SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
GENEREX BIOTECHNOLOGY CORPORATION
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(Name of Registrant as Specified in Its Charter)
______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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GENEREX BIOTECHNOLOGY CORPORATION
33 Harbour Square
Suite 202
Toronto, Ontario, Canada M5J 2G2
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 4, 2003
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders of
Generex Biotechnology Corporation ("Generex") that will be held on November 4,
2003, at 10:00 a.m. (local time), at St. Lawrence Hall, 157 King Street East,
Toronto, Ontario, Canada M5E 1C4, for the following purposes, as set forth in
the accompanying proxy statement:
1. To approve an amendment to Generex's Restated Certificate of
Incorporation increasing the number of authorized shares of common stock
to 150,000,000;
2. To authorize the Board of Directors, in the three-month period commencing
with the date of the meeting, to issue, without prior stockholder
approval, in connection with capital raising transactions, and/or
acquisitions of assets, businesses or companies, up to 10,000,000 shares
of common stock, including options, warrants, securities or other rights
convertible into common stock, in the aggregate, in excess of the number
of shares that NASDAQ's Rules 4350(i)(1)(C) and (D) permit Generex to
issue in such transactions without prior stockholder approval, issuance
of such 10,000,000 shares to be upon such terms as the Board of Directors
shall deem to be in the best interests of Generex, for a price of not
less than 70% of the market price at the time of such issuance and for an
aggregate consideration not to exceed $50,000,000; and
3. To approve an amendment to the Generex 2001 Stock Option Plan (the "2001
Plan") increasing the number of shares of common stock which may be
issued upon exercise of options under the 2001 Plan from 4,000,000 to
8,000,000.
The Board of Directors has established the close of business on October 10,
2003 as the record date for the determination of stockholders entitled to
receive notice of, and to vote at, the special meeting and any adjournment or
postponement thereof.
YOU ARE URGED TO REVIEW CAREFULLY THE ACCOMPANYING PROXY STATEMENT AND TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
You may revoke your proxy at any time before it has been voted. You are
cordially invited to attend the special meeting in person if it is convenient
for you to do so.
By order of the Board of Directors,
/s/ Rose C. Perri
--------------------------------
Rose C. Perri
Secretary
October __, 2003
2
GENEREX BIOTECHNOLOGY CORPORATION
PROXY STATEMENT
General Information
This proxy statement is provided to the stockholders of Generex
Biotechnology Corporation ("Generex") in connection with the solicitation by the
Board of Directors of Generex of proxies for use at the special meeting of
stockholders of Generex to be held on November 4, 2003 at 10:00 a.m. (local
time), at St. Lawrence Hall, 157 King Street East, Toronto, Ontario, Canada M5E
1C4, and any adjournments or postponements thereof. A form of proxy is enclosed
for use at the special meeting. Proxies properly executed and returned in a
timely manner will be voted at the special meeting in accordance with the
directions specified therein. If no direction is indicated, they will be voted
FOR (1) the amendment to increase the number of authorized shares of common
stock to 150,000,000, (2) the proposal to authorize the Board of Directors to
issue up to 10,000,000 shares of common stock at less than market price in
excess of amounts permitted under Nasdaq rules, and (3) the amendment to the
Generex 2001 Stock Option Plan (the "2001 Plan") increasing the number of shares
of common stock which may be issued upon exercise of options under the 2001 Plan
from 4,000,000 to 8,000,000. The persons named as proxies were selected by the
Board of Directors and are present members of the executive management of
Generex.
Any stockholder voting by proxy may revoke that proxy at any time before it
is voted at the special meeting by delivering written notice to the Secretary of
Generex, by delivering a proxy bearing a later date or by attending the special
meeting in person and casting a ballot.
Generex's principal executive offices are located at 33 Harbour Square,
Suite 202, Toronto, Ontario, Canada M5J 2G2, and its telephone number is (416)
364-2551. Proxy materials are first being mailed to stockholders beginning on or
about October 14, 2003.
Shares Outstanding, Voting Rights and Vote Required
Only stockholders of record at the close of business on October 10, 2003 are
entitled to vote at the special meeting. The only voting stock of Generex
outstanding and entitled to vote at the special meeting is its common stock,
$.001 par value per share (the "Common Stock"). As of the close of business on
October 10, 2003, _____ shares of Common Stock were outstanding. Each share of
Common Stock issued and outstanding is entitled to one vote on matters properly
submitted at the special meeting. Cumulative voting is not permitted under
Generex's Restated Certificate of Incorporation.
The presence, in person or by proxy, of the holders of a majority of the
total issued and outstanding shares of Common Stock entitled to vote at the
special meeting is necessary to constitute a quorum for the transaction of
business at the special meeting. Abstentions and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum. A
broker non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. Abstentions will be counted in
tabulating votes cast on the proposals presented to stockholders and will have
the same effect as negative votes. Broker non-votes will not be counted in
tabulating votes cast on the proposals presented to stockholders. Votes cast in
person or by proxy at the special meeting will be tabulated by the election
inspectors appointed for the meeting.
Approval of the proposal to amend to the Restated Certificate of
Incorporation requires the affirmative vote of a majority of the outstanding
shares of Common Stock entitled to vote at the special meeting. Approval of the
proposal to authorize the Board of Directors to issue up to 10,000,000 shares of
Common Stock at less than market price in excess of amounts permitted under
Nasdaq rules and the proposal to amend the 2001 Plan each requires the
affirmative vote of a majority of the shares present or represented by proxy at
the special meeting and cast on such proposals. The Board of Directors
recommends voting FOR the approval of an amendment to Generex's Restated
Certificate of Incorporation increasing the number of shares of Common Stock to
150,000,000, the proposal to authorize the Board of Directors to issue up to
10,000,000 shares of Common Stock at less than market price in excess of amounts
permitted under Nasdaq rules, and the amendment to the 2001 Plan increasing the
number of shares of Common Stock which may be issued upon exercise of options
under the 2001 Plan from 4,000,000 to 8,000,000.
3
PROPOSAL TO APPROVE AN AMENDMENT TO GENEREX'S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO 150,000,000.
(Proposal 1)
Generex's current Restated Certificate of Incorporation authorizes the
issuance of up to 50,000,000 shares, par value $.001 per share, of Common Stock,
and 1,000,000 shares of preferred stock, par value $.001. Proposal 1 seeks the
approval of Generex's stockholders to amend Generex's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
150,000,000, par value $.001 per share. Under Delaware law, the Certificate of
Incorporation cannot be amended without stockholder approval. As of October 3,
2003 Generex had outstanding 27,245,631 shares of Common Stock, and an
additional 12,457,994 shares of Common Stock were reserved to be issued pursuant
to outstanding stock options and warrants. In addition, Generex has outstanding
1,123 shares of Series A Preferred Stock with an aggregate liquidation
preference of $13,492,845. The Series A Preferred Stock may be converted at the
option of the holder at any time into an aggregate 533,799 shares of Common
Stock. In addition, if any shares of the Series A Preferred Stock remain
outstanding on January 16, 2007, Generex is required to redeem them for their
liquidation preference, payable in cash or in shares of Generex's Common Stock
valued at the fair market value of the stock at the time of redemption. Generex
also has outstanding 1,000 shares of Special Voting Rights Preferred Stock.
The Board of Directors believes that the increase in the number of
authorized shares is necessary in order to facilitate Generex's ability to raise
capital, to facilitate potential acquisitions and mergers, and to attract
qualified employees by offering stock options for shares of Common Stock as
incentive compensation for such persons, while meeting Generex's potential
responsibility to issue shares upon conversion of or in exchange for the Series
A Preferred Stock and upon exercise of outstanding options and warrants. The
proposed amendment is necessary to authorize shares that will be available for
Generex to issue Common Stock for such purposes without seeking stockholder
approval. Generex intends to issue additional shares in private placement
transactions to finance its clinical trials and general corporate expenses, and
to continue to issue options to employees and options and warrants to
consultants. In addition, Generex may issue additional shares in connection with
an acquisition, corporate transaction or other business combination if presented
with such an opportunity that would be beneficial to Generex. Generex has no
binding commitment regarding the issuance of any additional shares, in private
placements, but intends to engage in capital raising transactions form time to
time. Generex also intends to respond when appropriate business acquisition
opportunities are presented. Generex has previously announced the signing of
a letter of intent to acquire Antigen Express, Inc., although the parties are
still conducting due diligence and neither Generex or Antigen Express at this
time has any binding commitment.
The authorized but unissued shares of Common Stock will be available
for issuance from time to time as may be deemed advisable or required for
various purposes by the Board of Directors. If this proposal is approved, the
Board of Directors would be able to authorize the issuance of shares for these
transactions without the necessity and related costs and delays of either
calling a special stockholders' meeting or waiting for the regularly scheduled
annual meeting of the stockholders in order to increase the authorized shares of
Common Stock. In some instances, the rules of the NASDAQ Market require
stockholder approval of certain share issuances, notwithstanding the lack of any
legal requirement for stockholder approval, such as in the case of issuance of
shares of Common Stock, which would result in change of control. If, in a
particular transaction, stockholder approval was required by the NASDAQ rules or
the rules of any stock exchange or other market on which Generex's Common Stock
is then listed, the matter would be referred to the stockholders for their
approval. Otherwise, sale and issuance of the authorized, but unissued, shares
of Common Stock would remain within the discretion of the Board of Directors, in
the exercise of their fiduciary duties, and subject to applicable corporate,
securities and other laws and regulations.
4
Although approval of this Proposal will increase the number of shares
of authorized Common Stock, it would not immediately result in any change of the
voting power or of the equity percentages of Generex owned by the stockholders
prior to the issuance of any new shares of Common Stock. The amendment to
increase the authorized shares of Common Stock is not intended to have any
anti-takeover effect and is not part of any series of any anti-takeover
measures. However, stockholders should note that the availability of additional
authorized but unissued shares of Common Stock could make any attempt to gain
control of Generex or the Board of Directors more difficult or time-consuming
and that the availability of additional authorized but unisssued shares of
Common Stock might make it more difficult to remove management. Although the
Board of Directors currently has no intention of doing so, shares of Common
Stock could be issued by the Board of Directors to dilute the percentage of
Common Stock owned by a significant shareholder and increase the cost of, or the
number of, voting shares necessary to acquire control of the Board or to meet
the voting requirements imposed by Delaware law with respect to a business
combination involving Generex. Generex is not aware of any proposed attempt to
take over Generex or of any attempt to acquire a large block of Generex's Common
Stock.
Description of Authorized Classes
Common Stock
Holders of Common Stock are entitled to one vote for each share of
Common Stock owned of record on all matters to be voted on by stockholders,
including the election of directors. Holders of Common Stock do not have
cumulative voting rights, pre-emptive or other subscription rights. Subject to
preferences that may be applicable to any preferred stock outstanding at the
time, the holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available at such time and in such amounts as
the Board of Directors may, from time to time, determine in its sole discretion.
Upon the liquidation, dissolution or winding up of Generex, holders of
outstanding shares of Common Stock are entitled to receive the assets legally
ratably among the holders of the Common Stock outstanding at that time, after
payment of the liquidation preferences, if any, on all outstanding preferred
stock and payment of creditors' claims. Each outstanding share of Common Stock
is fully paid and non-assessable.
Preferred Stock
The Board of Directors has authority, by resolution, to issue up to
1,000,000 shares of preferred stock in one or more series and fix the number of
shares constituting any such series, the voting powers, designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations, or restrictions thereof, including the dividend
rights, dividend rate, terms of redemption (including sinking fund provisions),
redemption price or prices, conversion rights and liquidation preferences of the
shares constituting any series, without any further vote or action by the
stockholders. For example, the Board of Directors is authorized to issue a
series of preferred stock that would have the right to vote on, or veto, any
proposed amendment to Generex's Restated Certificate of Incorporation or any
other proposed corporate action, including business combinations.
5
Generex in 1998 designated 1,000 shares of the preferred stock as
Special Voting Rights Preferred Stock. The Special Voting Rights Preferred Stock
does not generally have voting rights, but the holders of the Special Voting
Rights Preferred Stock upon a change of control, have the right to elect a
majority of Generex's Board of Directors. In addition, the holders of the
Special Voting Rights Preferred Stock have the right to approve any transaction
that would result in a change of control. All 1,000 of these shares are
currently outstanding and held by Dr. Modi, our Vice President Research and
Development. A "change of control" is deemed to occur if Generex's founders
(namely, Ms. Gluskin, Dr. Modi or Ms. Rose Perri), or directors appointed or
nominated with the approval of Generex's founders, should cease to constitute at
least 60% of Generex's directors, or if any person becomes either Chairman of
the Board of Directors or Chief Executive Officer of Generex without the prior
approval of those directors. If a change of control were to occur, Dr. Modi
would thereafter be able to elect a majority of the directors. No change of
control has occurred to date.
In 2001, Generex designated 1,512 shares of preferred stock as Series A
Preferred Stock. The Series A Preferred Stock does not generally have voting
rights, but the holders of the Series A Preferred Stock do have the right to
vote on, or veto, a proposed amendment to Generex's Certificate of Incorporation
or a proposal to alter the rights of the holders of the Series A Preferred
Stock. In January 2001, Generex established a joint venture with Elan
International Services, Ltd. ("EIS") and Elan Corporation, plc ("Elan"). In
connection with the transaction, EIS purchased 1,000 shares of the Series A
Preferred Stock, for $12,015,000. EIS has the right to exchange the Series A
Preferred Stock for 30.1% of Generex's interest in Generex (Bermuda), Inc.
Alternatively, the Series A Preferred Stock may be converted, at EIS' option,
into shares of Generex's Common Stock, by converting the aggregate liquidation
preference of the Series A Preferred Stock into Common Stock at a conversion
price of approximately $25 per share. Finally, if any shares of Series A
Preferred Stock remain outstanding on January 16, 2007, Generex is required to
redeem all of the shares by paying the aggregate liquidation preference in cash
or shares of Common Stock. For this purpose the shares of Common Stock will be
valued at market value at the time of redemption. The Series A liquidation
preference is $12,015 per share. Including dividends on the Series A Preferred
Stock, there are 1,123 shares of Series A Preferred Stock out standing, with an
aggregate liquidation preference of $13,492,845. The Series A Preferred Stock is
entitled to an annual 6% dividend, payable in additional shares of Series A
Preferred Stock.
Text of Amendment
The proposed amendment would cause ARTICLE IV of Generex's Restated Certificate
of Incorporation to be amended to read as follows:
IV: The aggregate number of shares of all classes of stock that this
Corporation shall have the authority to issue is 151,000,000 shares,
consisting of (a) 150,000,000 shares of common stock, par value $.001
per share, and (b) 1,000,000 shares of preferred stock, par value $.001
per share. The preferred stock may be issued in one or more series and
may have preferences as to dividends and to liquidation of the
Corporation. The Board of Directors of the Corporation shall establish
the specific rights, preferences, voting privileges and restrictions of
such preferred stock, or any series thereof.
6
The Board of Directors recommends a vote FOR the Proposal to Approve an
Amendment to Generex's Restated Certificate of Incorporation to Increase
the Number of Authorized Shares of Common Stock to 150,000,000.
PROPOSAL TO APPROVE THE POTENTIAL ISSUANCE AND SALE OF SHARES AT PRICES
BELOW THE THEN CURRENT MARKET PRICE IN POTENTIAL CAPITAL RAISING
TRANSACTIONS AND ACQUISITIONS
(Proposal 2)
Management has recommended to the Board of Directors that, in light of
Generex's actual and potential cash needs, Generex must avail itself of all
possible means of financing, including the private placement of its securities.
In addition, Generex has been presented with potential acquisition candidates
and other acquisition and business combination opportunities in the past and
must have the flexibility to timely act upon any such opportunities and
transactions which may arise in the future. Management informed the Board that
the ability of Generex to offer its securities in private placements or
acquisitions at an offering price below the market price or book value of such
securities at the time of any such private placements or acquisitions would
afford Generex greater flexibility in structuring future financings or
acquisitions. However, NASDAQ Marketplace Rules 4350(i)(1)(C) and (D) require
stockholder approval prior to the sale or issuance or potential issuance of
shares equal to twenty percent (20%) or more of Generex's Common Stock or twenty
percent or more of the voting power of Generex outstanding before the issuance,
if the effective sale price of the Common Stock is less than the greater of the
book or market value of the Common Stock. Shares of Generex's Common Stock
issuable upon the exercise or conversion of warrants, options, debt instruments,
preferred stock or other equity securities issued or granted in such capital
raising transactions or acquisitions are considered shares issued in the
transaction or acquisition in determining whether the 20% limit has been
reached. Management believes the delay required to arrange for a meeting of
stockholders to approve a specific financing transaction or acquisition might
jeopardize the closing of the transaction or acquisition. In order to comply
with the possible application of the NASDAQ rules, Generex is seeking
stockholder approval for the issuance and sale of shares in a potential
acquisition, corporate transaction, other business combination or private
placement or other capital raising transaction ("Potential Equity Related
Investment") so that the Board of Directors will have flexibility to timely
enter into and close any such transactions.
There are various reasons management may seek additional financing in
the three-month period. Generex may need additional investment to fund expanded
research and development activities and working capital needs. While Generex has
no present need for additional financing for these purposes, Generex believes it
should have the flexibility to respond to opportunities as they are presented.
In addition, the sale of equity securities may be necessary to enable Generex to
continue to comply with the Stockholders' Equity requirements of the NASDAQ
SmallCap market. Increases in Stockholders' Equity could potentially permit
Generex to regain compliance with NASDAQ National Market standards. In addition,
Generex may be presented with an acquisition, corporate transaction or other
business combination opportunity that would be beneficial to it and would
require the issuance of shares and/or options in excess of the amounts required
under the Nasdaq rules.
7
Management believes it may need the general flexibility to issue shares
at prices which Generex and any prospective investor or acquisition candidate
expressly contemplate are below market value. In addition, Management also
believes that it needs this flexibility provided by this proposal as there may
be situations where the parties to a transaction believe the shares are being
issues at market value but the price would be considered below market by Nasdaq.
This would primarily occur because investors and others in the financial
community may consider market value to be an average of closing prices for a
period of several days, while Nasdaq would consider the market price to be the
closing price on a particular day or an average over a much shorter period.
Potential Equity Related Investments
The following description of various forms of Potential Equity Related
Investment and the reasons for such Potential Equity Related Investments is
offered for informational purposes to Generex's stockholders in connection
with this proxy solicitation and does not constitute an offer to sell or a
solicitation of an offer to buy any securities of Generex. Generex
cannot guarantee any private placement or other financing will be completed (or
if so, what the timing and the terms may be) and, accordingly, cannot be certain
that it will receive any proceeds from any potential financing.
At the end of May and the beginning of June, Generex raised $4,365,246
in equity financing. Some of these shares were sold at prices below market,
however, the transactions as a whole did not require stockholder approval under
the NASDAQ rule. Generex intends to consider additional private placements in
the near future, or a different form of private placement, as well as sales of
securities directly to venture capital or other select institutional investors.
Given the uncertainty of the ultimate sales price for securities placed in any
such private placement or other equity investment, and the percentage of
Generex's currently outstanding Common Stock that may be sold, the sale of
shares in a Potential Equity Related Investment (or one more transactions which
NASDAQ would consider to be integrated) could result in the issuance of twenty
percent or more of the outstanding voting stock of Generex and/or twenty percent
or more of the voting power at a price less than the greater of the book value
or the market value of the shares. Therefore, Generex is seeking stockholder
approval because the potential issuance and sale of shares may trigger the
threshold requiring approval under NASDAQ Marketplace Rules 4350(i)(1)(C) and/or
(D). Generex believes that the current capital market environment requires
Management to maintain maximum flexibility in order to be able to timely
consummate any potential capital-raising transaction without undue delay.
The Board of Directors has the authority, without stockholder approval
and without endangering Generex's NASDAQ listing, to authorize the issuance in
each separate transaction (which is not integrated, under NASDAQ's
interpretation of its own rules, with other transactions) of up to twenty
percent of its shares outstanding before such transaction. As of October 3,
2003, the Company had 27,245,631 shares outstanding. Consequently, the Board may
authorize the issuance of up to 5,499,126 shares without obtaining shareholder
approval, assuming issuance of the new shares is not "integrated" with Generex's
prior shares of stock below market. Generally, transactions which are at least
three months apart will not be considered integrated by NASDAQ. The approval of
Proposal No. 2 will give the Board of Directors the right to authorize the
issuance of an aggregate of 10,000,000 additional shares in such three month
period, in addition to these 5,499,126 shares, for an aggregate of 15,499,126
shares. In addition, stockholders should note that, whether or not Proposal No.
2 is adopted, the Board of Directors may authorize the issuance of any number of
shares in separate transactions which would not be deemed integrated by NASDAQ,
even if the aggregate number of such shares exceeds the number authorized by
Proposal No. 2.
8
Effect of a Potential Equity Related Investment upon Existing Stockholders
Approval of Proposal No. 2 will give the Board of Directors complete
discretion to determine the amount, type and terms of securities to be issued by
Generex. For example, Generex may issue any one or more of Common Stock,
preferred stock convertible to Common Stock, debt securities or other debt
obligations convertible to Common Stock, options and warrants. Some or all of
these securities may be issued to investment bankers, placement agents,
financial advisors and others who assist Generex in raising capital or in
financial affairs, for services rendered and not for cash investment. The Board
of Directors will have discretion to determine any applicable dividend or
interest rates, conversion prices, voting rights, redemption prices, maturity
dates and similar matters. If securities convertible into or exercisable for
Common Stock are issued in a Potential Equity Related Investments and such
securities, at the time of issuance constitute twenty percent or more of
Generex's securities and/or twenty percent or more of its voting power
outstanding prior to such issuance, then stockholder approval of the Potential
Equity Related Investments also will constitute approval of the issuance of
shares of Common Stock upon conversion of such securities, and no additional
approval will be solicited.
It is expected that any such securities will not be registered under
the Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state or foreign country. The securities will likely be
offered and sold in reliance on Section 4(2) of the Securities Act or another
applicable exemption. However, it is also likely that the terms of the
transactions will require Generex to register the shares of Common Stock for
resale by the investors after closing of the investment.
Any transaction requiring approval by stockholders under NASDAQ Rules
4350(i)(1)(C) and (D), would be likely to result in a significant increase in
the number of shares of Common Stock of Generex outstanding on a
fully-diluted basis, and current stockholders will own a smaller percentage of
the outstanding Common Stock of Generex. If convertible preferred stock,
convertible debt or another senior security is issued in the Potential Equity
Related Investment, the holders of the shares of such preferred stock, debt or
senior security will have claims on Generex's assets and other rights
superior to holders of Common Stock. Stockholders should note that the Board of
Directors has the authority under Generex's Certificate of Incorporation to
issue up to 1,000,000 shares of preferred stock in one or more series, with such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions as the Board of Directors
determines.
In addition, stockholders may experience potential dilution in the
market price of Generex's shares as a result of issuances of shares of Common
Stock at prices below the current market price. Such issuance could cause the
market price of Generex's shares to remain or decline below $1.00 per share.
Generex's shares traded below $1.00 on several occasions shortly before the
mailing of this proxy statement, and if the bid price of its shares is below
$1.00 for an extended period of time, Generex could be subject to de-listing
from NASDAQ.
No Appraisal Rights
Under Delaware law, stockholders are not entitled to appraisal rights
with respect to this proposal.
The Board of Directors unanimously recommends that stockholders vote
FOR Proposal No. 2, approval of the potential issuance and sale of equity
securities in order to comply with NASDAQ Marketplace Rules 4350(i)(1)(C)
and (D).
9
APPROVAL OF AN AMENDMENT TO THE GENEREX BIOTECHNOLOGY CORPORATION
2001 STOCK OPTION PLAN
(Proposal 3)
The Board of Directors approved an amendment to the Generex
Biotechnology Corporation 2001 Stock Option Plan (the "2001 Plan"), effective as
of November 4, 2003, to increase the shares of Common Stock authorized to be
issued under awards granted thereunder by 4,000,000 -- from 4,000,000 to
8,000,000. The amendment is intended to replenish the supply of Common Stock to
be issued under the 2001 Plan. Prior to the amendment, only 141,841 shares
remain available for awards under the 2001 Plan. Proposal 3 presents the
amendment to the 2001 Plan for approval by the stockholders.
The 2001 Plan was approved at the annual meeting of shareholders held
on March 18, 2002. The purpose of the 2001 Plan is to provide an additional
incentive to employees and directors to enter into and remain in the service or
employ of Generex by providing such individuals with an opportunity to receive
grants of options. In addition, the Board of Directors believes that the receipt
of such options encourages the recipients to contribute materially to the growth
of Generex and further align the interests of such recipients with the interests
of stockholders
Stockholder approval of the amendment to the 2001 Plan is required
under new NASDAQ rules and as a condition to favorable tax treatment of options
intended to be incentive stock options pursuant to Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for Generex to maintain the
deductibility of performance-based compensation granted under the 2001 Plan to
certain officers under Section 162(m) of the Code.
Summary Description of Amendment to Increase in Number of Shares Available for
Issuance.
To enable Generex to continue to grant stock option awards under the
2001 Plan, the amendment increases the number of shares of Generex's Common
Stock available for issuance by an additional 4,000,000 -- from 4,000,000 to
8,000,000 shares. The additional shares are needed to facilitate the continued
use of the 2001 Plan, which would have only 141,841 shares remaining available
for awards without the amendment.
On October 10, 2003, the closing price for a share of Generex's Common
Stock, as reported on the NASDAQ SmallCap Market, was $________.
A copy of the 2001 Plan, as amended, is attached to this Proxy
Statement as Appendix A.
Summary Description of the 2001 Plan
Awards under the 2001 Plan may be in the form of incentive stock
options ("ISOs") within the meaning of Section 422 of the Code, and options that
are not incentive stock options ("Non-ISOs") (collectively, "Options").
The 2001 Plan is administered by the Compensation Committee (the
"Committee"). The Committee has the authority to determine: (i) the individuals
to whom Options shall be granted; (ii) the type, size and terms of the Options
to be made to each individual; and (iii) the time when the Options will be
granted and the duration of any applicable exercise period, including the
criteria for exercisability and the acceleration of exercisability. The
Committee also has the authority to amend the terms of a previously issued
Option and deal with any other matters arising under the 2001 Plan.
10
Options may be granted to employees and non-employee directors as well
as certain consultants and advisors of Generex and its subsidiary corporations;
provided, however, that ISOs may only be granted to employees. Twenty-two
employees and non-employee directors were eligible to participate in the 2001
Plan as of October 3, 2003. If an Option granted under the 2001 Plan expires,
lapses or is terminated for any reason, the underlying shares again become
available for issuance under the 2001 Plan, unless otherwise provided by the
Committee. The maximum number of Options that may be granted to any individual
during any calendar year is 400,000.
Options granted under the 2001 Plan may include terms that permit a
participant to use shares of Common Stock to exercise the Options. The terms of
any such Options may provide for the grant of additional Options (or the
Committee may grant additional Options) to purchase a number of shares of Common
Stock equal to the number of whole shares used to exercise the Option and the
number of whole shares, if any, withheld in payment of any taxes. Any Options so
granted will be granted with an exercise price equal to the fair market value of
the Common Stock on the date of grant, or at such other exercise price as the
Committee may establish, for a term not longer than the unexpired term of the
exercised Option and on such other terms as the Committee may determine.
The exercise price of ISOs granted under the 2001 Plan must be equal to
the fair market value of the Common Stock on the date the ISO is granted (110
percent of the fair market value in the case of an ISO granted to an individual
who at the time of the grant owns ten percent or more of the combined voting
power of Generex capital stock (a "Ten Percent Owner")). The fair market value
of the Common Stock will be determined by the Committee.
In the event a participant's employment with Generex or its subsidiary
corporations is terminated for any reason, a participant may exercise an Option
only to the extent it was exercisable on the participant's date of termination.
An Option must be exercised prior to the earlier of (i) the expiration of ninety
days or such other period as the Committee may select (one year in the case of
disability or death) after the termination date or (ii) the expiration date of
the Option, which may not exceed ten years from the date of grant (five years in
the case of an ISO granted to a Ten Percent Owner), provided that the Committee
has the authority to issue non-ISOs which are exercisable until their expiration
date regardless of termination of employment or service. Subject to the
Committee's authority to provided different terms in an Option grant, in the
event of a participant's termination for cause or the participant's engaging in
conduct after termination that constitutes cause (as defined in the 2001 Plan
and determined by the Committee), the participant's Option will terminate
immediately and the participant automatically will forfeit all Common Stock for
which Generex has not yet delivered share certificates, upon refund of the
exercise price.
The Committee may adjust the number of shares covered by outstanding
options, the kind of shares issued under the 2001 Plan and the price per share
of Common Stock available for issuance under the 2001 Plan, at any time to
reflect any change in the capital structure of Generex affecting outstanding
shares of Common Stock, whether through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares or other similar change in the capital structure of Generex.
In the event of a "Change of Control" (as defined in the 2001 Plan),
unless the Committee determines otherwise, outstanding Options will become
exercisable immediately. In addition, the Committee may take whatever action it
deems necessary with respect to any or all outstanding Options, including
11
requiring that Optionees surrender their outstanding Options in exchange for a
payment by Generex or terminating any or all unexercised options after giving
Optionees an opportunity to exercise their outstanding Options. If a Change of
Control occurs in which Generex is not the surviving corporation, or survives
only as a subsidiary of another corporation, unless the Committee determines
otherwise, all outstanding Options that have not been exercised will be assumed
by, or replaced with comparable options or rights by the surviving corporation.
No Option may be transferred, except by will or the laws of descent and
distribution, and in the case of a Non-ISO, as permitted by the Committee.
The Committee may amend or terminate the 2001 Plan at any time;
provided, however, that the Committee will not increase the aggregate number of
shares that may be issued or transferred under the 2001 Plan or upon which
awards under the 2001 Plan may be granted, or otherwise materially amend the
2001 Plan, without stockholder approval to the extent such approval is required
in order to comply with the Code or applicable laws, or to comply with
applicable stock exchange requirements.
Federal Income Tax Consequences
The following description of federal income tax consequences is based
on current law and interpretations.
ISOs. In general, the value of an ISO is not included in the
participant's income at the time of grant, and the participant does not
recognize income on exercise of an ISO for the purpose of computing regular
federal income tax. However, when calculating income for alternative minimum tax
purposes, the excess, if any, of the fair market value of the shares acquired
over the exercise price (the "Spread") generally will be considered part of
income. At the subsequent sale of Common Stock received through the exercise of
an ISO, all gain on the sale of the Common Stock (as long as the Common Stock
has been held for one year after exercise and two years after grant) will be
characterized as capital gain or loss, and Generex will not be entitled to any
federal income tax deduction with respect to such gain. If the Common Stock has
been held for at least one year, the capital gain or loss will be taxed as
long-term capital gain or loss. If a participant disposes of ISO Common Stock
before the holding period has expired (a "Disqualifying Disposition"), the
Spread (up to the amount of the gain on disposition) will be ordinary income at
the time of such Disqualifying Disposition, and Generex will be entitled to a
federal income tax deduction. A participant must recognize as ordinary income
the gain on the disposition.
Non-ISOs. In general, the value of a Non-ISO is not included in the
participant's income at the time of grant, unless the Non-ISO Common Stock has a
"readily ascertainable fair market value" at the date of grant. It is not
anticipated that any Non-ISO will have a "readily ascertainable fair market
value" at the date of grant. On exercise, the difference between the exercise
price of a Non-ISO and the fair market value of the Common Stock received
generally will be recognized as ordinary income, subject to federal income tax
withholding, and will be allowed as a deduction to Generex. At the subsequent
sale of Common Stock received through the exercise of a Non-ISO, all gain on the
sale of the Common Stock will be characterized as capital gain or loss. If the
Common Stock has been held for at least one year, the capital gain or loss will
be taxed as long-term capital gain or loss.
Awards under the 2001 Plan
The Board of Directors has granted Options under the 2001 Plan as
follows through September 30, 2003 to the named executives, all executives as a
group, all non-executive directors as a group and all non-executive officer
12
employees as a group. The exercise prices of the options were fixed at the fair
market value of the underlying shares of Common Stock on the date of grant and
range from $ 1.00 per share to $ 8.70 per share.
Awards Granted Under Generex's 2001 Stock Option Plan
Name Dollar Value(1) Number of Options
---- --------------- -----------------
Anna E. Gluskin, President and Chief
Executive Officer ....................... $0 350,000
Mark Fletcher, Executive Vice President
and General Counsel ..................... $235,000 250,000
Rose C. Perri, Chief Operating Officer,
Treasurer and Secretary.................. $0 300,000
Pankaj Modi, Ph.D., Vice President,
Research and Development................. $0 300,000
All executives, as a group (4 persons) ........... $235,000 1,200,000
Non-executive directors, as a group
(4 persons).............................. $124,000 295,159
All non-executive officer employees,
as a group (29 persons).................. $206,500 2,407,640
----------
(1) The dollar value is the closing price of the Common Stock at September
30, 2003 ($1.94) less the exercise price. For purposes of calculating
the dollar value, all of the Options were assumed to be exercisable as
of September 30, 2003, notwithstanding any vesting schedule associated
with any of the grants.
Plan Benefits
Pursuant to the consulting agreement under which Dr. Modi is
compensated for his services to Generex, Generex has agreed to grant to Dr. Modi
Options to purchase 150,000 shares of Common Stock over ten consecutive fiscal
years, which started with the fiscal year ended July 31, 2001. Generex has
granted 300,000 Options to Dr. Modi under the 2001 Plan. Generex intends to
continue to use the 2001 Plan in the future to satisfy its obligations to grant
Options under the agreement with Dr. Modi. Approval of the amendment to the 2001
Plan at this year's annual meeting will constitute approval as well to use the
2001 Plan to satisfy Generex's obligations to grant Options to Dr. Modi for so
long as Common Stock remains available for issuance under the 2001 Plan.
Pursuant to Generex's Employment Agreement with Dr. Gerald Bernstein,
Generex has agreed to grant Dr. Bernstein Options to purchase 50,000 shares of
Common Stock each year during the term of his employment, which expires in April
2005. Generex has granted Options to purchase 60,159 shares to Dr. Bernstein
under the 2001 Plan. Generex intends to continue to use the 2001 Plan in the
future to satisfy its obligations to grant Options under the agreement with Dr.
Bernstein. Approval of the amendment to the 2001 Plan at this year's annual
meeting will constitute approval as well to use the 2001 Plan to satisfy
Generex's obligations to grant Options to Dr. Bernstein for so long as Common
Stock remains available for issuance under the 2001 Plan. Dr. Bernstein is a
director and an employee of Generex, but is not considered an executive officer
for this purpose.
13
Except for the Options required to be issued under Dr. Modi's and Dr.
Bernstein's agreements, the benefits that will be received in the future under
the 2001 Plan, as amended, by particular individuals or groups are not
determinable at this time. However, Generex expects that Options under the 2001
Plan will be continue to be issued annually to executives and non-executive
directors, including at a Committee meeting scheduled to be held later in
November, 2003.
Equity Stock Compensation Plan Information
The following table sets forth information, as of September 30, 2003,
regarding our existing compensation plans and individual compensation
arrangements pursuant to which our equity securities are authorized for issuance
to employees or non-employees (such as directors, consultants and advisors) in
exchange for consideration in the form of services:
------------------------------- ----------------------------- ----------------------------- -----------------------------
Plan Category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and rights future issuance under
warrants and rights equity compensation plans
(excluding securities
reflected in column (a))
------------------------------- ----------------------------- ----------------------------- -----------------------------
(a) (b) (c)
------------------------------- ----------------------------- ----------------------------- -----------------------------
Equity compensation plans
approved by security holders
1998 Stock Option Plan
1,095,500 $5.13 0
2000 Stock Option Plan
1,804,500 $7.74 195,500
2001 Stock Option Plan
3,858,159 $3.37 141,841
--------- ----- ----------
Total 6,758,159 $4.82 337,341
------------------------------- ----------------------------- ----------------------------- -----------------------------
Equity compensation plans not
approved by security holders 0 0 0
------------------------------- ----------------------------- ----------------------------- -----------------------------
Total 6,758,159 $4.82 337,341
------------------------------- ----------------------------- ----------------------------- -----------------------------
The Board of Directors Recommends a Vote FOR the Proposal to Approve the
Amendment to the 2001 Plan.
14
Security Ownership Of Certain Beneficial Owners And Management
The tables on the following pages set forth information regarding the beneficial
ownership of the Common Stock by:
o Our executive officers and directors;
o All directors and executive officers as a group; and
o Each person known to us to beneficially own more than five percent (5%)
of our outstanding shares of Common Stock.
The information contained in the table is as of October 3, 2003. At that date,
Generex had 27,245,631 shares of Common Stock outstanding. In addition to Common
Stock, Generex has outstanding 1,000 shares of Special Voting Rights Preferred
Stock. All of the shares of Special Voting Rights Preferred Stock are owned by
Dr. Pankaj Modi. In connection with Generex's joint venture with Elan, Generex
issued 1,000 shares of Series A Preferred Stock to an affiliate of Elan.
Including dividends issued on Series A Preferred Stock through January of 2003,
there are 1,123 shares of Series A Preferred Stock outstanding. All of the
Series A Preferred Stock is presently held of record by an affiliate of Elan.
A person is deemed to be a beneficial owner of shares if he or she has the power
to vote or dispose of the shares. This power can be exclusive or shared, direct
or indirect. In addition, a person is considered by SEC rules to beneficially
own shares underlying options or warrants that are presently exercisable or that
will become exercisable within sixty (60) days.
15
BENEFICIAL OWNERSHIP
Name of Beneficial Owner Number of Shares Percent of Class
(i) Directors and Executive Officers
John P. Barratt................................................. 70,000(1) *
Gerald Bernstein, M.D........................................... 113,628(2) *
Mark Fletcher................................................... 250,000(3) *
Anna E. Gluskin................................................. 1,603,794(4) 5.7%
Peter Levitch................................................... 119,483(5) *
Pankaj Modi, Ph.D............................................... 1,700,200(6) 6.1%
Rose C. Perri .................................................. 4,650,202(7) 16.6%
J. Michael Rosen ............................................... 148,730(8) *
Officers and directors as a group .............................. 7,632,370(9) 28%
(ii) Other Beneficial Owners (and their addresses)
Cranshire Capital, L.P. ........................................ 2,744,504(10) 9.9%
666 Dundee Road, Suite 1901
Northbrook, IL 60062
EBI, Inc. In Trust ............................................. 1,441,496(11) 5.3%
c/o Miller & Simons
First Floor, Butterfield Square
P.O. Box 260 Providencials
Turks and Caicos Islands
British West Indies
GHI, Inc. In Trust ............................................. 1,907,334(12) 7.0%
c/o Miller & Simons
First Floor, Butterfield Square
P.O. Box 260 Providencials
Turks and Caicos Islands
British West Indies
* Less than one percent.
(1) Represents 70,000 Options granted on March 19, 2003 under the 2001 Plan.
(2) Includes shares issuable upon exercise of 50,000 Options granted in
November, 2002, 5,159 Options granted on December 31, 2001 and 5,000 Options
granted on January 3, 2000, all under the 2001 Plan and pursuant to Dr.
Bernstein's Employment Agreement with Generex and his prior consulting
agreement.
(3) Represents 250,000 shares issuable upon the exercise of an Option granted
under the 2001 Plan.
16
(4) Includes 953,667 shares owned of record by GHI, Inc. that are beneficially
owned by Ms. Gluskin, 100,000 shares issuable upon the exercise of an Option
granted under Generex's 1998 Stock Option Plan (the "1998 Plan"), 200,000 shares
issuable upon the exercise of an Option granted under Generex's 2000 Stock
Option Plan (the "2000 Plan"), and 350,000 shares issuable upon exercise of an
Option granted under the 2001 Plan.
(5) Includes 70,000 shares issuable upon the exercise of an Option granted under
the 2001 Plan.
(6) Includes 150,000 shares issuable upon the exercise of an Option granted
under the 1998 Plan and 150,000 shares issuable upon the exercise of an Option
granted under the 2000 Plan. Also includes 300,000 shares issuable upon the
exercise of Options granted under the 2001 Plan. Dr. Modi also owns all the
outstanding shares of Generex's Special Voting Rights Preferred Stock. This
stock is not convertible into Common Stock.
(7) Includes 953,667 shares owned of record by GHI, Inc. that are beneficially
owned by Ms. Rose Perri, 100,000 shares issuable upon the exercise of an Option
granted under the 1998 Plan, 150,000 shares issuable upon the exercise of an
Option granted under the 2000 Plan, and 300,000 shares issuable upon exercise of
an Option under the 2001 Plan. Also includes the shares and Options that are
owned by the estate of Mr. Mark Perri, of which Ms. Rose Perri is executor and
beneficiary but is not considered to beneficially own for some purposes: 45,914
shares previously owned of record by Mr. Mark Perri; 1,100,000 shares owned of
record by EBI, Inc. (of which Mr. Mark Perri was beneficial owner); 305,332
shares held of record by brokerage accounts and Options for 200,000 shares which
survived Mr. Perri's death. Also includes 341,496 shares owned of record by EBI,
Inc., which Ms. Rose Perri may be deemed to beneficially own because of the
power to vote the shares but which are beneficially owned by other stockholders
because they are entitled to the economic benefits of the shares. Ms. Rose Perri
is also deemed to beneficially own an additional 953,667 shares owned of record
by GHI, Inc. by holding the right to vote such shares. These shares are also
beneficially owned by Ms. Gluskin.
(8) Includes 20,000 shares issuable upon the exercise of an Option granted under
the 2000 Plan, and 50,000 shares issuable upon exercise of Options granted under
the 2001 Plan. Also includes 7,943 shares owned by a company of which Mr. Rosen
is an officer and indirect 25% owner; Mr. Rosen may be deemed to beneficially
own these shares because he shares voting power and investment power with
respect to such shares.
(9) Includes 2,450,159 shares issuable upon the exercise of Options. Includes
1,441,496 shares owned of record by EBI, Inc. but beneficially owned or deemed
to be beneficially owned by Ms. Rose Perri. Includes 1,907,334 shares owned of
record by GHI, Inc. but beneficially owned by Ms. Gluskin or Ms. Rose Perri.
(10) Includes 1,310,840 outstanding shares and 1,425,664 shares issuable upon
exercise of warrants. Warrants which would otherwise be exercisable for 927,535
shares, however, contain a provision stating that they are not exercisable to
the extent exercise would result in the holder's beneficially owning more than
9.9% of Generex's outstanding common stock.
(11) All these shares were previously beneficially owned by Mr. Mark Perri but
are now deemed to be beneficially owned by Ms. Rose Perri because she has the
sole power to vote the shares. With respect to 1,100,000 of the shares owned of
record by EBI, Inc., Ms. Rose Perri also has investment power and otherwise is
entitled to the economic benefits of ownership.
(12) Ms. Gluskin and Ms. Rose Perri each own beneficially 953,667 of the shares
owned of record by GHI, Inc. by reason of their ownership of investment power
and other economic benefits associated with such shares. The shares beneficially
owned by Ms. Gluskin also are deemed to be beneficially owned by Ms. Rose Perri
because she has the sole power to vote the shares.
17
OTHER INFORMATION
Other Matters
The Board does not intend to present, and does not have any reason to
believe that others will present, any item of business at the special meeting
other than those specifically set forth in the notice of the meeting. However,
if other matters are properly brought before the meeting, the persons named on
the enclosed proxy will have discretionary authority to vote all proxies in
accordance with their best judgment.
Solicitation of Proxies
All costs and expenses of this solicitation, including the cost of preparing
and mailing this proxy statement will be borne by Generex. In addition to the
use of the mails, certain directors, officers and regular employees of Generex
may solicit proxies personally, or by mail, telephone or otherwise, but such
persons will not be compensated for such services. Arrangements will be made
with brokerage firms, banks, fiduciaries, voting trustees or other nominees to
forward the soliciting materials to each beneficial owner of stock held of
record by them, and Generex will reimburse them for their expenses in doing so.
By order of the Board of Directors
/s/ Rose C. Perri
-----------------------------------
Rose C. Perri
October __, 2003 Secretary
18
APPENDIX A
AMENDED
GENEREX BIOTECHNOLOGY CORPORATION
2001 STOCK OPTION PLAN
----------------------
The purpose of the Generex Biotechnology Corporation 2001 Stock Plan
(the "Plan") is to provide (i) designated employees of Generex Biotechnology
Corporation (the "Company") and its subsidiaries, (ii) certain consultants and
advisors who perform services for the Company or its subsidiaries and (iii)
non-employee members of the Board of Directors of the Company (the "Board") with
the opportunity to receive grants of incentive stock options and nonqualified
stock options (collectively, "Options"). The Company believes that the Plan will
encourage the participants to contribute materially to the growth of the
Company, thereby benefiting the Company's stockholders, and will align the
economic interests of the participants with those of the stockholders.
1. Administration
--------------
(a) Committee. The Plan shall be administered and interpreted by the
Compensation Committee (the "Committee") of the Board, which consists of two or
more persons who are "outside directors" as defined under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and related Treasury
regulations and "non-employee directors" as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). However, the
Board may ratify or approve any Option grants as it deems appropriate.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom Options shall be granted under the Plan,
(ii) determine the type, size and terms of the Options to be made to each such
individual, (iii) determine the time when the Options will be granted and the
duration of any applicable exercise period, including the criteria for
exercisability and the acceleration of exercisability, (iv) amend the terms of
any previously issued Option and (v) deal with any other matters arising under
the Plan.
(c) Delegation. The Committee may delegate certain of its duties to one
or more of its members or to one or more agents as it may deem advisable. The
Committee may employ attorneys, agents, consultants, accountants or other
persons, and shall be entitled to rely upon the advice, opinions or valuations
of such persons.
(d) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
-1-
2. Shares Subject to the Plan
--------------------------
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan or upon which awards under the Plan
may be granted is 8,000,000 shares. The maximum aggregate number of shares of
Company Stock that shall be subject to Options granted under the Plan to any
individual during any calendar year shall be 400,000 shares. The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including shares purchased by the Company on the open market for purposes
of the Plan. If and to the extent Options granted under the Plan terminate,
expire, or are canceled, forfeited, exchanged or surrendered without having been
exercised, the shares subject to such Options shall again be available for
purposes of the Plan, unless otherwise provided by the Committee.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding by reason of (i) stock dividend, spinoff,
recapitalization, stock split or combination or exchange of shares, (ii) merger,
reorganization or consolidation, (iii) reclassification or change in par value
or (iv) any other extraordinary or unusual event affecting the outstanding
Company Stock as a class without the Company's receipt of consideration, or if
the value of outstanding shares of Company Stock is substantially reduced as a
result of a spinoff or the Company's payment of an extraordinary dividend or
distribution, the maximum number of shares of Company Stock available under the
Plan, the maximum number of shares of Company Stock that any individual
participating in the Plan may be granted in any year, the number of shares
covered by outstanding Options, the kind of shares issued under the Plan, and
the price per share or the applicable market value of such Options may be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued shares of Company Stock
to preclude, to the extent practicable, the enlargement or dilution of rights
and benefits under such Options; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. Any adjustments determined
by the Committee shall be final, binding and conclusive.
3. Eligibility for Participation
-----------------------------
(a) Eligible Persons. All employees of the Company and its subsidiaries
("Employees") and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Consultants and
advisors who perform services for the Company or any of its subsidiaries ("Key
Advisors") shall be eligible to participate in the Plan if the Key Advisors
render bona fide services to the Company or its subsidiaries, the services are
not in connection with the offer and sale of securities in a capital-raising
transaction and the Key Advisors do not directly or indirectly promote or
maintain a market for the Company's securities.
(b) Selection of Optionees. The Committee shall select the Employees,
Non-Employee Directors and Key Advisors to receive Options and shall determine
the number of shares of Company Stock subject to a particular Option in such
manner as the Committee determines. Employees, Key Advisors and Non-Employee
Directors who receive Options under this Plan shall hereinafter be referred to
as "Optionees."
4. Granting of Options
-------------------
(a) Option Agreements. All Options shall be subject to the terms and
conditions set forth herein and to such other terms and conditions consistent
with this Plan as the Committee deems appropriate and as are specified in
writing by the Committee to the individual in a grant instrument or an amendment
to the grant instrument (the "Option Agreement"). The Committee shall approve
the form and provisions of each Option Agreement.
-2-
(b) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Option.
(c) Type of Option and Price.
(i) The Committee may grant Options that are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code ("Incentive Stock Options") or Options that are not intended so to qualify
("Nonqualified Stock Options") or any combination of Incentive Stock Options and
Nonqualified Stock Options, all in accordance with the terms and conditions set
forth herein. Incentive Stock Options may be granted only to Employees of the
Company or a parent or subsidiary (within the meaning of Section 424(f) of the
Code). Nonqualified Stock Options may be granted to Employees, Non-Employee
Directors and Key Advisors. Unless otherwise provided in the Option Agreement,
any Option granted under this Plan to an Employee is intended to be an Incentive
Stock Option.
(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be equal
to or less than the Fair Market Value (as defined below) of a share of Company
Stock on the date the Option is granted; provided, however, that (x) the
Exercise Price of an Incentive Stock Option shall be equal to the Fair Market
Value of a share of Company Stock on the date the Incentive Stock Option is
granted and (y) an Incentive Stock Option may not be granted to an Employee who,
at the time of grant, owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, unless the Exercise Price per share is not less than
110% of the Fair Market Value of Company Stock on the date of grant.
(iii) The Fair Market Value per share shall be the closing
price of the Company Stock on the relevant date or (if there were no trades on
that date) the latest preceding date upon which a sale was reported.
(d) Option Term. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant, which
date of grant is determined by the Committee. However, an Incentive Stock Option
that is granted to an Employee who, at the time of grant, owns stock possessing
more than ten percent of the total combined voting power of all classes of stock
of the Company, or any parent or subsidiary of the Company, may not have a term
that exceeds five years from the date of grant.
(e) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Option Agreement. Unless a
different vesting schedule is specified by the Committee in an Option Agreement,
Options granted under this Plan shall vest in one-half increments on each annual
anniversary of the date of grant over a period of two years. The Committee may
accelerate, and may provide in the Option Agreement for the acceleration of, the
exercisability of any or all outstanding Options at any time for any reason.
-3-
(f) Reload Options. In the event that shares of Company Stock are used
to exercise an Option, the terms of such Option may provide for the grant of
additional Options, or the Committee may grant additional Options, to purchase a
number of shares of Company Stock equal to the number of whole shares used to
exercise the Option and the number of whole shares, if any, withheld in payment
of any taxes. Such Options shall be granted with an Exercise Price equal to the
Fair Market Value of the Company Stock on the date of grant of such additional
Options, or at such other Exercise Price as the Committee may establish, for a
term not longer than the unexpired term of the exercised Option and on such
other terms as the Committee shall determine.
(g) Limit on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which Incentive Stock Options are exercisable for the
first time by an Optionee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the Option, as to the excess, shall be treated as a Nonqualified Stock
Option.
5. Termination of Employment, Disability or Death
-----------------------------------------------
(a) General Rule. Except as provided below, an Option may only be
exercised while the Optionee is employed by, or providing service to, the
Company as an Employee, Key Advisor or member of the Board. In the event that an
Optionee ceases to be employed by, or provide service to, the Company for any
reason other than (i) termination by the Company without Cause (as defined
below), (ii) voluntary termination by the Optionee, (iii) Disability (as defined
below) or (iv) death, any Option held by the Optionee shall terminate
immediately (unless the Committee specifies otherwise). In addition,
notwithstanding any other provision of this Plan, if the Committee determines
that the Optionee has engaged in conduct that constitutes Cause at any time
while the Optionee is employed by, or providing service to, the Company or after
the Optionee's termination of employment or service, any Option held by the
Optionee shall immediately terminate and the Optionee shall automatically
forfeit all shares underlying any exercised portion of an Option for which the
Company has not yet delivered the share certificates, upon refund by the Company
of the Exercise Price paid by the Optionee for such shares. Upon any exercise of
an Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a forfeiture.
(b) Termination Without Cause; Voluntary Termination. In the event that
an Optionee ceases to be employed by, or provide service to, the Company as a
result of (i) termination by the Company without Cause (as defined below) or
(ii) voluntary termination by the Optionee, any Option which is otherwise
exercisable by the Optionee shall terminate unless exercised within 90 days
after the date on which the Optionee ceases to be employed by, or provide
service to, the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the
Optionee's Options that are not otherwise exercisable as of the date on which
the Optionee ceases to be employed by, or provide service to, the Company shall
terminate as of such date.
(c) Termination Because Disabled. In the event the Optionee ceases to
be employed by, or provide service to, the Company because the Optionee is
Disabled, any Option which is otherwise exercisable by the Optionee shall
terminate unless exercised within one year after the date on which the Optionee
ceases to be employed by, or provide service to, the Company (or within such
other period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Except as otherwise
provided by the Committee, any of the Optionee's Options which are not otherwise
exercisable as of the date on which the Optionee ceases to be employed by, or
provide service to, the Company shall terminate as of such date.
-4-
(d) Death. If the Optionee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the Optionee ceases to
be employed or provide service on account of a termination specified in Section
5(b) above (or within such other period of time as may be specified by the
Committee), any Option that is otherwise exercisable by the Optionee shall
terminate unless exercised within one year after the date on which the Optionee
dies or otherwise ceased to be employed by, or provide service to, the Company
(or within such other period of time as may be specified by the Committee), but
in any event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee, any of the Optionee's Options that are not
otherwise exercisable as of the date on which the Optionee dies or otherwise
ceased to be employed by, or provide service to, the Company shall terminate as
of such date.
(e) Definitions.
(i) The term "Company" shall mean the Company and its parent
and subsidiary corporations or other entities, as determined by the Committee.
(ii) "Employed by, or provide service to, the Company" shall
mean employment or service as an Employee, Key Advisor or member of the Board
(so that an Optionee shall not be considered to have terminated employment or
service until the Optionee ceases to be an Employee, Key Advisor and member of
the Board), unless the Committee determines otherwise.
(iii) "Disability" shall mean an Optionee's becoming disabled
under the Company's long-term disability plan, or, if the Optionee is not
covered under such plan or no such plan is maintained, and in the case of an
Incentive Stock Option, "Disability" shall mean an Optionee's becoming disabled
within the meaning of Section 22(e)(3) of the Code.
(iv) "Cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that the Optionee has:
(i) breached his or her employment or service contract with the Company; (ii)
engaged in disloyalty to the Company, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his or her employment or service; (iii) disclosed trade secrets or
confidential information of the Company to persons not entitled to receive such
information; (iv) breached any written confidentiality, non-competition or
non-solicitation agreement between the Optionee and the Company; or (v) has
engaged in such other behavior detrimental to the interests of the Company as
the Committee determines.
6. Exercise of Options.
--------------------
(a) Notice of Exercise. A Optionee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company.
(b) Payment of Exercise Price. Along with the notice of exercise, the
Optionee shall pay the Exercise Price for an Option as specified by the
Committee (i) in cash, (ii) with the approval of the Committee, by delivering
shares of Company Stock owned by the Optionee (including Company Stock acquired
in connection with the exercise of an Option, subject to such restrictions as
the Committee deems appropriate) valued at Fair Market Value on the date of
exercise, (iii) with the approval of the Committee, by surrender of outstanding
awards under the Plan or (iv) by such other method as the Committee may approve.
Shares of Company Stock used to exercise an Option shall have been held by the
Optionee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option.
-5-
(c) Payment of Tax. The Optionee shall pay the amount of any
withholding tax due at the time of exercise.
7. Deferrals
---------
The Committee may permit or require an Optionee to defer receipt of the
delivery of shares that would otherwise be due to such Optionee in connection
with any Option. If any such deferral election is permitted or required, the
Committee shall, in its sole discretion, establish rules and procedures for such
deferrals.
8. Withholding of Taxes
--------------------
(a) Required Withholding. All Options under the Plan shall be subject
to applicable federal (including FICA), state, local and other tax withholding
requirements. The Company shall have the right to deduct from any amounts paid
to the Optionee, any federal, state, local or other taxes required by law to be
withheld with respect to such Options. The Company may require that the Optionee
or other person receiving or exercising Options pay to the Company the amount of
any federal, state, local or other taxes that the Company is required to
withhold with respect to such Options, or the Company may deduct from other
wages paid by the Company the amount of any withholding taxes due with respect
to such Options.
(b) Election to Withhold Shares. If the Committee so permits, an
Optionee may elect, in the form and manner prescribed by the Committee, to
satisfy the Company's income tax withholding obligation with respect to Options
paid in Company Stock by having shares withheld up to an amount that does not
exceed the Optionee's minimum applicable withholding tax rate for federal
(including FICA), state, local and other tax liabilities.
9. Transferability of Options
--------------------------
(a) Nontransferability of Options. Except as provided below, only the
Optionee may exercise rights under an Option during the Optionee's lifetime. A
Optionee may not transfer those rights except (i) by will or by the laws of
descent and distribution or (ii) with respect to Nonqualified Stock Options, if
permitted in any specific case by the Committee, pursuant to a domestic
relations order or otherwise as permitted by the Committee. When an Optionee
dies, the personal representative or other person entitled to succeed to the
rights of the Optionee ("Successor Optionee") may exercise such rights. A
Successor Optionee must furnish proof satisfactory to the Company of his or her
right to receive the Option under the Optionee's will or under the applicable
laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide that an Optionee may transfer Nonqualified
Stock Options to family members, or one or more trusts or other entities for the
benefit of or owned by family members, consistent with the applicable securities
laws, according to such terms as the Committee may determine; provided that the
Optionee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
-6-
10. Change of Control of the Company
--------------------------------
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) Unless the Board approves such acquisition, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, in a single transaction or series of transactions, of securities
of the Company representing more than 20 percent of the voting power of the then
outstanding securities of the Company; provided that a Change of Control shall
not be deemed to occur as a result of a change of ownership resulting from the
death of a stockholder, and a Change of Control shall not be deemed to occur as
a result of a transaction in which the Company becomes a subsidiary of another
corporation and in which the stockholders of the Company, immediately prior to
the transaction, will beneficially own, immediately after the transaction,
shares entitling such stockholders to more than 20 percent of all votes to which
all stockholders of the parent corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote);
(b) A merger or consolidation of the Company is consummated with
another corporation where the stockholders of the Company, immediately prior to
the merger or consolidation, will not beneficially own, immediately after the
merger or consolidation, shares entitling such stockholders to more than 80
percent of all votes to which all stockholders of the surviving corporation
would be entitled in the election of directors (without consideration of the
rights of any class of stock to elect directors by a separate class vote);
(c) A sale or other disposition of all or substantially all of the
assets of the Company occurs;
(d) A liquidation or dissolution of the Company occurs; or
(e) Shares of the Company's Special Voting Rights Preferred Stock are
outstanding and a "Change of Control" under the terms and conditions of such
securities occurs.
11. Consequences of a Change of Control
-----------------------------------
(a) Notice and Acceleration. Unless the Committee determines otherwise,
any outstanding Options that are not yet exercisable or vested shall become
exercisable or vested as of the Change of Control. The Committee shall provide
notice to Optionees of the Change of Control as soon as practicable.
(b) Assumption of Options. Upon a Change of Control where the Company
is not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
or rights by, the surviving corporation (or a parent or subsidiary of the
surviving corporation).
-7-
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions with respect to any or all outstanding
Options: (i) the Committee may require that Optionees surrender their
outstanding Options in exchange for a payment by the Company, in cash or Company
Stock as determined by the Committee, in an amount equal to the amount by which
the then Fair Market Value of the shares of Company Stock subject to the
Optionee's unexercised Options exceeds the Exercise Price of the Options; or
(ii) the Committee may, after giving Optionees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Committee deems appropriate. Such surrender or termination or settlement
shall take place as of the date of the Change of Control or such other date as
the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the right to
take any actions described in the Plan (including without limitation actions
described in subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right or action, the Change of Control would qualify for such treatments
and the Company intends to use such treatments with respect to the Change of
Control.
12. Requirements for Issuance or Transfer of Shares
-----------------------------------------------
(a) Limitations on Issuance or Transfer of Shares. No Company Stock
shall be issued or transferred in connection with any Option hereunder unless
and until all legal requirements applicable to the issuance or transfer of such
Company Stock have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any Option made to any Optionee
hereunder on such Optionee's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan will be subject to such stop-transfer orders and other restrictions as
may be required by applicable laws, regulations and interpretations, including
any requirement that a legend be placed thereon.
(b) Lock-Up Period. If so requested by the Company or any
representative of the underwriters (the "Managing Underwriter") in connection
with any underwritten offering of securities of the Company under the Securities
Act of 1933, as amended (the "Securities Act"), an Optionee (including any
successors or assigns) shall not sell or otherwise transfer any shares or other
securities of the Company during the 30-day period preceding and the 180-day
period following the effective date of a registration statement of the Company
filed under the Securities Act for such underwritten offering (or such shorter
period as may be requested by the Managing Underwriter and agreed to by the
Company) (the "Market Standoff Period"). The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.
13. Cancellation and Recission of Options
-------------------------------------
(a) Unless the Option Agreement specifies otherwise, the Committee may
cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired,
unpaid or deferred Options at any time if the Optionee is not in compliance with
all applicable provisions of the Option Agreement and the Plan, or if the
Optionee engages in any "Detrimental Activity." For purposes of this Section 13,
"Detrimental Activity" shall include: (i) the rendering of services for any
organization or engaging directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the Company; (ii) the
-8-
disclosure to anyone outside the Company, or the use in other than the Company's
business, without prior written authorization from the Company, of any
confidential information or material, in violation of the Company's applicable
agreement with the Optionee or of the Company's applicable policy regarding
confidential information and intellectual property; (iii) the failure or refusal
to disclose promptly and to assign to the Company, pursuant to the Company's
applicable agreement with the Optionee or to the Company's applicable policy
regarding confidential information and intellectual property, all right, title
and interest in any invention or idea, patentable or not, made or conceived by
the Optionee during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of the Company, or
the failure or refusal to do anything reasonably necessary to enable the Company
to secure a patent where appropriate in the United States and in other
countries; (iv) activity that results in termination of the Optionee's
employment for Cause; (v) a violation of any rules, policies, procedures or
guidelines of the Company, including (but not limited to) the Company's business
conduct guidelines; (vi) any attempt (directly or indirectly) to induce any
employee of the Company to be employed or perform services elsewhere or any
attempt (directly or indirectly) to solicit the trade or business of any current
or prospective customer, supplier or partner of the Company; (vii) the
Optionee's being convicted of, or entering a guilty plea with respect to, a
crime, whether or not connected with the Company; or (viii) any other conduct or
act determined to be injurious, detrimental or prejudicial to any interest of
the Company.
(b) Upon exercise, payment or delivery pursuant to an Option, the
Optionee shall certify in a manner acceptable to the Company that he or she is
in compliance with the terms and conditions of the Plan. In the event an
Optionee fails to comply with the provisions of paragraphs (a)(i)-(viii) of this
Section 13 prior to, or during the six months after, any exercise, payment or
delivery pursuant to an award, such exercise, payment or delivery may be
rescinded within two years thereafter. In the event of any such rescission, the
Optionee shall pay to the Company the amount of any gain realized or payment
received as a result of the rescinded exercise, payment or delivery, in such
manner and on such terms and conditions as may be required, and the Company
shall be entitled to set-off against the amount of any such gain any amount owed
to the Optionee by the Company.
(c) The Committee, in its sole discretion, may grant to an Optionee, in
exchange for the surrender and cancellation of an Option previously granted to
the Optionee, a new Option in the same or different form and containing such
terms, including without limitation a price that is higher or lower than any
price provided in the award so surrendered or cancelled.
14. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Committee may amend or terminate the Plan at any
time; provided, however, that the Committee shall not increase the aggregate
number of shares of Company Stock that may be issued or transferred under the
Plan or upon which awards under the Plan may be granted, or otherwise materially
amend the Plan, without stockholder approval if such approval is required in
order to comply with the Code or applicable laws, or to comply with applicable
stock exchange requirements.
(b) Termination of Plan. No Incentive Stock Option may be granted more
than ten years from the Plan's effective date. The Plan may be terminated by the
Committee at any time.
-9-
(c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after an Option is made shall not materially
impair the rights of an Optionee unless the Optionee consents or unless the
Committee acts under Section 20(b). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Option.
Whether or not the Plan has terminated, an outstanding Option may be terminated
or amended under Section 20(b) or may be amended by agreement of the Company and
the Optionee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
15. Funding of the Plan
-------------------
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Options under this Plan. In no event shall
interest be paid or accrued on any Option, including unpaid installments of
Options.
16. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be granted an
Option under this Plan. Neither this Plan nor any action taken hereunder shall
be construed as giving any individual any rights to be retained by or in the
employ of the Company or any other employment rights.
17. No Fractional Shares
--------------------
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Option. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
18. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
19. Effective Date of the Plan. Subject to approval by the Company's
stockholders, the Plan shall be effective as of May 4, 2001.
-10-
20. Miscellaneous
-------------
(a) Options in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to grant Options under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Options to employees
thereof who become Employees of the Company, or for other proper corporate
purposes, or (ii) limit the right of the Company to grant stock options or make
other awards outside of this Plan. Without limiting the foregoing, the Committee
may grant an Option to an employee of another corporation who becomes an
Employee by reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Company or any of its
subsidiaries in substitution for a stock option or stock awards grant made by
such corporation. The terms and conditions of the substitute Options may vary
from the terms and conditions required by the Plan and from those of the
substituted stock incentives. The Committee shall prescribe the provisions of
the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Committee may revoke
any Option if it is contrary to law or modify an Option to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Optionees.
The Committee may, in its sole discretion, agree to limit its authority under
this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Option Agreements issued under the Plan shall be governed
and construed by and determined in accordance with the laws of State of
Delaware, without giving effect to the conflict of laws provisions thereof.
-11-
GENEREX BIOTECHNOLOGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NOVEMBER 4, 2003
The undersigned stockholder of Generex Biotechnology Corporation
("Generex") hereby appoints Anna E. Gluskin and Rose C. Perri, and each of them
with full power of substitution, the true and lawful attorneys, agents and proxy
holders of the undersigned, and hereby authorizes them to represent and vote, as
specified herein, all of the shares of Common Stock of Generex held of record by
the undersigned on October 10, 2003, at the special meeting of stockholders of
Generex to be held on November 4, 2003 (the "Special Meeting") at 10:00 a.m. at
St. Lawrence Hall, 157 King Street East, Toronto, Ontario, and any
adjournments or postponements thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED.
IN THE ABSENCE OF DIRECTION, THE SHARES WILL BE VOTED FOR THE PROPOSALS.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS RELATING TO THE SPECIAL MEETING.
Item 1. To ratify the amendment to Generex's Restated Articles of Incorporation
increasing the number of authorized shares of common stock to 150,000,000.
FOR AGAINST ABSTAIN
Item 2. To approve the potential issuance and sale of equity securities below
market price in excess of shares permitted to be issued without shareholder
approval NASDAQ Marketplace Rules 4350(i)(1)(C) and (D).
FOR AGAINST ABSTAIN
Item 3. To the amendment to the Generex Biotechnology Corporation 2001 Stock
Option Plan to increase the number of shares of common stock issuable upon
exercise of options granted under the Plan to 8,000,000.
FOR AGAINST ABSTAIN
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
Trustees and others acting in a representative capacity should indicate the
capacity in which they sign and give their full title. If a corporation, please
indicate the full corporate name and have an authorized officer sign, stating
title. If a partnership, please sign in partnership name by an authorized
person.
________________________________
Signature:
________________________________
Signature:
________________________________
Date:
________________________________
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT. IF YOU DO ATTEND,
YOU MAY VOTE IN PERSON IF YOU DESIRE.