, County and State of New York, and each party consents to the exclusive jurisdiction of such courts (or any appellate court therefrom) over any such dispute. SECTION 14. Expenses. Each of the parties shall be responsible for its own costs and expenses incurred in connection with the transactions contemplated hereby and by the other Transaction Documents. SECTION 15. Exhibits and Schedules. The exhibits to and schedules delivered by or on behalf of any party in connection with this Agreement are an integral part of this Agreement, and any statements contained in such schedules shall be deemed to be representations and warranties under this Agreement. SECTION 16. Assignments and Transfers. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. All or any part of this Agreement, the Securities and the Underlying Shares may be assigned or transferred by EIS and its permitted assigns and transferees to their -21- respective affiliates and subsidiaries, as well as any special purpose financing or similar vehicle established by EIS. Other than as set forth above, no party shall assign or transfer all or any part of this Agreement, the Securities and the Underlying Shares, or any interest therein, without the prior written consent of the other party. SECTION 17. Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be in any way affected or impaired thereby. [Signature page follows] IN WITNESS WHEREOF, each of the undersigned has duly executed this Agreement as of the date first written above. GENEREX BIOTECHNOLOGY CORPORATION By: /s/ E. Mark Perri -------------------------------------------- Name: E. Mark Perri Title: Chairman ELAN INTERNATIONAL SERVICES, LTD. By: /s/ Kevin Insley -------------------------------------------- Name: Kevin Insley Title: President and Chief Financial Officer Annex I Method of Calculating "Weighted Average" Anti-Dilution Provisions Upon issuance of shares of Generex Common Stock at a price below EIS' purchase price, after giving effect to any prior adjustment hereunder, the "weighted average" price per share of Generex Common Stock shall be determined as follows: C' = CO + PN ------- O+N Where: C' = The new effective price per share C = The old effective price per share O = The number of shares of Generex Common Stock outstanding prior to the new issuance (including all shares issuable in connection with options, warrants, and other convertible securities that are exercisable within 60 days of this calculation) P = The price per share of Generex Common Stock sold in new issuance N = The number of shares of Generex Common Stock sold in the new issuance The number of additional shares to be issued to EIS following the determination of the new effective price per share is as follows: S'= A - S - C' Where: S' = The number of additional shares to be issued to EIS S = The number of shares initially issued to EIS (as adjusted mechanically for any stock splits or similar transactions subsequent to the issuance of the shares to EIS) A = The dollar amount of the initial investment by EIS EX-4.2 3 0003.txt EXHIBIT 4.2 GENEREX BIOTECHNOLOGY CORPORATION REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of January 16, 2001 by and among Generex Biotechnology Corporation, a Delaware corporation (the "Company"), and Elan International Services, Ltd., a Bermuda exempted limited liability company ("EIS"). R E C I T A L S: A. Pursuant to a Securities Purchase Agreement dated as of the date hereof by and among the Company, EIS (the "Purchase Agreement"), EIS has acquired, or will acquire in the future, (a) certain shares of Series A Preferred Stock of the Company (the "Series A Preferred Stock") convertible into shares of common stock of the Company (the "Common Stock"), (b) certain shares of Common Stock and (c) warrants (the "Warrants") to purchase certain shares of Common Stock. The Series A Preferred Stock, the Common Stock and the Warrants collectively are referred to herein as the "Securities". B. The execution of the Purchase Agreement has occurred on the date hereof and it is a condition to the closing of the transactions contemplated thereby that the parties execute and deliver this Agreement. C. The parties desire to set forth herein their agreement on the terms and subject to the conditions set forth herein related to the granting of certain registration rights to the Holders (as defined below) relating to the Common Stock held and the Common Stock issuable upon conversion or exercise of the Securities by such Holders. A G R E E M E N T: The parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the U.S. Securities and Exchange Commission. "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Holders" or "Holders of Registrable Securities" shall mean EIS, EPIL and any Person who shall have acquired Registrable Securities from EIS as permitted herein and in the Purchase Agreement, either individually or jointly, as the case may be, in a transaction pursuant to which registration rights are transferred pursuant to Section 10 hereof. "Person" shall mean an individual, a partnership, a company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental or quasi-governmental entity, or any department, agency or political subdivision thereof. "Registrable Securities" means (i) any shares of Common Stock subscribed for pursuant to the Purchase Agreement; (ii) any shares of Common Stock issued or issuable upon conversion or exercise of the Securities; and (iii) any shares of Common Stock issued or issuable in respect of the securities referred to in clause (i) and (ii) above, until, in the case of any such security, it is effectively registered under the Securities Act and disposed of in accordance with the registration statement covering it; excluding in all cases, however, any Registrable Securities that may be sold under Rule 144(k) promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission, and Registrable Securities sold by a Person in a transaction (including a transaction pursuant to a registration statement under this Agreement and a transaction pursuant to Rule 144 promulgated under the Securities Act) in which registration rights are not transferred pursuant to Section 10 hereof. Whenever a number or percentage of Registrable Securities is to be determined pursuant to this Agreement, each then outstanding Security that is convertible into or exercisable for shares of Common Stock will be deemed to be equal to the number of shares of Common Stock for which such Security is then so convertible or exercisable. The terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act. "Registration Expenses" shall mean all expenses, other than Selling Expenses, incurred by the Company in complying with Sections 2 or 3 hereof, including without limitation, all registration, qualification and filing fees, exchange listing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration. "Securities Act" shall mean the Securities Act of 1933, as amended. "Selling Expenses" shall mean all underwriting discounts, selling commissions and non-accountable expense allowances of underwriters and stock transfer taxes and the costs, fees and expenses of any accountants, attorneys or other experts retained by the Holders. -2- 2. Demand Registrations. (a) Requests for Registration. Any Holder or Holders who collectively hold Registrable Securities representing at least 5% of the Registrable Securities then outstanding shall have the right (subject to the limitations below) to request registration under the Securities Act of all or part of their Registrable Securities on Form S-3 (or any successor form to Form S-3, or any similar short-form registration statement) (each, a "Demand Registration"). The request for the Demand Registration shall specify the approximate number of Registrable Securities requested to be registered, which must have a minimum expected aggregate offering price to the public of at least U.S.$1,000,000. Within 10 days after receipt of any such request, the Company will give written notice of such requested registration to all other Holders of Registrable Securities. The Company shall include such other Holders' Registrable Securities in such offering if they have responded affirmatively within 10 days after the receipt of the Company's notice. The Holders shall be permitted one Demand Registration hereunder; provided, however, that such right shall not apply to (i) the registration of shares relating to the Company's previously announced equity drawdown financing facility expected to be filed in the first calendar quarter of 2001, (ii) any registration statements on forms S-4 or S-8 or any successor forms and (iii) any registration statements that have been filed as of the date hereof and have not yet been declared effective. A registration will not count as a permitted Demand Registration until it has become effective (unless such Demand Registration has not become effective due solely to the fault of the Holders requesting such registration, including a request by such Holders that such registration be withdrawn). (b) Priority on Demand Registrations. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering, exceeds the number of Registrable Securities and other securities, if any, which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration: (i) first, the Registrable Securities requested to be included in such registration by the Holders (or, if necessary, such Registrable Securities pro rata among the Holders thereof based upon the number of Registrable Securities owned by each such Holder); and (ii) thereafter, other securities requested to be included in such registration, as determined by the Company. (c) Restrictions on Demand Registration. The Company may postpone or suspend for up to three months in any 12-month period the filing or the effectiveness of a registration statement for a Demand Registration if the -3- Company determines in good faith that such Demand Registration (i) would reasonably be expected to have a material adverse effect on (x) any proposal or plan by the Company to engage in any financing, acquisition or disposition of assets (other than in the ordinary course of business) or (y) any merger, consolidation, tender offer or similar transaction or (ii) would require disclosure of any information that the board of directors of the Company determines in good faith the disclosure of which would be detrimental to the Company; in addition, the Company may postpone or suspend the filing or effectiveness of a registration statement for an additional three months following the consummation of any merger between the Company and another publicly traded entity; provided, however, that in such event, the Holders initially requesting such Demand Registration will be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration will not count as a permitted Demand Registration hereunder and the Company will pay any Registration Expenses in connection with such registration. (d) Selection of Underwriters. The Holders will have the right to select the investment banker(s) and manager(s) to administer an offering pursuant to the Demand Registration, subject to the Company's prior written approval, which will not be unreasonably withheld, delayed or conditioned. (e) Other Registration Rights. (i) Except as provided in this Agreement, so long as any Holder or Holders own at least 10% of the Registrable Securities originally issued or available for issuance, the Company will not grant to any Persons the right to require the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, which conflicts with the rights granted to the Holders hereunder, without the prior written consent of the Holders of at least 50% of the Registrable Securities. The granting of demand registration rights, with or without provisions similar to those contained in Section 5 of this Agreement, shall not be deemed, in and of itself, to conflict with the rights granted to the Holders hereunder. The granting of piggyback rights which may have the right to participate pari passu with the Holders, shall not be deemed, in and of itself, to be inconsistent with the rights of the Holders. (ii) Notwithstanding anything to the contrary herein, EIS agrees that the Company will not have any obligation to register shares owned by Elan or maintain any prior registration of such shares (pursuant to demand or piggyback rights) at any time that, in the written opinion of counsel to the Company, such shares may be sold by EIS under Securities Act Rule 144(k). 3. Piggyback Registrations. (a) Right to Piggyback. If at any time the Company shall propose to register shares of Common Stock under the Securities Act (other than in a registration statement on Form S-3 relating to sales of securities to -4- participants in a Company dividend reinvestment plan, or Form S-4 or S-8 or any successor form or in connection with an acquisition or exchange offer or an offering of securities solely to the existing shareholders or employees of the Company), the Company (i) will give prompt written notice to all Holders of Registrable Securities of its intention to effect such a registration and (ii) subject to Section 3(b) and the other terms of this Agreement, will include in such registration all Registrable Securities which are permitted under applicable securities laws to be included in the form of registration statement selected by the Company and with respect to which the Company has received written requests for inclusion therein within 20 days after the receipt of the Company's notice (each, a "Piggyback Registration"). The Holders will be permitted to withdraw all or any part of the Registrable Securities from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration. The rights granted to the Holders in this Section 3 do not apply to (i) the registration of shares relating to the Company's previously announced equity drawdown financing facility expected to be filed in the first calendar quarter of 2001, and (ii) any registration statements that have been filed as of the date hereof and have not yet been declared effective. (b) Priority on Piggyback Registrations. If a Piggyback Registration is to be an underwritten offering, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration: (i) first, the securities the Company proposes to sell; (ii) second, securities held by holders other than the Holders of Registrable Securities; (iii) third, the Registrable Securities requested to be included in such registration by the Holders and any securities requested to be included in such registration by any other Person other than Persons having a lower priority of registration than the Holders, pro rata among the Holders of such Registrable Securities and such other Persons, on the basis of the number of securities requested to be included in such registration by each of such Holders and such other Persons; and (iv) thereafter, other securities requested to be included in such registration, as determined by the Company. The Holders of any Registrable Securities included in such an underwritten offering will execute an underwriting agreement in customary form and in form and substance satisfactory to the managing underwriters. -5- (c) Right to Terminate Registration. If at any time after giving written notice of its intention to register any of its securities as set forth in Section 3(a) and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company may, at its election, give written notice of such determination to each Holder of Registrable Securities and thereupon be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith as provided herein). (d) Selection of Underwriters. The Company will have the right to select the investment banker(s) and manager(s) to administer an offering pursuant to a Piggyback Registration. 4. Expenses of Registration. Except as otherwise provided herein or as may otherwise be prohibited by applicable law, all Registration Expenses incurred in connection with all registrations pursuant to Sections 2 and 3 hereof shall be borne by the Company. All Selling Expenses relating to securities registered on behalf of the Holders of Registrable Securities shall be borne by such Holders. 5. Holdback Agreements. (a) The Company agrees not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 10-day period prior to, and during the 90-day period following, the effective date of any underwritten Demand Registration (except as part of such underwritten registration or pursuant to registration statements on Form S-4 or Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree. This paragraph shall not apply to the distribution under any registration statement the Company has filed before receiving the request for the Demand Registration. (b) Each Holder agrees, if requested by the managing underwriters in an underwritten offering of Common Stock or securities convertible for Common Stock of the Company, not to effect any offer, sale, distribution or transfer, except pursuant to Rule 144 (or any similar provision then effect) under the Securities Act (except as part of such underwritten registration), during the 10-day period prior to, and during the 180-day period in the case of the Company's initial public offering or a 90-day period in the case of any other offering of Common Stock (or, in each case, such shorter period as may be agreed to in writing by the Company and the Holders of at least 50% of the Registrable Securities) following, the effective date of such Registration Statement; provided, however, that no Holder shall be required to enter into more than one such agreement in any 12-month period. 6 6. Registration Procedures. Whenever the Holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use all reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will as expeditiously as possible: (a) subject to Section 2(c) hereof, prepare and file with the Commission a registration statement on any appropriate form for which the Company qualifies with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will (i) furnish to the counsel selected by the Holders copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel, and (ii) notify each Holder of Registrable Securities covered by such registration of any stop order issued or threatened by the Commission); (b) subject to Section 2(c) hereof, prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be reasonably necessary to keep such registration statement effective for a period equal to the shorter of (i) six months and (ii) the time by which all securities covered by such registration statement have been sold, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (d) use all reasonable efforts to register or qualify such Registrable Securities under the securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6(d), (ii) subject itself to taxation in any -7- jurisdiction or (iii) take any action that would subject it to general service of process in any such jurisdiction); (e) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; provided, however, that the Company shall not be required to amend the registration statement or supplement the Prospectus for a period of up to six months if the board of directors determines in good faith that to do so would reasonably be expected to have a material adverse effect on any proposal or plan by the Company to engage in any financing, acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or similar transaction or would require the disclosure of any information that the board of directors determines in good faith the disclosure of which would be detrimental to the Company, it being understood that the period for which the Company is obligated to keep the Registration Statement effective shall be extended for a number of days equal to the number of days the Company delays amendments or supplements pursuant to this provision. Upon receipt of any notice pursuant to this Section 6(e), the Holders shall suspend all offers and sales of securities of the Company and all use of any prospectus until advised by the Company that offers and sales may resume, and shall keep confidential the fact and content of any notice given by the Company pursuant to this Section 6(e); (f) cause all such Registrable Securities to be listed on each securities exchange, if any, on which similar securities issued by the Company are then listed; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the Holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (i) make available for inspection by a representative of the Holders of Registrable Securities included in the registration statement, any underwriter participating in any disposition pursuant to -8- such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (j) otherwise use its reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any shares of Common Stock included in such registration statement for sale in any jurisdiction, use all reasonable efforts promptly to obtain the withdrawal of such order; and (l) if the registration is an underwritten offering, use all reasonable efforts to obtain a so-called "cold comfort" letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters. 7. Obligations of Holders. Whenever the Holders of Registrable Securities sell any Registrable Securities pursuant to a Demand Registration or a Piggyback Registration, such Holders shall be obligated to comply with the applicable provisions of the Securities Act, including the prospectus delivery requirements thereunder, and any applicable state securities or blue sky laws. In addition, each Holder of Registrable Securities will be deemed to have agreed by virtue of its acquisition of such Registrable Securities that, upon receipt of any notice described in Section 6(e), such holder will forthwith discontinue disposition of such Registrable Securities covered by such registration statement or prospectus until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6(e), or until it is advised in writing by the Company that the use of the applicable prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such prospectus. -9- 8. Indemnification. (a) The Company agrees to indemnify, to the fullest extent permitted by applicable law, each Holder of Registrable Securities, its officers and directors and each Person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities, expenses or any amounts paid in settlement of any litigation, investigation or proceeding commenced or threatened (collectively, "Claims") to which each such indemnified party may become subject under the Securities Act insofar as such Claim arose out of (i) any untrue or alleged untrue statement of material fact contained, on the effective date thereof, in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein, by such Holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same or by such Holder's failure to comply with applicable securities laws or this Agreement. In connection with an underwritten offering, the Company will indemnify the underwriters, their officers and directors and each Person who controls the underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders of Registrable Securities. (b) In connection with any registration statements in which a Holder of Registrable Securities is participating, each such Holder will, to the fullest extent permitted by applicable law, indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any and all Claims to which each such indemnified party may become subject under the Securities Act insofar as such Claim arose out of (i) any untrue or alleged untrue statement of material fact contained, on the effective date thereof, in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any failure to comply with applicable securities laws or this Agreement; provided that with respect to a Claim arising pursuant to clause (i) or (ii) above, the material misstatement or omission is contained in the information such Holder provided to the Company pursuant to Section 11 hereof; provided, further, that the obligation to indemnify will be individual to each Holder and will be limited to the amount of proceeds received by such Holder from the sale of Registrable Securities pursuant to such registration statement. (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (but the failure to provide such notice shall not release the indemnifying party of its obligation under paragraphs (a) and -10- (b), unless and then only to the extent that, the indemnifying party has been prejudiced by such failure to provide such notice) and (ii) unless in such indemnified party's reasonable judgment, based on written advice of counsel to the Company, a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party, based on written advice of counsel, a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim; provided, however, that in no event shall the Company be obligated to pay the fees and expenses of more than two (2) counsel for all indemnified parties. (d) The indemnifying party shall not be liable to indemnify an indemnified party for any settlement, or consent to judgment of any such action effected without the indemnifying party's written consent (but such consent will not be unreasonably withheld, delayed or conditioned). Furthermore, the indemnifying party shall not, except with the prior written approval of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to each indemnified party of a release from all liability in respect of such claim or litigation without any payment or consideration provided by each such indemnified party. (e) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under clauses (a) and (b) above in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Company, the underwriters, the sellers of Registrable Securities and any other sellers participating in the registration statement from the sale of shares pursuant to the registered offering of securities for which indemnity is sought but also the relative fault of the Company, the underwriters, the sellers of Registrable Securities and any other sellers participating in the registration statement in connection with the misstatement or omission which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, the underwriters, the sellers of Registrable Securities and any other sellers participating in the registration statement shall be deemed to be based on the relative relationship of the total net proceeds from the offering (before deducting expenses) to the Company, the total underwriting commissions and fees from the offering (before deducting expenses) to the underwriters and the total net proceeds from the offering (before deducting expenses) to the sellers of Registrable Securities and any other sellers participating in the registration statement. The relative fault of the Company, the underwriters, the sellers of Registrable Securities and any other sellers participating in the registration statement shall be determined by reference to, among other things, whether the untrue or alleged -11- untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the sellers of Registrable Securities and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided that in no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (f) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and will survive the transfer of the Registrable Securities. 9. Participation in Underwritten Registrations. No Holder may participate in any registration hereunder which is underwritten unless such Holder (a) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements, which arrangements, in the case of a Demand Registration, approved by the Holder or Holders of more than 50% of the Registrable Securities electing to participate in such Demand Registration, (b) as expeditiously as possible notifies the Company of the occurrence of any event as a result of which any prospectus contains an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (c) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Transfer of Registration Rights. The rights granted to any Holder under this Agreement may be assigned to any permitted transferee of Registrable Securities, in connection with any transfer or assignment of Registrable Securities by a Holder; provided, however, that: (a) such transfer is otherwise effected in accordance with applicable securities laws, (b) such transfer is permitted by the Purchase Agreement, (c) if not already a party hereto, the assignee or transferee agrees in writing prior to such transfer to be bound by the provisions of this Agreement applicable to the transferor and (d) EIS shall act as agent and representative for such Holder for the giving and receiving of notices hereunder. 11. Information by Holder. Each Holder shall furnish to the Company such written information regarding such Holder and any distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance -12- referred to in this Agreement and shall promptly notify the Company of any changes in such information. 12. Exchange Act Compliance. The Company shall comply with all of the reporting requirements of the Exchange Act then applicable to it, if any, and shall comply with all other public information reporting requirements of the Commission which are conditions to the availability of Rule 144 for the sale of the Registrable Securities. The Company shall cooperate with each Holder in supplying such information as may be necessary for such Holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of Rule 144. 13. Termination of Registration Rights. All registration rights and obligations (including, without limitation, under Section 5) under this Agreement shall terminate and be of no further force and effect, as to any particular Holder, at such time as all Registrable Securities held by such Holder are eligible to be sold without compliance with the registration requirements of the Securities Act pursuant to Rule 144(k) promulgated thereunder or have been resold pursuant to a registration statement hereunder. 14. Miscellaneous. (a) No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the Holders of Registrable Securities in this Agreement without the prior written consent of a majority in interest of such Registrable Securities. The granting of demand registration rights, with or without provisions similar to those contained in Section 5 of this Agreement, shall not be deemed, in and of itself, to conflict with the rights granted to the Holders hereunder. The granting of piggyback rights which may have the right to participate pari passu with the Holders, shall not be deemed, in and of itself, to be inconsistent with the rights of the Holders. (b) Remedies. Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement; provided, however, that in no event shall any Holder have the right -13- to enjoin, delay or interfere with any offering of securities by the Company. (c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Holders of at least 50% of the Registrable Securities; provided, however, that without the prior written consent of all the Holders, no such amendment or waiver shall reduce the foregoing percentage required to amend or waive any provision of this Agreement. (d) Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. This Agreement may be transferred by EIS and their permitted assigns and transferees to their respective affiliates and subsidiaries, as well as any special purpose financing or similar vehicle established by EIS, in connection with a transfer of Registrable Securities permitted by the Purchase Agreement. Other than as set forth above, no party shall transfer or assign this Agreement without the prior written consent of the other party, which will not be unreasonably withheld, delayed or conditioned. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of Holders of Registrable Securities are also for the benefit of, and enforceable by, any permitted transferee of Registrable Securities, in accordance with Section 10 hereof. (e) Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be in any way affected or impaired thereby. (f) Counterparts and Facsimile. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. This Agreement may be signed and delivered to the other party by facsimile transmission; such transmission shall be deemed a valid signature. (g) Descriptive Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (h) Governing Law; Disputes. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of laws. Any dispute under this Agreement that is not settled by mutual consent shall be finally adjudicated by any federal or state court sitting in the City, County and State of New York, and each party consents to the exclusive jurisdiction of such courts (or any appellate court therefrom) over any such dispute. -14- (i) Notices. All notices, demands and requests of any kind to be delivered to any party in connection with this Agreement shall be in writing and shall be deemed to have been duly given if personally or hand delivered or if sent by internationally-recognized overnight courier or by registered or certified mail, return receipt requested and postage prepaid, or by facsimile transmission, addressed as follows: (i) if to the Company, to: Generex Biotechnology Corporation 32 Harbour Square Suite 202 Toronto Ontario Canada Attention: Chief Executive Officer Facsimile: (416) 364-9363 with a copy to: Eckert Seamans Cherin Mellott, LLC 1515 Market Street 9th Floor Philadelphia, PA 19102 Attention: John G. Chou Facsimile: (215) 851-8383 (ii) if to EIS, to: Elan International Services, Ltd. 102 St. James Court Flatts, Smiths Parish Bermuda FL 04 Attention: Chief Executive Officer Facsimile: (441) 292-2224 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: William M. Hartnett Facsimile: (212) 269-5420 or to such other address as the party to whom notice is to be given may have furnished to the other party hereto in writing in accordance with provisions of this Section 14(i). Any such notice or communication shall be deemed to have been effectively given (i) in the case of personal or hand delivery, on the date of such delivery, (ii) in the case of an internationally-recognized overnight delivery courier, on the second business day after the date when sent, (iii) in the case of mailing, on the fifth business day following that day on which the piece of mail containing such communication is posted and (iv) in the case of facsimile transmission, on the date of telephone confirmation of receipt. (j) Entire Agreement. This Agreement constitutes the full and entire understanding and agreement of the parties with regard to the subject matter hereof and supersedes all prior agreements and understandings among the parties with respect thereto. [Signature page follows] -15- IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. GENEREX BIOTECHNOLOGY CORPORATION By: /s/ E. Mark Perri ----------------------------------------- Name: E. Mark Perri Title: Chairman ELAN INTERNATIONAL SERVICES, LTD. By: /s/ Kevin Insley ----------------------------------------- Name: Kevin Insley Title: President and Chief Financial Officer EX-4.3 4 0004.txt EXHIBIT 4.3 THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY SECURITIES LAWS OF A STATE OR OTHER JURISDICTION AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF (OTHER THAN TO AN AFFILIATE OR AS OTHERWISE PERMITTED BY THIS WARRANT CERTIFICATE PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL SATISFACTORY TO GENEREX BIOTECHNOLOGY CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. GENEREX BIOTECHNOLOGY CORPORATION WARRANT TO PURCHASE SHARES OF COMMON STOCK THIS CERTIFIES THAT, for value received, Elan International Services, Ltd., a Bermuda exempted limited liability company, or its permitted transferees and successors as provided herein (each, a "Holder"), is entitled to subscribe for and purchase up to 75,000 shares, as adjusted pursuant to Section 4 (the "Shares"), of the fully paid and nonassessable common stock, par value U.S.$.001 per share (the "Common Stock"), of Generex Biotechnology Corporation, a Delaware corporation (the "Company"), at the price per share equal to a 125% premium over the Original Issue Date Base Price (as defined below) (such price, and such other prices that shall result from time to time, from the adjustments specified in Section 4, the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. The "Original Issue Date Base Price" shall mean the average closing price per share of publicly traded shares of Common Stock over the sixty day period immediately preceding the date of this Warrant (the "Closing Date") as reported on the Nasdaq National Market System or a national securities exchange. The Warrant Price shall be equal to $25.15 per share. 1. Term. Subject to the limitations set forth in Sections 3 and 4, the purchase right represented by this Warrant is exercisable, in whole or in part, at any time, and from time to time, from and after the date hereof and until 5:00 p.m. Eastern Standard Time, January 16, 2007. To the extent not exercised at 5:00 p.m. Eastern Standard Time on January 16, 2007, this Warrant shall completely and automatically terminate and expire, and thereafter it shall be of no force or effect. 2. Method of Exercise; Payment; Issuance of New Warrant. (a) The purchase right represented by this Warrant may be exercised by the Holder, in whole or in part and from time to time, by the surrender of this Warrant (with the notice of exercise form attached hereto as Annex A duly executed) at the principal office of the Company and by the payment to the Company of an amount, at the option of the Holder, (i) in cash or other immediately available funds, (ii) by the surrender of this Warrant (or a portion hereof) in accordance with the terms hereof but without payment in cash (a "Cashless Exercise") or (iii) with any combination of (i) and (ii). The number of shares of Common Stock issuable in respect of a Cashless Exercise shall be computed using the following formula: X = Y (A-B) ------- A Where: X = the number of shares of Common Stock to be issued to the Holder in respect of a Cashless Exercise Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled in connection with such Cashless Exercise (at the date of such calculation) A = the Fair Market Value (as defined below) of one share of the Company's Common Stock (at the date of such calculation) B = Warrant Price (as adjusted to the date of such calculation) The "Fair Market Value" of one share of Common Stock shall be determined by the Company's Board of Directors in good faith and certified in a Board resolution (taking into account the most recently or concurrently completed arm's length transaction between the Company and an unaffiliated third party the closing of which occurs within the six months preceding or on the date of such calculation, if any) and shall be reasonably agreed to by the Holder (provided, that in the event the Company and the Holder do not agree on the Fair Market Value, the parties shall jointly appoint an independent third party to determine the Fair Market Value); provided, however, that in the event the Common Stock is traded on a securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value shall be deemed to be the average of the closing sale prices for the Common Stock over the fifteen (15) day trading period (or such shorter period for which closing sale prices are available if the Common Stock commenced trading during such period) ending on the trading day prior to the date of exercise of this Warrant. -2- (b) The persons or entities in whose name(s) any certificate(s) representing Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the Shares represented thereby (and such Shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is properly exercised and full payment for the Shares acquired pursuant to such exercise is made. Upon any exercise of the rights represented by this Warrant, certificates for the Shares purchased shall be delivered to the holder hereof as soon as possible and in any event within 30 days of receipt of such notice and payment, and unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such 30-day period. 3. Stock Fully Paid, Reservation of Shares. All Shares that may be issued upon the exercise of this Warrant will, upon issuance, be duly and validly authorized and issued, fully paid and nonassessable, and will be free from all transfer taxes (except for taxes resulting from the issuance of shares to a person other than the Holder), liens and charges with respect to the issue thereof and assuming payment of the Warrant Price for all Shares so purchased, legally and validly owned by the Holder. During the period within which this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon the exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to the adjustment from time to time upon the occurrence of certain events, as follows: (a) Reclassification, Etc. In case of (i) any reclassification, reorganization, change or conversion of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value) into other shares or securities of the Company, or (ii) any merger or consolidation of the Company with or into another entity (other than a merger or consolidation with another entity in which the Company is the acquiring and the surviving entity and that does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or (iii) any sale of all or substantially all the assets of the Company, then the Company, or such successor or purchasing entity, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant or a supplement hereto (in form and substance reasonably satisfactory to the holder of this Warrant), so that the Holder shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities, receivable upon such reclassification, reorganization, change or conversion by a holder of the number of shares of -3- Common Stock then purchasable under this Warrant. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this Section 4(a) shall similarly attach to successive reclassifications, reorganizations, changes, and conversions. (b) Stock Dividends; Etc. -------------------- (i) If at any time prior to the earlier of the exercise or expiration hereof the Company shall fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or property or rights convertible into, or entitling the holder thereof to receive directly or indirectly, any of the foregoing (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof) or with payment that is less than the lower of (x) the then-Fair Market Value of the Common Stock (including, in the case of Common Stock Equivalents, on an as-converted basis) and (y) the Warrant Price then in effect, then and in each case, this Warrant shall be for, in addition to the number of shares of the Common Stock otherwise deliverable upon exercise of this Warrant, and without adjustment to the Warrant Price, the amount of such additional shares of Common Stock and any Common Stock Equivalents that the holder hereof would have received or become entitled to receive on the same terms and conditions as if such holder had been a holder of record of such Common Stock as shall have been deliverable immediately prior to such record date pursuant to the terms of this Section 4; provided that the upon the exercise, in addition to the Warrant Price, the Holder shall pay any consideration which would have been payable for such Common Stock or Common Stock Equivalents. (ii) If the Company at any time during which this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, (A) in the case of a subdivision, the Warrant Price shall be proportionately decreased and the number of Shares purchasable hereunder shall be proportionately increased, and (B) in the case of a combination, the Warrant Price shall be proportionately increased and the number of Shares purchasable hereunder shall be proportionately decreased. (c) Other Distributions. In the event the Company shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Company or other persons, assets, cash (excluding cash dividends declared out of retained earnings) or options or rights not referred to in the previous subsection (b), then, in each such case for the purpose of this subsection (c), upon exercise of this Warrant, the Holder shall be entitled to a proportionate share of any such distribution as though such -4- Holder was a holder of the number of shares of Common Stock of the Company into which this Warrant would be convertible as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution. (d) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or bylaws or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. (e) Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to this Section 4, the Company shall prepare a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated. Such certificate shall be signed by its chief financial officer and shall be delivered to the Holder. (f) Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise as reasonably determined in good faith by the Company's Board of Directors. (g) Cumulative Adjustments. No adjustment in the Warrant Price shall be required under this Section 4 until cumulative adjustments result in a concomitant change of 1% or more of the Warrant Price or in the number of shares of Common Stock purchasable upon exercise of this Warrant as in effect prior to the last such adjustment; provided, however, that any adjustment that by reason of this Section 4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. 5. Compliance with Securities Act; Disposition of Warrant or Shares of Common Stock. (a) The Holder, by acceptance hereof, agrees that this Warrant and the Shares to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant or any Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of applicable securities laws and which are in compliance with the provisions of the legend set forth below. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Securities Act of 1933, as amended (the "Act"), or an exemption from the registration requirements of such Act is available, the Holder shall confirm -5- in writing, by executing an instrument in form reasonably satisfactory to the Company, that the Shares so purchased are being acquired for investment and not with a view toward distribution or resale and that the Holder is an accredited investor, as defined in Regulation D under the Act. This Warrant and all Shares issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY SECURITIES LAWS OF A STATE OR OTHER JURISDICTION AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF (OTHER THAN TO AN AFFILIATE OR AS OTHERWISE PERMITTED BY THIS WARRANT CERTIFICATE PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL SATISFACTORY TO GENEREX BIOTECHNOLOGY CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS." (b) (i) This Warrant may be transferred or assigned, in whole or in part, by Elan International Services, Ltd. to its affiliates and subsidiaries, including any special purpose financing or similar vehicle affiliate. Other than as set forth in the preceding sentence, this Warrant may not be transferred or assigned by either party without the prior written consent of the other. Subject to the foregoing, this Warrant and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that the transferor and the Company shall continue to be liable and obligated for their respective obligations hereunder after any such assignment. (ii) With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Shares, the Holder shall give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of counsel reasonably -6- acceptable to the Company (as to content of such opinion and the identity of such counsel), if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Securities Act as then in effect or any federal or state law then in effect) of this Warrant or such Shares and indicating whether or not under the Act certificates for this Warrant or such Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with the Act. In addition, the Company may, upon the reasonable advice of its counsel, require the prospective transferee to execute documentation verifying as to the transferees investment intent and status as an accredited investor. Promptly upon receiving such written notice, reasonably satisfactory opinion and other materials as to investment intent and status, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. Each certificate representing this Warrant or the Shares thus transferred shall bear a legend as to the applicable restrictions on transferability in order to insure compliance with the Securities Act, unless in the aforesaid opinion of counsel for the Holder such legend is not required in order to insure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. (iii) The shares of Common Stock for which this Warrant is exercisable are entitled to the benefit of certain registration rights as set forth in a Registration Rights Agreement dated as of the date hereof between the Company and the initial Holder named herein. 6. Rights as Shareholders. No Holder, as such, shall be entitled to vote or receive dividends or be deemed the holder of Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant is exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. 7. Representations and Warranties. The Company represents and warrants to the Holder as follows: (a) The Company has all requisite corporate power and authority to authorize and execute this Warrant and the certificates evidencing the Shares and to perform all obligations and undertakings under this Warrant and the certificates evidencing the Shares; (b) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms; -7- (c) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; and (d) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Certificate of Incorporation or bylaws, as amended, and do not and will not constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound. 8. Miscellaneous. (a) This Warrant may not be modified or amended, or any provisions hereof waived, except by written agreement of the Company and the Holder. (b) All notices, demands and requests of any kind to be delivered to any party in connection with this Note shall be in writing and shall be deemed to have been duly given if personally or hand delivered or if sent by an internationally-recognized overnight delivery courier or by registered or certified mail, return receipt requested and postage prepaid, or by facsimile transmission addressed as follows: (i) if to the Company, to: Generex Biotechnology Corporation 32 Harbour Square Suite 202 Toronto Ontario Canada Attention: Chief Executive Officer Facsimile: (416) 364-9363 with a copy to: Eckert Seamans Cherin Mellot 1515 Market Street 9th Floor Philadelphia, PA 19102 Attention: John G. Chou Facsimile: (215) 851-8383 -8- (ii) if to EIS, to: Elan International Services, Ltd. 102 St. James Court Flatts, Smiths Parish Bermuda FL 04 Attention: Chief Executive Officer Facsimile: (441) 292-2224 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: William M. Hartnett Facsimile: (212) 269-5420 (c) The Company covenants to the Holder that upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of a bond or indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant, the Company will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant. (d) The descriptive headings of the several sections and paragraphs contained in this Warrant are for reference purposes only and shall not affect in anyway the meaning or interpretation of this Warrant. (e) This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the principles of conflicts of laws. Any dispute under this Warrant that is not settled by mutual consent shall be finally adjudicated by any federal or state court sitting in the City, County and State of New York, and the Company consents to the exclusive jurisdiction of such courts (or any appellate court therefrom) over any such dispute. (f) This Warrant may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one Warrant. This Warrant may be signed and delivered to the other party by a facsimile transmission; such transmission shall be deemed a valid signature. (g) Each of the parties shall be responsible for its own costs and expenses incurred in connection with the transactions contemplated hereby. [Signature page follows] -9- IN WITNESS WHEREOF, the Company has executed this Warrant as of the 16th day of January, 2001. GENEREX BIOTECHNOLOGY CORPORATION By: /s/ E. Mark Perri ------------------------------- Name: E. Mark Perri Tittle: Chief Financial Officer Annex A ------- NOTICE OF EXERCISE - ------------------ To: Generex Biotechnology Corporation 1. The undersigned hereby elects to purchase _______ shares of Common Stock of Generex Biotechnology Corporation pursuant to the terms of the attached Warrant, and tenders herewith full payment of the purchase price of such shares, in cash or other immediately available funds. 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below: _____________________________________________________ (Name) _____________________________________________________ _____________________________________________________ (Address) 3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. Signature: __________________________________________ Name: _______________________________________________ Address: ____________________________________________ ____________________________________________ ____________________________________________ Social Security or taxpayer identification number: ______________________________________________ 11 EX-4.4 5 0005.txt EXHIBIT 4.4 CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RIGHTS of SERIES A PREFERRED STOCK of GENEREX BIOTECHNOLOGY CORPORATION (Pursuant to Section 151 of the Delaware General Corporations Law) We, Anna E. Gluskin and Rose C. Perri, the President and the Secretary, respectively, of Generex Biotechnology Corporation, a corporation organized and existing under the Delaware General Corporation Law (the "Corporation"), in accordance with the provisions of 151 of the Delaware General Corporation Law thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors of the Corporation by the Certificate of Incorporation of the said Corporation, the Board of Directors of the Corporation on January 15, 2001 adopted the following resolution, pursuant to the Corporation's Certificate of Incorporation and Section 151(g) of the Delaware General Corporation Law, creating one series of shares of preferred stock designated as Series A Preferred Stock: "RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation of the Corporation, the Board of Directors does hereby provide for the issuance of a series of preferred stock, U.S.$.001 par value per share, of the Corporation, to be designated "Series A Preferred Stock", initially consisting of up to 1,512 shares, and the Board of Directors of the Corporation does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions thereof, as follows: 1. Designation. 1,512 shares of preferred stock shall be designated and known as the "Series A Preferred Stock." Such number of shares may not be increased or decreased without obtaining the consent of a majority in interest of the holder(s) of the then-outstanding shares of Series A Preferred Stock; provided that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of such shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. 2. Dividend Provisions. (a) From and after the date hereof, when and if the Board of Directors of the Corporation shall declare a dividend or distribution payable with respect to the then-outstanding shares of Common Stock of the Corporation, the holders of the Series A Preferred Stock shall be entitled to the amount of dividends per share in the same form as such Common Stock dividends that would be payable on the largest number of whole shares of Common Stock into which a holder's aggregate shares of Series A Preferred Stock could then be converted pursuant to Section 4 hereof (such number to be determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend). (b) In addition to Section 2(a) above, each share of Series A Preferred Stock, shall be entitled to receive a mandatory dividend equal to 6.0% per year of the Original Issue Price (as defined below) thereof, compounded annually on each succeeding 12 month anniversary of the first issuance. Such dividend shall be cumulative and shall be payable annually on each succeeding 12 month anniversary of the first issuance and shall be payable solely by the issuance of additional shares of Series A Preferred Stock at a price per share equal to the Original Issue Price (as defined in 3(b), below) thereof and not in cash; provided, that such dividend shall not be declared or paid to any holder without the consent of such holder. Fractional shares of Series A Preferred Stock shall be issuable for all purposes hereunder. 3. Seniority; Liquidation Preference. (a) The Corporation may not issue any additional classes or series of preferred stock with a liquidation preference, dividend or other rights senior to the Series A Preferred Stock except pursuant to Section 14 hereof. (b) In the event of any liquidation, dissolution or winding-up of the affairs of the Corporation, whether voluntary or involuntary, (collectively, a "Liquidation"), before any payment of cash or distribution of other property shall be made to the holders of the Common Stock or any other class or series of stock subordinate in liquidation preference to the Series A Preferred Stock, the holders of the Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation legally available for distribution to its shareholders, the Original Issue Price per share (as appropriately adjusted for any combinations or divisions or similar recapitalizations affecting the Series A Preferred Stock after issuance) and accrued and unpaid dividends thereon (the "Series A Liquidation Preference"). As used herein, the "Original Issue Price" per share is U.S.$12,015. (c) If, upon any Liquidation, the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of the Series A Preferred Stock the full amounts to which they shall be entitled, the holders of the Series A Preferred Stock shall share ratably in any distribution of assets in proportion to the respective amounts which would be payable to them in respect of the shares held by them if all amounts payable to them in respect of such were paid in full pursuant to Section 3(b). (d) After the distributions described in Section 3(c) above have been paid, subject to the rights of other series of preferred stock that may from time to time come into existence, the remaining assets of the Corporation available for distribution to shareholders shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common Stock held by each. 2 4. Conversion. The holders of the Series A Preferred Stock shall have conversion rights, through and including the Conversion Termination Date (as defined below), as follows (the "Conversion Rights"): (a) Right to Convert. (i) Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time that is three (3) years after the issuance thereof, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (x) the aggregate outstanding liquidation preference and accrued dividends (the "Outstanding Amount") by (y) the Series A Conversion Price (as defined below). The "Series A Conversion Price" shall be a price per share that represents a 130% premium over the average closing price per share of publicly traded shares of Common Stock over the sixty day period immediately preceding the Original Issue Date (such average closing price hereinafter referred to as the "Original Issue Date Base Price"); provided the Series A Conversion Price shall be subject to adjustment as set forth below in this Section 4(a). The Series A Preferred Stock may be convertible at the option of the Corporation any time in the event of any merger, consolidation or acquisition of or involving the Corporation (a "Significant Transaction"), subject to the receipt of any applicable regulatory approvals. Notwithstanding the above, the Series A Preferred Stock, in the event that there shall occur a merger or consolidation of the Corporation with or into another entity as a consequence of which Elan International Services, Ltd. and its affiliates ("EIS") shall own 50% or less of the equity (on a fully diluted basis) of the survivor of such merger or consolidation than EIS did of the Corporation prior thereto or the consummation of an initial public offering of the Corporation's Common Stock, then, in any such event, the outstanding shares of the Series A Preferred Stock then held by the original holder of the Series A Preferred Stock or any of its affiliates shall, immediately prior to the consummation thereof, be at the option of the Corporation converted into the same number of shares of Common Stock into which such shares are convertible pursuant to this Section 4(a)(i) (a "Required Conversion"); provided, further, in the event of a Required Conversion, the Common Stock delivered upon such conversion shall have the benefit of the Exchange Right identical to that with respect to the Series A Preferred Stock on the date of conversion so converted and shall be evidenced by a security substantially in the form attached to the definitive agreement providing for the initial issuance of shares of Series -A Preferred Stock. (ii) Before any holder of Series A Preferred Stock shall be entitled to convert such shares into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly 3 endorsed, at the office of the Corporation or of any transfer agent for the Series A Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as set forth above. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. (iii) In the event the Corporation should at any time fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or property or rights convertible into, or entitling the holder thereof to receive directly or indirectly, any of the foregoing (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock or other securities or property issuable upon conversion or exercise thereof) or with payment that is less than the lower of (x) the then-Fair Market Value price of the Common Stock (including, in the case of Common Stock Equivalents, on an as-converted basis) and (y) the Series A Conversion Price then in effect, then and in each case with respect to each share of Series A Preferred Stock, the Conversion Right shall be for, in addition to the number of shares of the Common Stock otherwise deliverable upon exercise of the Conversion Right, and without adjustment to the Series A Conversion Price, the amount of such additional shares of Common Stock and any Common Stock Equivalents that the holder of such share of Series A Preferred Stock would have received or become entitled to receive on the same terms and conditions as if such holder had been a holder of record of such Common Stock as shall have been deliverable immediately prior to such record date pursuant to the terms of this Section 4. The "Fair Market Value" of one share of Common Stock shall be determined by the Corporation's Board of Directors in good faith (taking into account the most recently or concurrently completed arm's length transaction between the Corporation and an unaffiliated third party the closing of which occurs within the six months preceding or on the date of such calculation, if any) and shall be reasonably agreed to by the majority of the holders of the Series A Preferred Stock (provided, that in the event the Corporation and the majority of holders of the Series A Preferred Stock do not agree on the Fair Market Value, the parties shall jointly appoint an independent third party to determine the Fair Market Value); provided, 4 however, that in the event the Common Stock is traded on a securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value shall be deemed to be the average of the closing sale prices for the Common Stock over the 30-day period (or such shorter period for which closing sale prices are available if the Common Stock commenced trading during such period) ending the trading day prior to (x) the record date referred to in this paragraph (iv) or (y) with respect to Section 6 hereof, the redemption date. (iv) If the Corporation at any time during which any share of Series A Preferred Stock remains outstanding shall subdivide or combine its Common Stock, (A) in the case of a subdivision, the Series A Conversion Price shall be proportionately decreased and the number of shares of Common Stock purchasable thereunder shall be proportionately increased, and (B) in the case of a combination, the Series A Conversion Price shall be proportionately increased and the number of shares of Common Stock purchasable thereunder shall be proportionately decreased. (v) In case of (A) any reclassification, reorganization, change or conversion of securities of the class issuable upon conversion of the Series A Preferred Stock (other than a change in par value, or from par value to no par value) into other shares or securities of the Corporation, or (B) any consolidation of the Corporation with or into another entity (other than a merger or consolidation with another entity in which the Corporation is the acquiring and the surviving entity and that does not result in any reclassification or change of outstanding securities issuable upon conversion of the Series A Preferred Stock), or (C) any sale of all or substantially all the assets of the Corporation, each holder of shares of Series A Preferred Stock shall have the right to receive, in lieu of the shares of Common Stock otherwise issuable upon the conversion of its shares of Series A Preferred Stock and accumulated and unpaid dividends then-outstanding thereunder, the kind and amount of shares of stock and other securities, money and property receivable upon such reclassification, reorganization, change, merger, consolidation or conversion by a holder of the number of shares of Common Stock then issuable under the Series A Preferred Stock. The provisions of this Section 4(a)(v) shall similarly attach to successive reclassifications, reorganizations, changes, and conversions. (b) In order to exercise the Conversion Right, a holder shall provide written notice thereof to the Corporation, setting forth (a) the fact that such holder intends to exercise the Conversion Right, and (b) the proposed date for such exercise (the "Conversion Date"), which shall be between 10 and 30 days after the date of such notice; provided, however, that if the Corporation shall deliver the holders a written request to delay the date for such exercise by no more than 45 days, the Conversion Date will be as set forth in that request. On the Conversion Date, (y) the holder shall tender its shares of Series A Preferred Stock to the Corporation for cancellation free and clear of encumbrances of any type or nature, and (z) the Corporation shall cause to be 5 delivered to such holder, such shares of Common Stock free and clear of encumbrances of any type or nature. The holders and the Corporation shall take all other necessary or appropriate actions in connection with or to effect such closing. 5. Exchange Right. The original purchaser (or any of its affiliates) of the Series A Preferred Stock shall have the right to exchange (the "Exchange Right") all of the shares of Series A Preferred Stock, including shares of Series A Preferred Stock paid as dividends with respect thereto, of the Corporation for 3,612 shares of non-voting convertible preferred shares ("Preferred Shares") (as adjusted for any combinations or divisions or similar recapitalizations) of Generex (Bermuda), Ltd., a Bermuda exempted limited liability company ("Newco"), held by the Corporation and which are convertible into 30.1% (subject to potential dilution resulting from issuance of additional Common Shares of Newco (the "Common Shares, and together with the Preferred Shares, the "Shares") after the Closing Date) of the aggregate issued and outstanding Shares, so that after giving effect to the conversion thereof EIS shall initially own 50% (subject to potential dilution resulting from issuance of additional Common Shares after the Closing Date) of the then-issued and outstanding Shares. The "Closing Date" is the date of closing if the transaction pursuant to which shares of Series A Preferred Stock will initially be issued. Upon exercise of the Exchange Right, all shares of Series A Preferred Stock originally purchased from the Corporation, including shares of Series A Preferred Stock paid as dividends with respect thereto, shall be canceled and shall no longer be entitled to any rights in the Corporation. In the event of such an exchange, any and all accrued and unpaid dividends shall not be declared payable and shall not be due. Other than in the case of a Required Conversion, if any shares of the Series A Preferred Stock are converted pursuant to Section 4(a), to shares of Common Stock, the Exchange Right with respect to the shares of Series A Preferred Stock originally purchased from the Corporation shall be canceled and shall no longer be entitled to any rights in the Corporation. In order to exercise the Exchange Right, the holders shall provide written notice thereof to the Corporation, setting forth (a) the fact that such holders intend to exercise the Exchange Right, and (b) the proposed date for such exercise (the "Exercise Date"), which shall be between 10 and 30 days after the date of such notice; provided, however, that if the Corporation shall deliver the holders a written request to delay the date for such exercise by no more than 45 days, the Exercise Date will be as set forth in that request. On the Exercise Date, (y) the holders shall tender their shares of Series A Preferred Stock to the Corporation for cancellation free and clear of encumbrances of any type or nature, and (z) the Corporation shall cause to be delivered to EIS, acting on behalf of such holders, such shares of Newco free and clear of encumbrances of any type or nature. The holders and the Corporation shall take all other necessary or appropriate actions in connection with or to effect such closing. 6 6. Redemption. (a) To the extent the Corporation shall have funds legally available for such payment, on January 16, 2007, if any shares of the Series A Preferred Stock shall be outstanding, the Corporation shall redeem all outstanding shares of the Series A Preferred Stock, at a redemption price equal to the aggregate Series A Liquidation Preference, either (a) in cash, or (b) in shares of Common Stock with a Fair Market Value equal to such redemption price, in each case together with any accrued and unpaid dividends thereon to the date fixed for redemption, without interest. (b) In the event the Corporation shall redeem shares of Series A Preferred Stock pursuant to Section 6(a), notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 10 days nor more than 20 days prior to the redemption date, to each holder of record of the shares to be redeemed at such holder's address as the same appears on the stock register of the Corporation; provided that neither the failure to give such notice nor any defect therein shall affect the validity of the giving of notice for the redemption of any share of Series A Preferred Stock to be redeemed except as to the holder to whom the Corporation has failed to give said notice or except as to the holder whose notice was defective. Each such notice shall state: (i) the redemption date; (ii) the number of shares of Series A Preferred Stock to be redeemed; (iii) the redemption price and the Fair Market Value of the Common Stock, if applicable; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date (c) In the case of any redemption pursuant to Sections 6(a) hereof, notice having been mailed as provided in Section 6(a) hereof, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares called for redemption), dividends on the shares of Series A Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such share shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. 7. Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets, cash (excluding cash dividends declared out of retained earnings and excluding cash dividends to which holders of Series A Preferred are entitled under Section 2(a) of this Certificate of Designations) or options or rights not referred to in Section 4, then, in each such case for the purpose of this Section 7, the holders of the 7 Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series A Preferred Stock would be convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution. 8. Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets provided for in Section 4 hereof) provision shall be made so that the holders of the Series A Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of Section 4 with respect to the rights of the holders of the Series A Preferred Stock after the recapitalization to the end that the provisions of Section 4 (including adjustment of the Series A Conversion Price then in effect and the number of shares purchasable upon conversion of the Series A Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. 9. No Impairment. (a) The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions hereof and in the taking of all such action as may be necessary or appropriate in order to protect the Series A Conversion Rights, Exchange Right and redemption rights of the holders of the Series A Preferred Stock against impairment. (b) If the Corporation is unable or shall fail to discharge its obligations under Section 5 or Section 6(a) (an "Obligation"), such Obligation shall be discharged as soon as the Corporation is able to discharge such Obligation. If and so long as any Obligation with respect to the Series A Preferred Stock shall not be fully discharged, the Corporation shall not (i) directly or indirectly, redeem, purchase, or otherwise acquire any classes or series of preferred stock with a liquidation preference, dividend or other rights senior to the Series A Preferred Stock ("Senior Stock") or discharge any mandatory or optional redemption, sinking fund or other similar obligation in respect of any Senior Stock (except in connection with a redemption, sinking fund or other similar obligation to be satisfied pro rata with the Series A Preferred Stock) or (ii) declare or make any distribution to any classes or series of preferred stock with a liquidation preference, dividend or other rights junior to the Series A Preferred Stock or any other securities which rank junior to the Series A Preferred Stock ("Junior Securities"), or, directly or 8 indirectly, discharge any mandatory or optional redemption, sinking fund or other similar obligation in respect of the Junior Securities. 10. No Fractional Shares and Certificate as to Adjustments. (a) No fractional shares shall be issued upon the conversion of any share or shares of the Series A Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the aggregate number of shares of Series A Preferred Stock each holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable to each such holder upon such conversion. (b) Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price pursuant to Section 4, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of shares of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustment and readjustment, (ii) the Series A Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series A Preferred Stock. 11. Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock that shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock not otherwise reserved for issuance shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Corporation will take such corporate action that may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to its Certificate of Incorporation. 12. Notices. Any notice required by the provisions hereof to be given to the holders of shares of Series A Preferred Stock shall be deemed given on the date of service if served personally on the party to whom notice is to be given, or on the date of transmittal of services by facsimile transmission to the party to whom notice is to be given, and addressed to each holder of record at his address appearing on the books of the Corporation. 9 13. Voting Rights. Subject to Section 14 below, holders of Series A Preferred Stock shall not be entitled to vote, including with respect to the election of directors of the Corporation. 14. Protective Provisions. Subject to the rights of any series of preferred stock that may from time to time come into existence, so long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then-outstanding shares of Series A Preferred Stock, voting separately as a series: (a) amend its Certificate of Incorporation so as to affect adversely the shares of Series A Preferred Stock or any holder thereof (including by creating any additional classes or series of Senior Stock); or (b) change the rights of the holders of the Series A Preferred Stock in any other respect. 15. Status of Converted Stock. In the event any shares of Series A Preferred Stock shall be converted pursuant to Section 4 or exchanged pursuant to Section 5 hereof, the shares so converted or exchanged shall be canceled and shall not be reissuable by the Corporation." 10 IN WITNESS WHEREOF, said Generex Biotechnology Corporation has caused this Certificate of Designations to be signed by Anna E. Gluskin, its President and Rose C. Perri, its Secretary this 16th day of January, 2001. GENEREX BIOTECHNOLOGY CORPORATION By: /s/ Anna E. Gluskin ---------------------------- Name: Anna E. Gluskin Title: President By: /s/ Rose C. Perri ---------------------------- Name: Rose C. Perri Title: Secretary -----END PRIVACY-ENHANCED MESSAGE-----