FORBEARANCE AND AMENDMENT
AGREEMENT
This Forbearance and Amendment Agreement (the
“ Agreement ”) is made this ___ day of February
2009 by and between Generex Biotechnology Corporation (the “
Company ”) and the holder listed on the signature page
hereto (the “ Holder ”).
RECITALS
A.
Pursuant to that certain Securities Purchase Agreement, dated as of
March 31, 2008, by and among the Company, the Holder and the other
parties thereto (the “ Purchase Agreement ”),
the Holder purchased the Company’s 8% Senior Secured
Convertible Note in the original principal amount of $______ (the
“ Note ”). Capitalized terms used in this
Agreement that are not otherwise defined herein have the meanings
set forth in the Note.
B. Pursuant to the Purchase
Agreement, the Holder also purchased (i) a Series A Warrant to
acquire additional shares of Common Stock (the “ Series A
Warrants ”); (ii) a Series A-1 Warrant to acquire
additional shares of Common Stock (the “ Series A-1
Warrants ”); (iii) a Series B Warrant to acquire
additional shares of Common Stock (the “ Series B
Warrants ”); and (iv) a Series C Warrant to acquire
additional shares of Common Stock (the “ Series C
Warrants ”), in each case, as set forth on Schedule of
Buyers attached to the Purchase Agreement. The Series A
Warrants, the Series A-1 Warrants, the Series B Warrants, and the
Series C Warrants issued to the Holder are hereinafter collectively
referred to as the “ Series Warrants
.” In addition to the Series Warrants, the Holder
also owns other warrants to purchase Common Stock (collectively,
the “ Other Warrants ” and together with the
Series Warrants, the “ Warrants ”).
C.
Various Events of Default have occurred
under the Note.
D.
During and only during the period beginning on the date of
this Agreement and ending on the twenty-one (21) day anniversary of
the date hereof (such period is referred to herein as the “
Standstill Period ” and such scheduled ending date is
referred to herein as the “ Scheduled Standstill
Expiration Date ”), the Holder is willing
to temporarily forbear from exercising certain rights and remedies
on the terms, conditions and provisions contained in this
Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises
and the mutual covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Holder hereby agree as
follows:
1.
Acknowledgment of Events of Default . The Company
acknowledges and agrees that:
(i) an
Event of Default has occurred prior to the date hereof under
Section 4(a)(xiv) of the Note as a result of the failure of the
Company to comply with its obligations under Paragraph 15 of that
certain Agreement, dated December 22, 2008, between the Company and
the Holder;
(ii) an
Event of Default has occurred prior to the date hereof under
Section 4(a)(xv) of the Note as a result of the failure of the
Company to satisfy the Net Cash Balance Test under Section 13(f) of
the Note;
(iii) an
Event of Default has occurred prior to the date hereof under
Section 4(a)(xiv) of the Note as a result of the failure of the
Company to deliver Event of Default Notices to the Holder with
respect to the Events of Default listed in each of clauses (i) and
(ii) above;
(iv) an
Event of Default has occurred prior to the date hereof under
Section 4(a)(xviii) of the Note as a result of each of clauses (i)
through (iii) above causing an Event of Default to occur under the
Other Notes; and
[(v) an
Event of Default has occurred prior to the date hereof under the
Note and the Purchase Agreement with regard to the timing of
delivery by the Company to the Holder and the holder of the Other
Notes of cash in payment of the Installment Amount due February 1,
2009 by reason of such delivery not being consistent among the
Holder and each other Holder.] – Iroquois version.
The Events of
Default listed in clauses (i) through (iv) above are collectively
referred to herein as the “ Existing Events of Default
.” The Company represents and warrants to the Holder that no
other (a) Event of Default has occurred other than the Existing
Events of Default and (b) breach by the Company or any of its
Subsidiaries of their respective obligations has occurred under any
of the Transaction Documents.
2.
Forbearance; Standstill Termination . Unless and until a
Standstill Termination (as defined below) occurs, during the
Standstill Period, the Holder will not exercise any of its rights
or remedies under Section 4(b) of the Note or Section 16 of the
Security Agreement solely with respect to any of the Existing
Events of Default. Upon the occurrence of a Standstill Termination,
the Standstill Period shall be automatically terminated and the
Holder shall then be permitted and entitled to immediately exercise
all of its rights and remedies under Section 4(b) of the Note
and Section 16 of the Security Agreement with respect to each of
the Existing Events of Default. “ Standstill
Termination ” shall mean the occurrence of the earliest
of (i) the Scheduled Standstill Expiration Date; (ii) any Event of
Default occurring after the date hereof; and (iii) the filing by or
against the Company of any Insolvency Proceeding (as defined in the
Security Agreement).
3.
No Waiver; Reservation of Rights . The Company acknowledges
that the Holder is not waiving any of the Existing Events of
Default but is simply agreeing to forbear from exercising its
rights and remedies under Section 4(b) of the Note or Section
16 of the Security Agreement with respect to the Existing Events of
Default to the extent expressly set forth in this Agreement.
Without limiting the generality of the foregoing, the Company
acknowledges and agrees that immediately upon occurrence of a
Standstill Termination, the Holder shall have all of its rights and
remedies under Section 4(b) of the Note and Section 16 of the
Security Agreement with respect to the Existing Events of Default
to the same extent, and with the same force and effect, as if the
forbearance had not occurred. The Company will not assert and
hereby forever waives any right to assert that the Holder is
obligated in any way to continue beyond the occurrence of a
Standstill Termination to forbear from enforcing its rights or
remedies under Section 4(b) of the Note or Section 16 of the
Security Agreement with respect to any of the Existing Events of
Default or that the Holder is not entitled to act on any of the
Existing Events of Default after the occurrence of a Standstill
Termination as if the Standstill Period never existed. The Company
acknowledges that the Holder has made no representations as to what
actions, if any, the Holder will take upon the occurrence of a
Standstill Termination or the occurrence of any breach of this
Agreement or any of the other Transaction Documents after the date
hereof, and the Holder does hereby specifically and fully reserve
any and all rights, remedies, and claims it has (after giving
effect hereto) with respect to the Existing Events of Default and
each other Event of Default or each other breach under this
Agreement or any of the other Transaction Documents that may occur.
It is expressly understood and agreed that nothing contained in
this Agreement shall prohibit the Holder from exercising any rights
or remedies that may be available to the Holder under this
Agreement, the Note (including, without limitation, converting all
or any portion thereof), any other Transaction Document or
applicable law, other than its rights and remedies under Section
4(b) of the Note and Section 16 of the Security Agreement solely
with respect to the Existing Events of Default during the
Standstill Period as expressly contemplated hereby. The Company, on
behalf of itself and its Subsidiaries, hereby acknowledges receipt
of notices of intention to enforce security pursuant to section
244(1) of the Bankruptcy and Insolvency Act (Canada)
contemporaneously with execution of this Agreement and hereby
irrevocably waives the ten (10) day notice period pursuant to the
Bankruptcy and Insolvency Act (Canada) and hereby consents to, and
will not object to or oppose, any motion by the Holder to appoint a
receiver (either private or court-appointed) if any Event of
Default occurs after the date hereof.
4.
Amendment of Note . The Note is hereby amended as
follows:
(a) The
term “Installment Amount” in the Note is hereby deleted
in its entirety and replaced with:
“
Installment Amount ” means, with respect to any
Installment Date occurring on or after March 1, 2009, the lesser of
(A) the product of (i) $1,927,333.32, multiplied by
(ii) Holder Pro Rata Amount and (B) the Principal amount under this
Note as of such Installment Date, as any such Installment Amount
may be reduced pursuant to the terms of this Note, whether upon
conversion, redemption or otherwise, together with, in each case,
the sum of any accrued and unpaid Interest as of such Installment
Date under this Note (if such Installment Date is also an Interest
Date) and accrued and unpaid Late Charges, if any, under this Note
as of such Installment Date. In the event the Holder shall sell or
otherwise transfer any portion of this Note, the transferee shall
be allocated a pro rata portion of each unpaid Installment Amount
hereunder.”
(b) The
term “Installment Date” in the Note is hereby deleted
in its entirety and replaced with:
“
Installment Date ” means each of the following dates:
(i) August 1, 2008; (ii) September 1, 2008; (iii) October 1, 2008;
(iv) November 1, 2008; (v) December 1, 2008; (vi) January 1,
2009; (vii) February 1, 2009; (viii) March 1, 2009; (ix)
April 1, 2009; (x) May 1, 2009; (xi) June 1, 2009; and (xii) the
Maturity Date.”
(c) The
term “Fundamental Transaction” in the Note is hereby
deleted in its entirety and replaced with:
“
Fundamental Transaction ” means that (1) the Company
shall, directly or indirectly, in one or more related transactions,
(i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company to another Person, or
(iii) allow another Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or
associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other
Person acquires more than the 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock
purchase agreement or other business combination), or (v)
reorganize, recapitalize or reclassify its Common Stock, or (2) any
“person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is
or shall become the “beneficial owner” (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and
outstanding Common Stock.”
(d) The
term “Maturity Date” in the Note is hereby deleted in
its entirety and replaced with:
“
Maturity Date ” shall mean July 1, 2009;
provided , however , that the Maturity Date may be
extended at the option of the Holder (i) in the event that, and for
so long as, an Event of Default shall have occurred and be
continuing or any event shall have occurred and be continuing that
with the passage of time and the failure to cure would result in an
Event of Default or (ii) through the date that is twenty (20)
Business Days after the consummation of a Fundamental Transaction
in the event that a Fundamental Transaction is publicly announced
or a Fundamental Transaction Notice is delivered prior to the
Maturity Date; provided , further , that if a Holder
elects to convert some or all of this Note pursuant to Section 3
hereof, and the Conversion Amount would be limited pursuant to
Section 3(d) hereunder, the Maturity Date shall automatically be
extended until such time as such provision shall not limit the
conversion of this Note.”
(e) The
following is hereby added to the Note as Section 28(yy):
“(yy) “
Forbearance and Amendment Agreement ” means that
certain Forbearance and Amendment, dated February ___, 2009, by and
between the Company and the Holder, as the same may be amended from
time to time.”
(f) Section
4(a)(iii) of the Note is hereby deleted in its entirety and
replaced with the following:
“(iii) the
suspension from trading or failure of the Common Stock to be listed
on an Eligible Market for a period of five (5) consecutive days or
for more than an aggregate of ten (10) days in any 365-day period,
provided that the foregoing shall not constitute an Event of
Default if the Common Stock is quoted on the OTC Bulletin Board on
the fifth (5 th )
Business Day immediately following such suspension from trading or
such failure to be so listed;”
(g) The
word “or” is hereby deleted at the end of Section
4(a)(xvii).
(h) Section
4(a)(xviii) of the Note is hereby deleted in its entirety and
replaced with the following:
“(xviii) the Company and its
Subsidiaries (taken together as a whole) expend cash in excess of
$900,000 in the aggregate in any of the following calendar months
in 2009: March, April or May; provided, however, solely for
purposes of the foregoing determination, all cash used to effect
(i) (x) Company Redemptions under this Note as permitted under the
last sentence of Section 8(a) hereof and (y) Company Redemptions
(as defined in the Other Notes) under the Other Notes as permitted
under the last sentence of Section 8(a) thereof; (ii) the
agreements and instruments contemplated by Sections 5 and 6 of the
Forbearance and Amendment Agreement; and (iii) the expense
reimbursement to the Holder contemplated by Section 18 of the
Forbearance and Amendment Agreement, in each case shall
not be deemed to be cash expended; ”
(i) The
following is hereby added to the Note as Section
4(a)(xix):
“(xix) any
breach by the Company of Section 8 of the Registration Rights
Agreement (including, without limitation, any failure by the
Company to (x) file with the SEC any required reports under Section
13 or 15(d) of the 1934 Act such that it is not in compliance with
Rule 144(c)(1), or (y) meet any of the requirements under rule
144(i)(2)); or”
(j) The
following is hereby added to the Note as Section
4(a)(xx):
“(xx) any
Event of Default (as defined in the Other Notes) occurs with
respect to any Other Notes.”
(k) The
following is hereby added to the Note as the last sentence of
Section 8(a):
“Notwithstanding anything contained in
this Section 8 to the contrary, the Company shall not be permitted
to elect, or effect, a Company Redemption from and after February
___, 2009; provided, however, the Company may elect, and effect, a
Company Redemption subject to, and in accordance with, the terms of
this Note if such Company Redemption is effected solely by using
net proceeds received by the Company from (i) any Subsequent
Placements (as defined in the Securities Purchase Agreement)
consummated after February ___, 2009; (ii) revenues from sales of
products by the Company; or (iii) licensing fees received by the
Company.”
(l) The
following is hereby added to the Note as Section 13(j):
“(j)
Certification . Without limiting the
Company’s obligations under any other provision of this Note
(including, without limitation, Sections 4 and 29), the Company
shall provide to the Holder on the first Business Day following the
end of each of March 2009, April 2009 and May 2009 a certification
(executed on behalf of the Company by the Chief Financial Officer
of the Company) as to whether an Event of Default occurred under
Section 4(a)(xviii) hereof with respect to the calendar month
immediately preceding the date of such certification and shall
immediately publicly disclose (on a Current Report on Form 8-K or
otherwise) any such Event of Default on the date of such
certification.”
It is expressly
understood and agreed that the Company’s payment of the
Installment Amount with respect to the Installment Date that is
March 1, 2009 shall be paid in accordance with the terms and
conditions of that certain letter agreement, dated February 13,
2009, by and between the Company and the Holder.
5.
Control Agreement . (a) The Company shall (i)
promptly negotiate with the Holder and JPMorgan Chase Bank, N.A. or
another member of the New York Clearing House Association, other
financial institution of a reputation and size similar to that of
SmithBarney or regional commercial bank of a reputation and size
similar to that of State Street Corp., M&T Bank Corp, or Valley
National Bancorp or another financial institution reasonable
acceptable to the Holder (any of the foregoing being the “
Depository ”), and execute, a Control Agreement (as
defined in the Security Agreement) in form and substance acceptable
to the Holder in its sole discretion (that shall include, without
limitation, those terms set forth on Attachment 1
hereto), with respect to a blocked, non-operating Deposit Account
(as defined in the Security Agreement) of the Company, and (ii)
deposit $3,000,000 in such Deposit Account immediately following
the execution of such Control Agreement (it being understood and
agreed that such Control Agreement and such Deposit Account will
each be subject to the terms and conditions of the Security
Agreement and that the Company shall cause the Security Agreement
to promptly be amended (in form and substance acceptable to the
Holder in its sole discretion) to include any relevant terms on
Attachment 1 hereto). If such Control Agreement has not been
executed by the Company and the Depository in such form and
substance so acceptable to the Holder in its sole discretion by the
Scheduled Standstill Expiration Date or if such deposit has not
been so made by the Company immediately following the execution of
such Control Agreement, the Company hereby agrees and acknowledges
that a breach of the Company’s obligations under this
Agreement shall have occurred, that such breach shall be an Event
of Default under Section 4(a)(xiv) of the Note and that such breach
shall be a breach which is not curable.
(b) Without limiting the foregoing
provisions of paragraph (a) above, the Company, acting in good
faith, shall use commercially reasonable efforts to (i) cause to be
issued by the Depository prior to the Scheduled Standstill
Expiration Date, a clean, unconditional and irrevocable letter of
credit that will remain “evergreen” until the Note and
each of the Other Notes are repaid in full (the “Letter of
Credit”) in the aggregate amount of $3 million for the
ratable benefit of the Holder and each holder of any of the Other
Notes, that will be subject to the following provisions of this
Agreement, and (ii) if the Letter of Credit shall be issued by the
Depository, enter into with the Holder (and each holder of any of
the Other Notes) an agreement applicable to the Letter of Credit
that contains terms similar to those set forth on Attachment 1
hereto with regard to drawdowns and otherwise shall be in form and
substance acceptable to the Holder in its sole discretion, as
evidenced by the Holder’s written acceptance thereof by the
Scheduled Standstill Expiration Date. For purposes
hereof, it is understood and agreed that commercially reasonable
efforts shall include, without limitation, the Company paying
customary issuance fees not to exceed 1.5% of the principal amount
of the Letter of Credit, and establishing a blocked cash collateral
account to secure the Letter of Credit in an amount not to exceed
$3 million). If the Letter of Credit has been obtained
by the Company, and the Holder and each of the Other Holders
entered into an agreement with the Company applicable to the Letter
of Credit in compliance with the provisions of this paragraph (b)
by the Scheduled Standstill Expiration Date, then the Company shall
have no further obligations solely under this Section 5 with
respect to the Control Agreement, Deposit Account and
deposit expressly contemplated in paragraph (a)
above. If, however, the Company fails to act in good
faith or use commercially reasonable efforts to cause the Letter of
Credit to be issued, or the agreement applicable to the Letter of
Credit to be entered into by the parties, as provided hereby, the
Company hereby agrees and acknowledges that a breach of the
Company’s obligations under this Agreement shall have
occurred, that such breach shall be an Event of Default under
Section 4(a)(xiv) of the Note and that such breach shall be a
breach which is not curable.
6.
Irrevocable Transfer Agent Instructions . (a) The
Company shall promptly issue and deliver to the Company’s
transfer agent (the “Transfer Agent”) irrevocable
instructions in form and substance acceptable to the Holder in its
sole discretion which shall instruct the Transfer Agent (without
any further action, approval or instruction required by the
Company) to issue certificates or transmit shares of the
Company’s common stock to the Holder’s balance account
at The Depository Trust Company at the Holder’s written
request in accordance with the terms of the Note after the date
hereof (including, without limitation, upon the occurrence of an
Event of Default) (the “Instructions”). If
the Instructions have not been issued and delivered to the Transfer
Agent by the Company by the Scheduled Standstill
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