Exhibit 10.1
At Market Issuance Sales
Agreement
October 14, 2009
Wm Smith &
Co.
1700 Lincoln
Street, Suite 2545
Denver CO
80203
Ladies and
Gentlemen:
Generex Biotechnology Corporation, a Delaware
corporation (the “ Company ”), confirms its
agreement (this “ Agreement ”) with Wm Smith
& Co., a Colorado corporation (“ Wm Smith
”), as follows:
1.
Issuance and Sale of Shares . The Company agrees
that, from time to time during the term of this Agreement, on the
terms and subject to the conditions set forth herein, it may issue
and sell through Wm Smith, acting as agent, up to $20,000,000 of
shares (the “ Shares ”) of the Company’s
common stock, par value $0.001 per share (the “ Common
Stock ”); provided, however, that in no event shall the
Company issue or sell through Wm Smith such number of Shares that
would cause the Company to not satisfy the eligibility requirements
for use of Form S-3 (including Instruction I.B.6.
thereof). Notwithstanding anything to the contrary
contained herein, the parties hereto agree that compliance with the
limitations set forth in this Section 1 on the number of Shares
issued and sold under this Agreement shall be the sole
responsibility of the Company and that Wm Smith shall have no
obligation in connection with such compliance. The
issuance and sale of Shares through Wm Smith will be effected
pursuant to the Registration Statement (as defined below) filed by
the Company and declared effective by the Securities and Exchange
Commission (the “ Commission ”), although
nothing in this Agreement shall be construed as requiring the
Company to use the Registration Statement to issue Common
Stock.
The Company has filed, in accordance with the
provisions of the Securities Act of 1933, as amended, and the rules
and regulations thereunder (collectively, the “ Securities
Act ”), with the Commission a registration statement on
Form S-3 (File No. 333-139637), including a base prospectus, with
respect to equity and other offerings, including the Shares, and
which incorporates by reference documents that the Company has
filed or will file in accordance with the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively, the “ Exchange
Act ”). The Company will prepare a prospectus
supplement (the “ Prospectus Supplement ”) to
the base prospectus included as part of such registration
statement. The Company will furnish to Wm Smith, for use
by Wm Smith, copies of the prospectus included as part of such
registration statement, as supplemented by the Prospectus
Supplement, relating to the Shares. Except where the
context otherwise requires, such registration statement, as amended
when it became effective, including all documents filed as part
thereof or incorporated by reference therein, and including any
information contained in a Prospectus (as defined below)
subsequently filed with the Commission pursuant to Rule 424(b)
under the Securities Act and also including any other registration
statement filed pursuant to Rule 462(b) under the Securities Act,
collectively, are herein called the “ Registration
Statement ,” and the base prospectus, including all
documents incorporated therein by reference, included in the
Registration Statement, as it may be supplemented by the Prospectus
Supplement, in the form in which such prospectus and/or Prospectus
Supplement have most recently been filed by the Company with the
Commission pursuant to Rule 424(b) under the Securities Act is
herein called the “ Prospectus .” Any reference
herein to the Registration Statement, the Prospectus or any
amendment or supplement thereto shall be deemed to refer to and
include the documents incorporated by reference therein, and any
reference herein to the terms “amend,”
“amendment” or “supplement” with respect to
the Registration Statement or the Prospectus shall be deemed to
refer to and include the filing after the execution hereof of any
document with the Commission deemed to be incorporated by reference
therein. For purposes of this Agreement, all references
to the Registration Statement, the Prospectus or to any amendment
or supplement thereto shall be deemed to include any copy filed
with the Commission pursuant to its Electronic Data Gathering
Analysis and Retrieval System, or if applicable, the Interactive
Data Electronic Application system when used by the Commission (
collectively, “ EDGAR ”).
2.
Placements . Each time that the Company wishes to
issue and sell Shares hereunder (each, a “ Placement
”), it will notify Wm Smith by email notice (or other method
mutually agreed to in writing by the Parties) of the number of
Shares (the “ Placement Shares ”) to be issued,
the type of Shares, the time period during which sales are
requested to be made, any limitation on the number of Shares that
may be sold in any one day and any minimum price below which sales
may not be made (a “ Placement Notice ”), the
form of which is attached hereto as Schedule 1. The
Placement Notice shall originate from any of the individuals from
the Company set forth on Schedule 3 (with a copy to each of the
other individuals from the Company listed on such schedule), and
shall be addressed to each of the individuals from Wm Smith set
forth on Schedule 3, as such Schedule 3 may be amended from time to
time. The Placement Notice shall be effective unless and
until (i) the entire amount of the Placement Shares have been sold,
(ii) the Company suspends or terminates the Placement Notice,
(iii) the Agreement has been terminated under the provisions
of Section 12, (iv) Wm Smith determines that the certificate
delivered by the Company pursuant to Section 7(m) in connection
with the respective Placement Notice was incorrect, or (v) Wm
Smith notifies the Company that Wm Smith, in its reasonable
and good faith judgment, is unable to perform its obligations
thereunder as a result of any action taken against Wm Smith by a
regulatory authority with jurisdiction over Wm Smith and the types
of offerings that would include the Placement. The
amount of any discount, commission or other compensation to be paid
by the Company to Wm Smith in connection with the sale of the
Placement Shares shall be calculated in accordance with the terms
set forth in Schedule 2. It is expressly acknowledged
and agreed that neither the Company nor Wm Smith will have any
obligation whatsoever with respect to a Placement or any Placement
Shares unless and until the Company delivers a Placement Notice to
Wm Smith and Wm Smith does not decline such Placement Notice
pursuant to the terms set forth above, and then only upon the terms
specified therein and herein. In the event of a conflict
between the terms of this Agreement and the terms of a Placement
Notice, the terms of the Placement Notice will control.
3.
Sale of Placement Shares by Wm Smith . Subject to
the terms and conditions herein set forth, upon the Company’s
issuance of a Placement Notice, and unless the sale of the
Placement Shares described therein has been declined, suspended, or
otherwise terminated in accordance with the terms of this
Agreement, Wm Smith will use its commercially reasonable efforts
consistent with its normal trading and sales practices to sell such
Placement Shares up to the amount specified, and otherwise in
accordance with the terms of such Placement Notice. Wm
Smith will provide written confirmation to the Company no later
than the opening of the Trading Day (as defined below) immediately
following the Trading Day on which it has made sales of Placement
Shares hereunder setting forth the number of Placement Shares sold
on such day, the compensation payable by the Company to Wm Smith
pursuant to Section 2 with respect to such sales, and the Net
Proceeds (as defined below) payable to the Company. Wm
Smith may sell Placement Shares by any method permitted by law
deemed to be an “at the market” offering as defined in
Rule 415 of the Securities Act, including without limitation sales
made directly on NASDAQ Capital Market (the “ Exchange
”), on any other existing trading market for the Common Stock
or to or through a market maker. Wm Smith may also sell
Placement Shares in privately negotiated
transactions. The Company acknowledges and agrees that
(i) there can be no assurance that Wm Smith will be successful
in selling Placement Shares, and (ii) Wm Smith will incur no
liability or obligation to the Company or any other person or
entity if it does not sell Placement Shares for any reason other
than a failure by Wm Smith to use its commercially reasonable
efforts consistent with its normal trading and sales practices to
sell such Placement Shares as required under this Section
3. For the purposes hereof, “ Trading Day
” means any day on which Common Stock is purchased and sold
on the principal market on which the Common Stock is listed or
quoted.
4.
Suspension of Sales . The Company may, upon
notice to Wm Smith in writing (including by email correspondence to
each of the individuals set forth on Schedule 3, if receipt of such
correspondence is actually acknowledged by any of the individuals
to whom the notice is sent, other than via auto-reply) or by
telephone (confirmed immediately by verifiable facsimile
transmission or email correspondence to each of the individuals of
the other Party set forth on Schedule 3), suspend any sale of
Placement Shares; provided, however, that such suspension shall not
affect or impair either party’s obligations with respect to
any Placement Shares sold hereunder prior to the receipt of such
notice. Each of the Parties agrees that no such notice
under this Section 4 shall be effective against the other unless it
is made to one of the individuals named on Schedule 3 hereto, as
such Schedule may be amended from time to time.
5.
Settlement .
(a)
Settlement of Placement Shares . Unless otherwise
specified in the applicable Placement Notice, settlement for sales
of Placement Shares will occur on the third (3rd) Trading Day (or
such earlier day as is industry practice for regular-way trading)
(each, a “ Settlement Date ”) following the
respective Point of Sale (as defined below). The amount
of proceeds to be delivered to the Company on a Settlement Date
against receipt of the Placement Shares sold (the “ Net
Proceeds ”) will be equal to the aggregate sales price
received by Wm Smith at which such Placement Shares were sold,
after deduction for (i) Wm Smith’s commission, discount
or other compensation for such sales payable by the Company
pursuant to Section 2 hereof, (ii) any other amounts due and
payable by the Company to Wm Smith hereunder pursuant to Section
7(g) (Expenses) hereof, and (iii) any transaction fees imposed
by any governmental or self-regulatory organization in respect of
such sales (provided that any fees due and payable to the Financial
Industry Regulatory Authority (FINRA) in respect of this Agreement
or any transactions consummated hereunder shall be solely for the
account of Wm Smith).
(b)
Delivery of Placement Shares . On or before each
Settlement Date, the Company will, or will cause its transfer agent
to, electronically transfer the Placement Shares being sold by
crediting Wm Smith’s or its designee’s account at The
Depository Trust Company through its Deposit and Withdrawal at
Custodian System or by such other means of delivery as may be
mutually agreed upon by the parties hereto which in all cases shall
be freely tradeable, transferable, registered shares in good
deliverable form. On each Settlement Date, Wm Smith will
deliver the related Net Proceeds in same day funds to an account
designated by the Company on, or prior to, the Settlement
Date. The Company agrees that if the Company, or its
transfer agent (if applicable), defaults in its obligation to
deliver Placement Shares on a Settlement Date, the Company agrees
that in addition to and in no way limiting the rights and
obligations set forth in Section 10(a) (Indemnification and
Contribution) hereto, it will (i) hold Wm Smith harmless
against any loss, claim, damage, or expense (including reasonable
legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company and (ii) pay to Wm
Smith any commission, discount, or other compensation to which it
would otherwise have been entitled absent such default.
6.
Representations and Warranties of the Company
. The Company represents and warrants to, and agrees
with, Wm Smith that as of the date of this Agreement and as of each
Representation Date (as defined in Section 7(m) below) on which a
certificate is required to be delivered pursuant to Section 7(m) of
this Agreement, as the case may be, except as may be disclosed in
the Registration Statement or a Disclosure Schedule delivered in
connection herewith:
(a)
Registration Statement and Prospectus . The
Company and, assuming no act or omission on the part of Wm Smith
that would make such statement untrue, the transactions
contemplated by this Agreement meet the requirements for and comply
with the conditions for the use of Form S-3 under the Securities
Act. The Registration Statement has been filed with the
Commission and has been declared effective under the Securities
Act. The Prospectus Supplement will name Wm Smith as an
underwriter, acting as principal and/or agent, that the Company
might engage in the section entitled “Plan of
Distribution.” The Company has not received, and has no
notice of, any order of the Commission preventing or suspending the
use of the Registration Statement, or threatening or instituting
proceedings for that purpose. The Registration Statement
and the offer and sale of Shares as contemplated hereby meet the
requirements of Rule 415 under the Act and comply in all
material respects with said Rule. Any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement have been so
described or filed. Copies of the Registration
Statement, the Prospectus, and any such amendments or supplements
and all documents incorporated by reference therein that were filed
with the Commission on or prior to the date of this Agreement have
been delivered, or are available through EDGAR, to Wm Smith and
their counsel. The Company has not distributed and,
prior to the later to occur of each Settlement Date and completion
of the distribution of the Placement Shares, will not distribute
any offering material in connection with the offering or sale of
the Placement Shares other than the Registration Statement and the
Prospectus and any Issuer Free Writing Prospectus (as defined
below) to which Wm Smith has consented. The Common Stock
is currently listed on the NASDAQ Capital Market under the trading
symbol “GNBT”. Except as disclosed in the
Registration Statement, the Company has not, in the 12 months
preceding the date hereof, received notice from the Exchange to the
effect that the Company is not in compliance with the listing or
maintenance requirements except that the Company has been notified
of its failure to comply with the $1 minimum bid listing
maintenance requirement of the NASDAQ Capital
Market. The Company has no reason to believe that it
will not in the foreseeable future continue to be in compliance
with all such listing and maintenance requirements save and except
as aforesaid.
(b)
No Misstatement or Omission . The Registration
Statement, when it became or becomes effective, and the Prospectus,
and any amendment or supplement thereto, on the date of such
Prospectus or amendment or supplement, conformed or will conform in
all material respects with the requirements of the Securities
Act. At each Settlement Date, the Registration Statement
and the Prospectus, as of such date, will conform in all material
respects with the requirements of the Act. The
Registration Statement, when it became or becomes effective, did
not, or will not, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not
misleading. The Prospectus and any amendment or
supplement thereto, on the date thereof and at each Point of Sale,
did not or will not include an untrue statement of a material fact
or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The documents incorporated by reference
in the Prospectus or any Prospectus Supplement did not, and any
further documents filed and incorporated by reference therein will
not, when filed with the Commission, contain an untrue statement of
a material fact or omit to state a material fact required to be
stated in such document or necessary to make the statements in such
document, in light of the circumstances under which they were made,
not misleading. The foregoing shall not apply to
statements in, or omissions from, any such document made in
reliance upon, and in conformity with, information furnished to the
Company by Wm Smith specifically for use in the preparation
thereof. “ Point of Sale ” means, for
a Placement, the time at which an acquiror of Placement Shares
entered into a contract, binding upon such acquiror, to acquire
such Shares.
(c)
Conformity with Securities Act and Exchange Act
. The documents incorporated by reference in the
Registration Statement, the Prospectus or any amendment or
supplement thereto, when such documents were or are filed with the
Commission under the Securities Act or the Exchange Act or became
or become effective under the Securities Act, as the case may be,
conformed or will conform in all material respects with the
requirements of the Securities Act and the Exchange Act, as
applicable.
(d)
Financial Information . The consolidated
financial statements and the related notes thereto included or
incorporated by reference in the Registration Statement and the
Prospectus comply with the applicable requirements of the Act and
the Exchange Act, as applicable, and present fairly, the financial
position of the Company and its Subsidiaries (as defined below) as
of the dates indicated and the results of their operations and the
changes in their consolidated cash flows for the periods specified;
such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby (except (i) as
may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim
financial statements, to the extent that they may not include
footnotes or may be condensed or summary statements), and the other
financial information included or incorporated by reference in the
Registration Statement and the Prospectus has been derived from the
accounting records of the Company and its Subsidiaries and presents
fairly the information shown thereby. Any pro forma
financial statements or data included or incorporated by reference
in the Registration Statement and the Prospectus comply with the
requirements of Regulation S-X of the Securities Act, including,
without limitation, Article 11 thereof, and the assumptions
used in the preparation of such pro forma financial statements and
data are reasonable, the pro forma adjustments used therein are
appropriate to give effect to the circumstances referred to therein
and the pro forma adjustments have been properly applied to the
historical amounts in the compilation of those statements and
data. No other financial statements or schedules of the
Company or any other entity are required by the Act to be included
in the Registration Statement or the Prospectus. All
disclosures contained in the Registration Statement, the Pricing
Disclosure Materials and the Prospectus regarding “non-GAAP
financial measures” (as such term is defined by Item 10 of
Regulation S-K under the Act) comply with Regulation G of the
Exchange Act and Item 10 of Regulation S-K under the Act, to the
extent applicable. The Company does not have any
material liabilities or obligations, direct or contingent
(including any off-balance sheet obligations and any
“variable interest entities” within the meaning of
Financial Accounting Standards Board Interpretation No. 46), not
disclosed in the Registration Statement, the Pricing Disclosure
Materials and the Prospectus.
(e)
Conformity with EDGAR Filing . The Prospectus
delivered to Wm Smith for use in connection with the sale of the
Placement Shares pursuant to this Agreement will be identical to
the versions of the Prospectus created to be transmitted to the
Commission for filing via EDGAR, except to the extent permitted by
Regulation S-T.
(f)
Organization . The Company and each of its
Subsidiaries are, and will be, duly organized, validly existing as
a corporation and in good standing under the laws of their
respective jurisdictions of organization. The Company
and each of its Subsidiaries are, and will be, duly licensed or
qualified as a foreign corporation for transaction of business and
in good standing under the laws of each other jurisdiction in which
their respective ownership or lease of property or the conduct of
their respective businesses requires such license or qualification,
and have all corporate power and authority necessary to own or hold
their respective properties and to conduct their respective
businesses as described in the Registration Statement and the
Prospectus, except where the failure to be so qualified or in good
standing or have such power or authority would not, individually or
in the aggregate, have a material adverse effect or would
reasonably be expected to have a material adverse effect on or
affecting the business, properties, management, consolidated
financial position, stockholders’ equity or results of
operations of the Company and its Subsidiaries taken as a whole (a
“ Material Adverse Effect ”).
(g)
Subsidiaries . Generex Pharmaceuticals Inc.,
Generex (Bermuda), Inc., Antigen Express, Inc., Generex
Pharmaceuticals (USA) LLC, SIA “Generex Biotechology
BALTIC” and Generex Marketing & Distribution Inc.
(collectively, the “ Subsidiaries ”), are the
Company’s only significant subsidiaries (as such term is
defined in Rule 1-02 of Regulation S-X promulgated by the
Commission). Except as set forth in the Registration
Statement in and the Prospectus, the Company owns, directly or
indirectly, all of the membership interests of the Subsidiaries
free and clear of any lien, charge, security interest, encumbrance,
right of first refusal or other restriction, and all the membership
interests of the Subsidiaries are validly issued and are fully
paid, nonassessable and free of preemptive and similar
rights.
(h)
No Violation or Default . Neither the Company nor
any of its Subsidiaries are (i) in violation of its charter or
by-laws or similar organizational documents; (ii) in default,
and no event has occurred that, with notice or lapse of time or
both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or its Subsidiaries
are a party or by which the Company or its Subsidiaries are bound
or to which any of the property or assets of the Company or its
Subsidiaries are subject; or (iii) in violation of any law or
statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the
case of each of clauses (ii) and (iii) above, for any such
violation or default that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. To the Company’s knowledge, no other party
under any material contract or other agreement to which it or a
Subsidiary is a party is in default in any respect thereunder where
such default would have a Material Adverse Effect.
(i)
No Material Adverse Change . Except as set forth
in or otherwise contemplated by the Registration Statement
(exclusive of any amendment thereof) or the Prospectus (exclusive
of any supplement thereto), since the date of the most recent
financial statements of the Company included or incorporated by
reference in the Registration Statement and the Prospectus and
prior to each Settlement Date, (i) there has not been and will
not have been any change in the capital stock of the Company
(except for changes in the number of outstanding shares of Common
Stock of the Company due to the issuance of shares upon the
exercise or conversion of securities exercisable for, or
convertible into, shares of Common Stock outstanding on the date
hereof) or long-term debt of the Company or of its Subsidiaries or
any dividend or distribution of any kind declared, set aside for
payment, paid or made by the Company on any class of capital stock,
that has resulted in or that would reasonably be expected to result
in a Material Adverse Effect to the Company and its Subsidiaries
taken as a whole; (ii) other than this Agreement, neither the
Company nor its Subsidiaries have entered or will enter into any
transaction or agreement, not in the ordinary course of business,
that is material to the Company and its Subsidiaries taken as a
whole or incurred or will incur any liability or obligation, direct
or contingent, not in the ordinary course of business, that is
material to the Company and its Subsidiaries taken as a whole;
(iii) there has not been any material adverse change in the
business, properties, management, financial position,
stockholders’ equity, or results of operations of the Company
and its Subsidiaries, taken as a whole; and (iv) neither the
Company nor its Subsidiaries have sustained any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court
or arbitrator or governmental or regulatory authority.
(j)
Capitalization . The issued and outstanding
shares of capital stock of the Company have been validly issued,
are fully paid and nonassessable and, other than as disclosed in or
contemplated by the Registration Statement or the Prospectus, are
not subject to any preemptive rights, rights of first refusal or
similar rights. The Company has an authorized, issued
and outstanding capitalization as set forth in the Registration
Statement and the Prospectus as of the dates referred to therein
(other than the grant of additional options under the
Company’s existing stock option plans, or changes in the
number of outstanding shares of Common Stock of the Company due to
the issuance of shares upon the exercise or conversion of
securities exercisable for, or convertible into, shares of Common
Stock outstanding on the date hereof) and such authorized capital
stock conforms to the description thereof set forth in the
Registration Statement and the Prospectus. The
description of the securities of the Company in the Registration
Statement and the Prospectus is complete and accurate in all
material respects. Except as disclosed in or
contemplated by the Registration Statement or the Prospectus, as of
the date referred to therein, the Company does not have outstanding
any options to purchase, or any rights or warrants to subscribe
for, or any securities or obligations convertible into, or
exchangeable for, or any contracts or commitments to issue or sell,
any shares of capital stock or other securities.
(k)
Authorization; Enforceability . The Company has
full legal right, power and authority to enter into this Agreement
and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the
Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except to the extent that
(i) enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable
principles and (ii) the indemnification and contribution
provisions of Section 10 hereof may be limited by federal or state
securities laws and public policy considerations in respect
thereof.
(l)
Authorization of Placement Shares . The Placement
Shares, when issued and delivered pursuant to the terms approved by
the Board of Directors or a duly designated committee thereof,
against payment therefor as provided herein, will be duly and
validly authorized and issued and fully paid and nonassessable,
free and clear of any pledge, lien, encumbrance, security interest
or other claim, including any statutory or contractual preemptive
rights, resale rights, rights of first refusal or other similar
rights, and will be registered pursuant to Section 12 of the
Exchange Act. The Placement Shares, when issued, will
conform in all material respects to the description thereof set
forth in or incorporated into the Prospectus.
(m)
No Consents Required . No consent, approval,
authorization, order, registration or qualification of or with any
court or arbitrator or governmental or regulatory authority is
required for the execution, delivery and performance by the Company
this Agreement, the issuance and sale by the Company of the
Placement Shares, except for the registration of the Placement
Shares under the Act and such consents, approvals, authorizations,
orders and registrations or qualifications as may be required under
applicable state securities laws or by the by-laws and rules of the
Financial Industry Regulatory Authority (“ FINRA
”) or the Exchange in connection with the sale of the
Placement Shares by Wm Smith.
(n)
No Preferential Rights . Except as set forth in
the Registration Statement, the Prospectus or in a separate
disclosure letter delivered to Wm Smith concurrently with the
execution and delivery of this Agreement, (i) no person, as
such term is defined in Rule 1-02 of Regulation S-X promulgated
under the Securities Act (each, a “ Person ”),
has the right, contractual or otherwise, to cause the Company to
issue or sell to such Person any shares of Common Stock or shares
of any other capital stock or other securities of the Company,
(ii) no Person has any preemptive rights, resale rights,
rights of first refusal, or any other rights (whether pursuant to a
“poison pill” provision or otherwise) to purchase any
shares of Common Stock or shares of any other capital stock or
other securities of the Company, (iii) no Person has the
right to act as an underwriter or as a financial advisor to the
Company in connection with the offer and sale of the Shares, and
(iv) no Person has the right, contractual or otherwise, to
require the Company to register under the Securities Act any shares
of Common Stock or shares of any other capital stock or other
securities of the Company, or to include any such shares or other
securities in the Registration Statement or the offering
contemplated thereby, whether as a result of the filing or
effectiveness of the Registration Statement or the sale of the
Placement Shares as contemplated thereby or otherwise.
(o)
Independent Public Accountant . MSCM LLP (the
“ Accountant ”), whose report on the
consolidated financial statements of the Company is filed with the
Commission as part of the Registration Statement and the
Prospectus, are and, during the periods covered by their report,
were independent public accountants within the meaning of the
Securities Act and the Public Company Accounting Oversight Board
(United States). To the Company’s knowledge, after
due and careful inquiry, the Accountant is not in violation of the
auditor independence requirements of the Sarbanes-Oxley Act of 2002
(the “ Sarbanes-Oxley Act ”) with respect to the
Company.
(p)
Enforceability of Agreements . To the knowledge
of the Company, all agreements between the Company and third
parties expressly referenced in the Prospectus are legal, valid and
binding obligations of the Company enforceable in accordance with
their respective terms, except to the extent that
(i) enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable
principles and (ii) the indemnification provisions of certain
agreements may be limited be federal or state securities laws or
public policy considerations in respect thereof and except for any
unenforceability that, individually or in the aggregate, would not
unreasonably be expected to have a Material Adverse
Effect.
(q)
No Litigation . Except as set forth in the
Registration Statement or the Prospectus, there are no legal,
governmental or regulatory actions, suits or proceedings pending,
nor, to the Company’s knowledge, any legal, governmental or
regulatory investigations, to which the Company or a Subsidiary is
a party or to which any property of the Company or any of its
Subsidiaries is the subject that, individually or in the aggregate,
if determined adversely to the Company or any of its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the ability of the Company to
perform its obligations under this Agreement; to the
Company’s knowledge, no such actions, suits or proceedings
are threatened or contemplated by any governmental or regulatory
authority or threatened by others; and (i) there are no
current or pending legal, governmental or regulatory
investigations, actions, suits or proceedings that are required
under the Act to be described in the Prospectus that are not so
described; and (ii) there are no contracts or other documents
that are required under the Act to be filed as exhibits to the
Registration Statement that are not so filed.
(r)
Licenses and Permits . Except as set forth in the
Registration Statement or the Prospectus, the Company and each of
its Subsidiaries possess or have obtained, and at each Settlement
Date will possess and will have obtained, all licenses,
certificates, consents, orders, approvals, permits and other
authorizations issued by, and have made all declarations and
filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the
ownership or lease of their respective properties or the conduct of
their respective businesses as described in the Registration
Statement and the Prospectus (the “ Permits ”),
except where the failure to possess, obtain or make the same would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except as disclosed in
the Registration Statement or the Prospectus, neither the Company
nor any of its Subsidiaries have received written notice of any
proceeding relating to revocation or modification of any such
Permit or has any reason to believe that such Permit will not be
renewed in the ordinary course, except where the failure to obtain
any such renewal would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
(s)
Market Capitalization . As of the close of
trading on the Exchange on the Trading Day immediately prior to
the date of this Agreement, the aggregate market value of
the outstanding voting and non-voting common equity (as defined in
Securities Act Rule 405) of the Company held by persons other than
affiliates of the Company (pursuant to Securities Act Rule 144,
those that directly, or indirectly through one or more
intermediaries, control, or are controlled by, or are under common
control with, the Company) (the “ Non-Affiliate
Shares ”), was greater than $75 million (calculated by
multiplying (x) the price at which the common equity of the Company
was last sold on the Exchange on the Trading Day immediately prior
to the date of this Agreement times (y) the number of Non-Affiliate
Shares). The Company is not a shell company (as defined
in Rule 405 under the Securities Act) and has not been a shell
company for at least 12 calendar months previously and if it has
been a shell company at any time previously, has filed current Form
10 information (as defined in Instruction I.B.6 of Form S-3) with
the Commission at least 12 calendar months previously reflecting
its status as an entity that is not a shell company.
(t)
No Material Defaults . Neither the Company nor
any of the Subsidiaries has defaulted on any installment on
indebtedness for borrowed money or on any rental on one or more
long-term leases, which defaults, individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect. The Company has not filed a report pursuant to
Section 13(a) or 15(d) of the Exchange Act since the filing of its
last Annual Report on Form 10-K, indicating that it (i) has
failed to pay any dividend or sinking fund installment on preferred
stock or (ii) has defaulted on any installment on indebtedness
for borrowed money or on any rental on one or more long-term
leases, which defaults, individually or in the aggregate, could
reasonably be expected to have a Material Adverse
Effect.
(u)
Certain Market Activities . Neither the Company,
nor any of the Subsidiaries, nor any of their respective directors,
officers or controlling persons has taken, directly or indirectly,
any action designed, or that has constituted or might reasonably be
expected to cause or result in, under the Exchange Act or
otherwise, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Placement Shares.
(v)
Broker/Dealer Relationships . Neither the Company
nor any of the Subsidiaries or any related entities (i) is
required to register as a “broker” or
“dealer” in accordance with the provisions of the
Exchange Act or (ii) directly or indirectly through one or
more intermediaries, controls or is a “person associated with
a member” or “associated person of a member”
(within the meaning of Article I of the NASD Manual administered by
FINRA).
(w)
No Reliance . The Company has not relied upon Wm
Smith or legal counsel for Wm Smith for any legal, tax or
accounting advice in connection with the offering and sale of the
Placement Shares.
(x)
Taxes . The Company and each of its Subsidiaries
have filed all federal, state, local and foreign tax returns which
have been required to be filed and paid all taxes shown thereon
through the date hereof, to the extent that such taxes have become
due and are not being contested in good faith. Except as
otherwise disclosed in or contemplated by the Registration
Statement or the Prospectus, no tax deficiency has been determined
adversely to the Company or any of its Subsidiaries which has had,
or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. The Company has no
knowledge of any federal, state or other governmental tax
deficiency, penalty or assessment which has been or might be
asserted or threatened against it which could have a Material
Adverse Effect.
(y)
Title to Real and Personal Property . Except as
set forth in the Registration Statement or the Prospectus, the
Company and its Subsidiaries have good and valid title in fee
simple to all items of real property and good and valid title to
all personal property described in the Registration Statement or
Prospectus as being owned by them that are material to the
businesses of the Company or such Subsidiary, in each case free and
clear of all liens, encumbrances and claims, except those that
(i) do not materially interfere with the use made and proposed
to be made of such property by the Company and any of its
Subsidiaries or (ii) would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect. Any real property described in the Registration
Statement or Prospectus as being leased by the Company and any of
its Subsidiaries is held by them under valid, existing and
enforceable leases, except those that (A) do not materially
interfere with the use made or proposed to be made of such property
by the Company or any of its Subsidiaries or (B) would not be
reasonably expected, individually or in the aggregate, to have a
Material Adverse Effect.
(z)
Intellectual Property . Except as set forth in
the Registration Statement or the Prospectus, the Company and its
Subsidiaries own or possess adequate enforceable rights to use all
patents, patent applications, trademarks (both registered and
unregistered), service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures)
(collectively, the “ Intellectual Property ”),
necessary for the conduct of their respective businesses as
conducted as of the date hereof, except to the extent that the
failure to own or possess adequate rights to use such Intellectual
Property would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; the Company and any of
its Subsidiaries have not received any written notice of any claim
of infringement or conflict which asserted Intellectual Property
rights of others, which infringement or conflict, if the subject of
an unfavorable decision, would result in a Material Adverse Effect;
the Company has conducted searches of the United States patents of
record and published foreign patents issued to third parties that
may interfere with any of the Company’s or its
Subsidiaries’ patents or patent applications and it has
determined that none of the Company’s or its
Subsidiaries’ patents or patent applications interfere with
any other United States patents or United States patent
applications which correspond to published foreign patents; the
Company has conducted an infringement search and determined that no
patent held by any third party is infringed by the activities of
the Company and its Subsidiaries; there are no pending, or to the
Company’s knowledge, threatened judicial proceedings or
interference proceedings challenging the Company’s or its
Subsidiaries’ rights in or to or the validity of the scope of
any of the Company’s or its Subsidiaries’ patents,
patent applications or proprietary information; no other entity or
individual has any right or claim in any of the Company’s or
its Subsidiaries’ patents, patent applications or any patent
to be issued therefrom by virtue of any contract, license or other
agreement entered into between such entity or individual and the
Company or by any non-contractual obligation, other than by written
licenses granted by the Company; the Company and its Subsidiaries
have not received any written notice of any claim challenging the
rights of the Company or a Subsidiary in or to any Intellectual
Property owned, licensed or optioned by the Company or such
Subsidiary which claim, if the subject of an unfavorable decision
would result in an Material Adverse Effect.
(aa)
Compliance Program . The Company has established
and administers a compliance program applicable to the Company, to
assist the Company and the directors, officers and employees of the
Company in complying with applicable regulatory
guidelines.
(bb)
Environmental Laws . Except as set forth in the
Registration Statement or the Prospectus, the Company and its
Subsidiaries (i) are in compliance with any and all applicable
federal, state, local and foreign laws, rules, regulations,
decisions and orders relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, “ Environmental
Laws ”); (ii) have received and are in compliance
with all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses as described in the Registration Statement and the
Prospectus; and (iii) have not received notice of any actual
or potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants, except, in the case of any of clauses
(i), (ii) or (iii) above, for any such failure to comply or failure
to receive required permits, licenses, other approvals or liability
as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(cc)
Disclosure Controls . The Company and each of its
Subsidiaries maintain systems of internal accounting controls
sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15
and 15d-15) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the
Company and each of its Subsidiaries is made known to the
certifying officers by others within those entities, particularly
during the period in which the Company’s Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, as the case may be, is
being prepared. The Company’s certifying officers
have evaluated the effectiveness of the Company’s controls
and procedures as of a date within 90 days prior to the filing date
of the Form 10-K for the fiscal year ended July 31, 2008 (such
date, the “ Evaluation Date ”). The
Company presented in its Form 10-K for the fiscal year ended July
31, 2008 the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Act) or, to the Company’s
knowledge, in other factors that could significantly affect the
Company’s internal controls.
(dd)
Sarbanes-Oxley . To the knowledge of the Company,
there is and has been no failure on the part of the Company and any
of the Company’s directors or officers, in their capacities
as such, to comply with any applicable provisions of the
Sarbanes-Oxley Act and the rules and regulations promulgated
thereunder. Each of the principal executive officer and
the principal financial officer of the Company (or each former
principal executive officer of the Company and each former
principal financial officer of the Company as applicable) has made
all certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to all reports, schedules, forms,
statements and other documents required to be filed by it or
furnished by it to the Commission. For purposes of the
preceding sentence, “principal executive officer” and
“principal financial officer” shall have the meanings
given to such terms in the Sarbanes-Oxley Act.
(ee)
Finder’s Fees . Neither the Company nor any
of the Subsidiaries has incurred any liability for any
finder’s fees, brokerage commissions or similar payments in
connection with the transactions herein contemplated, except as may
otherwise exist with respect to Wm Smith pursuant to this
Agreement.
(ff)
Labor Disputes . No labor disturbance by or
dispute with employees of the Company or any of its Subsidiaries
exists or, to the knowledge of the Company, is threatened which
would reasonably be expected to result in a Material Adverse
Effect
(gg)
Investment Company Act . Neither the Company nor
any of the Subsidiaries is or, after giving effect to the offering
and sale of the Placement Shares, will be an “investment
company” or an entity “controlled” by an
“investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended (the “
Investment Comp
